- HEADLINES: Chicago soyoil/soybeans sharply higher with crush margins expansion: China books US soybeans off the PNW for October; GFS cooler/wetter at midday.
- Chicago grain futures are higher at midday with soybeans/soyoil being sharply higher ahead of the USDA July crop report on Wednesday. The trade is preparing for a bullish USDA report due to US 2023 soybean seeding being down 4.0 million acres, and the resulting drop in supplies/product stocks. Corn and wheat futures are rising in sympathy with beans, but amid an extra 2.0 million acres of US corn and hope that US all wheat yields rise, traders are much less bullish of grain. We look for a higher Chicago close with US crop condition ratings expected to be up 1-3% in corn/soybeans, and to be steady to up 2% in spring wheat. Even with a modest condition recovery, US corn/soy ratings will be the third lowest since 1986 and with drought conditions being maintained, questions abound on what final US corn/soybean yields will be. We look for WASDE to trim its corn yield to 176-177 bushels/acre on Wednesday with no change or a 0.5 bushels/acre reduction in its soy yield. WASDE will want to be directionally correct in July, and then allow NASS to make the real crop assessment in August. NASS does not conduct field surveys until the September report. We are doubtful that the US 2023 corn yield can surpass the record at 177 bushels/acre, or the soybean yield can rise above trendline at 52.0 bushels/acre due to drought. Amid the lack of subsoil moisture, the coming next 6 weeks of Central US rain will be key to where US summer row crop yields finish.
- US export inspections for the week ending July 6 were 13.4 million bu of corn, 8.7 million bu of soybeans, and 15.4 million bu of wheat. The corn and soybean sales pace remains disappointingly slow. For their respective crop years to date, the US has shipped just 1,318 million bu of corn (down 620 million from last year or 32%) and 1,824 million bu of soybeans (down 95 million or 5%).
- China booked 10-14 cargoes of US soybeans for October off the PNW late this weekend and early today. Their pricing led to the Chicago rally as China engages in a US new crop purchase program.
- Wildfires are gaining considerable ground across British Columbia and through portions of Alberta. Smoke into the NC US looks to be a growing problem for humans, livestock, and crops in the weeks ahead.
- Early EU wheat yields are coming in below producer expectations due to hot/dry weather during the reproductive period. EU wheat yields are down 5-12% from expectations, but additional harvest data is needed to determine a trend. The same lower than expected yield trend is offered for SE Russian wheat yields. The point is that the excessive stocks that are carried forward from old crop (Russia/EU) may not be so bearish if early harvest yields disappoint and producers hold their new supplies. Interior Russian prices are rising on tightening cash supplies. And French barley bids at port have jumped due to Chinese demand. We note that China has been struggling with poor quality wheat from Australia and is adding French barley/Brazilian corn to raise the quality of its livestock feed. Quickly, Chinese nominations are showing in the Brazilian corn line-up for spot Brazilian corn, which is the likely reason for the recent S American corn basis jump.
- The midday GFS weather forecast is wetter for the SW and C Midwest and cooler than was offered in prior runs. The NW Midwest and N Plains will be short-changed on rainfall, but there is no heat looking forward into July 19. The overnight model was warm to hot in the 11–15-day period with the midday GFS forecast being cooler. The GFS forecast was too hot due to the northeast expansion of the Intermountain West high-pressure ridge. We see the midday GFS forecast as being too cool with no ridge amplification.
- Short term, widely scattered showers are expected across IA and portions of N IL late Tuesday/Wednesday with MO/S IL drenched from late Friday through Saturday. Drier weather follows with the jet stream maintaining ridge riding storm systems into July 18.
- The USDA will release their July Crop Report on Wednesday with the trade too bullish on soybean and too bearish on US corn stock expectations. We maintain a bullish soyoil/soybean stance while corn struggles to sustain a rally. Yet, it is world wheat values that are seasonally bottoming if Russian/European wheat yields prove to be disappointing. The US dollar is likely to keep declining which could pull new investment money into commodities. there were inflows into US commodity futures in the opening overnight and today’s morning reopening in Chicago.