- HEADLINES: Wheat sags on renewed spec selling; Russian wheat crop update, low protein abounds; Cash soyoil basis firms.
- Midday Chicago futures are mixed to lower as wheat sags on renewed fund selling. Corn futures are following wheat downwards while soy futures trade on either side of unchanged. Longer term support is offered below $5.00 December corn futures with November soybeans having like support below $13.20. Oil share spreading interest has returned with soyoil futures holding key chart support. S American/US soyoil basis levels are firm, which has acted to underpin soyoil futures. Last week Brazilian soyoil was priced at $0.23 under and trade today is occurring at $0.175 under.
- We note that this is the wrong time of the year for a secondary seasonal low with a bottom more likely following the August 11 USDA Crop report. Fund managers are looking to the period following the August USDA report for a new investment opportunity. The back and forth of the summer weather market is something that fund managers want to avoid and they fondly remember the low that occurred in August 2020, and the bullish demand trend that followed. We doubt that this year’s rally will be as robust unless El Niño plays a role in cutting Brazilian corn and second corn crop production. Few are monitoring Brazilian weather during the off season, but the dryness is acute, and doubt is emerging on whether initial soy seeding can commence after September 14.
- Chicago brokers report that funds have sold 4,700 contracts of wheat, 5,800 contracts of corn, and 1,200 contracts of soybeans. In soy products, funds have sold 2,900 contracts of soyoil and 1,400 contracts of soyoil. Funds are liquidating stale long positions that were established last week.
- The USDA did not announce any new US soybean sales to China or other destinations this morning. Sellers have another 24 hours to help in confirming the sales that were 6-8 cargoes that were rumoured to be completed on Monday’s break.
- Russian wheat yield/quality estimates are in decline. Based on yield data, we peg the 2023 Russian wheat crop at 83.0 million mt, which is 2 million below the USDA. Wheat protein levels are poor in most regions with some levels as low as 10-10.5%. Only Krasnodar protein is equal to last year at 12-13%. The combination of a smaller Russian 2023 crop with less milling wheat has caused exporters to scramble for supply with cash basis levels rising to push the Russian farmer to sell newly harvested supplies. Just a month ago, Russian wheat exporters expected that the basis and cash market would be run over by record large old crop stocks and the new harvest. The sharp basis gain has some wondering whether Rosstat’s crop estimate of the 2022 crop is correct at 104.4 million mt
- There are estimates of the 2023/24 Brazilian soybean crop at 157-158 million mt, down 5-6 million from the USDA. Brazilian farm margins are well down from recent years, and few are willing to expand seeding on low cash basis bids.
- The details of the midday GFS weather forecast feature less rain in IL and much of the Eastern Midwest, but the overall pattern is consistent. An active pattern of showers is forecast into August 8. The first meaningful event sweeps across Southern IA, MO and into Southern IL Wed-Thursday. Moderate rain becomes more widespread thereafter into the middle part of next week, with 7-day accumulations of 1-2” to favour IA/IL as well as the Delta/Southeast and pockets of MN. Major crop producing areas of the Dakotas will be left arid, but the absence of heat limits crop stress. The midday GFS forecast in fact includes low temperatures in the upper 40s/low 50s across the N Plains/Upper Midwest Aug 8-11, but confidence in this is low.
- The market’s ebb and flow between digesting major supply issues (Black Sea logistical threats) and improved US yield potential will be ongoing throughout August, recent volatility shows just how on edge the market is and overall solving food supply issues will be challenging in 2023/24. Early Aug is seasonally the wrong time of year to add to sales. Post-harvest recoveries will be strong. The world needs record wheat Russian exports.