- HEADLINES: Chicago corrects early day gains on windfall profit taking; Midday GFS/Canadian weather forecasts dry for Plains/NW Midwest; US export sales poor.
- Chicago futures are correcting early morning gains on windfall profit taking. The morning selling is occurring as the bulls accept windfall gains following Wednesday’s NASS USDA Report. The coming 3-day weekend and uncertainty of US weather which includes a tropical storm has pushed the bulls into taking some risk off the table. We expect a higher Chicago close on Thursday and see the morning break as a buying opportunity. An open chart gap rests at $5.885 in December corn which offers initial support with key support at $5.81. November beans will be underpinned below $14.00, while September Chicago wheat holds $6.75.
- Corn, soybean, and wheat futures are trading mixed at midday. Minneapolis wheat is the bear leader. The Minneapolis/KC spread has reached out to historical resistance at a $2.20-2.30 premium which has sparked a correction. Spring wheat has reached spread levels that entice end users to switch to other protein wheat classes, such as hard wheat from the Central Plains. We doubt that flat prices of spring wheat have scored a top as domestic and export demand is highly inelastic. Any fall back to $8.25 basis September Minneapolis wheat would be seen as a new buying opportunity. We doubt that any Chicago futures can endure a lasting price break until late summer.
- Chicago brokers estimate that funds have bought 3,200 contracts of soybeans and 3,100 contracts of soymeal, while selling 3,000 contracts of soyoil, 4,000 contracts of corn and 3,000 contracts of wheat. Managed money was active buyers overnight and then turned sellers on waning upside momentum. End users have used the break to extend their forward coverage.
- The export sales report indicated that that for the week ending June 24 the US sold 8.3 million bu of wheat, .6 million bu of old and 2.7 million bu of new crop corn, and 3.4 million bu of old crop and 61.4 million bu of new crop soybeans. The sales totals for US corn, wheat and old crop soybeans were bearish. The new crop soybean sales were noticed in the daily reporting system and bullish.
- For their respective crop years to date, the US has sold 235 million bu of wheat (down 28 million or 8% from last year), 2,738 million bu of corn (up 1,072 million or 64%), and 2,272 million bu of US soybeans (up 625 million or 38%). We expect that US corn, soybean and wheat sales increased last week on the market decline as exporters added forward coverage ahead the NASS June 30 report.
- Russian interior grain markets are poorly defined with farmers unwilling to sell their new winter wheat harvest. Russian farmers appear willing to store their initial wheat cuttings awaiting a higher cash price, rather than having to participate in the floating weekly export tax. Russian President Putin claimed yesterday that the floating export tax was working and prevented Russian flour prices from rising to even higher levels.
- The midday GFS weather forecast offers limited rainfall for the Northern US Plains, the Canadian Prairies, and the NW Midwest into Sunday July 11 . A weak frontal pass on July 7-8 looks to produce a few light showers, but outside of S IA, rainfall totals will be limited to less than 0.4″. The remainder of the area is arid with rising temperatures. Hurricane Elsa veers inland across Sarasota on July 7 after raking the Western Peninsula with hurricane force winds. Elsa then curves NE to the North Carolina and returns to tropical strength as it returns into the Atlantic. The GFS forecast has Elsa as a strong hurricane that must be closely monitored. The storm will cause an eastward shift in the Western US high pressure ridge to the lntermountain West and the Western US Plains which will produce numerous days of 90′s across the Plains/W Midwest. This remains a concerning weather pattern for the N Plains, W Midwest and Western US and yield reductions are likely.
- Bullish US and world grain stocks will underpin Chicago heading into the USDA report on July 12. A deep cut in the Brazilian corn crop will raise US 2021/22 corn exports. And the USDA will very likely cut harvested acre estimates from NASS to account for the ongoing N Plains and NW Midwest drought in corn, soybeans, and spring wheat. We doubt that the USDA will lower yields until crop conditions decline deeper. The risks vs rewards are stacked strongly in the favour of the bulls with $7.50-8.00 corn possible with any US corn yield loss below 175 bushels/acre.