We kicked off the day with Core Inflation Rate MoM & YoY, Export Sales, Inflation Rate MoM & YoY, CPI, CPI s.a., Initial Jobless Claims, Continuing Jobless Claims, Jobless Claims 4-Week Average, and Real Earnings at 7:30 A.M., Fed Cook Speech at 8:15 A.M., EIA Natural Gas Storage at 9:30 A.M., 4-Week & 8-Week Bill Auction at 10:30 A.M., 15-Year & 30-Year Mortgage Rate at 11:00 A.M., 30-Year Bond Auction at 12:00 P.M., Fed Balance Sheet and Monthly Budget Statement at 3:30 P.M.,

The average 30-Year Mortgage interest rate , according to the Mortgage Bankers Association survey, set a 2024 high in April of 7.29%. Rates then steadily declined through the summer and fell rapidly in August as the market anticipated a September Fed rate cut. Rates set a low the week of the Fed announcement and have since turned higher. The 10-Year Note bottomed at 3.65% and is trading at an 11-week high of 4.04% this week, while the average mortgage rate bottomed at 6.13% and was at 6.36% last week. Mortgage demand picked up at the end of summer and reached a 2.5 – year high. But rising home prices offset much of the decline in interest rates, keeping home affordability near 40-year lows.

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South American Weather Pattern Discussion

Models At Odds Over Northern Brazil Rainfall Next 10 Days; All Agree Drought Shrinks Into Late October:

The South American forecast is broadly consistent with prior runs, though the EU, GFS, and AI models remain in disagreement over rainfall in Mato Grosso and far N Brazil over the next 8-10 days. The EU is by far the wettest, advertising heavy, regular rain in Mato Grosso beginning early next week. The GFS/AI models delay this pattern shift into Oct 16-17. Yet most important is that rainfall will expand into Central Brazil and additional rain lies in the offing for Argentina. Even the drier GFS projects rainfall adequate for soybean seeding Mato Grosso do Sul, Goias, and Minas Gerais. Seeding delays over the next 10 days will be confined to Mato Grosso, which must be watched, but Ag Resources (ARC) maintains that an acceleration in fieldwork there occurs the next two weeks. Notes also that needed rain blankets Argentina’s core Ag Belt into Oct 18^th, and on Wednesday radar maps showed a decently organized system impacting southern Brazil.

World Weather Pattern Discussion

La Nina Intensifies Next 30 Days; Short-Lived Event Projected:

A further cooling of the equatorial Pacific is forecast into the early part of November, with La Nina officially established in September. However, model guidance has backed off on both intensity and duration of this years La Nina event, and the extent to which this impacts atmospheric patterns is important. The 9-month ENSO forecast shows La Nina is highly probable to be present throughout the South American growing season. But amid upcoming boosts in soil moisture in Argentina, and as La Nina is forecast to wane beginning Jan/Feb,  the odds of lasting dryness in Argentina & S Brazil is diminishing. Ded-Jan precipitation matters most for Argentine soybean yields. February is critical for Argentina’s second corn crop, which now accounts for 65-70% of the country’s total. A shift to El Nino is possible by N Hemisphere summer, though confidence so far out is low.

Export Updates

Before today’s Export Sales the USDA announced another new sale of 126,000 tons of corn to unknown destinations. Census US corn exports in August totaled 203 Bil Bu, (13%) above FGIS inspections but inline with previous estimates. Final 23/24 US corn exports were 2,292 Mill Bu, vs. 1,661 Mil the prior year, and ARC’s work suggests export disappearance stays elevated into late spring – when new South American supplies will be available. Using weekly FGIS inspections as well as Census data’s ongoing premium to exports in Sep at 165 Mil, vs. 124 Mil in 2023. Shipments in Oct-April should match or exceed slightly year-ago levels, and in the last week the US has returned to a rather competitive position in the global feed marketplace – on a fob basis, US Gulf origin is quoted below Brazilian and Ukrainian origin, with US’s discount for Dec-Feb arrival waning. Export sales/shipments late spring onward will be determined by South American yield potential, but massive tonnages will leave the US in autumn and winter. Disappearance peaks in Mar-Apr.

CBOT Corn Ends Flat, Finds Buying at Chart Support; Export Fob premiums Continue To Rally:

Dec CBOT corn’s correction paused at its 20-day moving average, and major changes to US supply and demand in the short/medium term will be a function of USDA’s yield forecast nearly exclusively. ARC looks for a modest hike in yield, which offsets lower carry-in, but end stocks will be near unchanged at 2.0 Bil Bu. US demand growth remains intact. Corn used for ethanol production Sep1-Oct 4 is estimated at 1.52 Bil Gal, up 3% year-over-year. Production margins have recovered slightly amid weaker cash corn stability in DDG values. Seasonally, weekly grind expands into late Nov/Dec. Fob premiums in Brazil & Ukraine scored new seasonal highs on Wednesday, and recent US daily sales announcement are aligned with US corn again being rather competitive in the global market. Dec corn is overvalued abvove $4.40 and too cheap below $4.00. Trade this range. ARC doubts rally efforts find follow-through until USDA’s Oct WASDE has come and gone. It’s Dec-Mar when US exports expand meaningfully. South America’s climate pattern is improving.

Wednesday CBOT Open Interest

Open Interest in soybean futures was up 7,774 contracts, while corn open interest was down 7,274 contracts and wheat was down 2,665 contracts with improved weather forecast in South Americathat is producing cash related hedge in soybeans while liquidation is featured in the grain complex.

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