- Chicago futures are slightly higher at midday with corn, soybeans and wheat firmer on short covering/positioning ahead of the USDA August Crop Report that is due out Wednesday. Fund managers have been the best buyers of corn/meal on short covering with the oil/meal spread being unwound on the formation of a seasonal high in the tropical oil values. Spread unwinding remains a key feature for price.
- Chicago has a heavy feel at midday with traders discussing that a year ago, NASS estimated the 2019 US corn yield at a shocking 169.5 bushels/acre. Traders are betting that NASS should not have much trouble beating that yield by at least 10 bushels/acre based on vegetation maps and producer yield reports.
- Big yields and big crops are expected on Wednesday with the Midwest harvest starting in just 4-5 weeks. We look for a mixed close with producer selling of old crop corn noted on any rally to take advantage of stout cash basis bids. Traders may try to secure a bearish break post report but buying the markets ahead of a harvest does is seasonally incorrect. A better time to look for a seasonal low would be between September 15-October 15th, after key monthly crop reports when we all know how big is big. A US 2020 corn yield above 181 bushels/acre or above 53 bushels/acre in soybeans mutes recent Chinese buying.
- Chicago brokers estimate that funds have bought 2,200 contacts of corn, 2,100 contracts of wheat and 3,600 contracts of soybeans. In soy products, funds have bought 3,100 contracts of soymeal while selling 2,000 contracts of soyoil.
- Midwest farmers report straight line winds in excess of 100 miles per hour that produced damage to storage bins/crops on Monday from a storm that ripped through IA/IL/WI and IN. The rain was needed, but the winds were not. Pictures of flattened corn fields are circulating. Greensnap produces a 100% yield loss but bent over fields will be able to recover. It is impossible to balance the positive aspect of the rain against Mother Nature’s steamrolled corn fields.
- The hardest hit area is from NC IA were corn fields appear that they were steamrolled. Yet, in gauging the where the strongest winds occurred and potential damage, some estimate that 35-85 million bu of US corn production could have been lost. For producers impacted, the loss is devastating. Yet, on a national basis, the loss will not alter the US corn balance sheet when you consider that rain also helped corn acres that were not toppled. Looking backwards, a sustained bull market in corn has never occurred on straight line winds (or hail) since it is difficult for such acute weather to impact a broad area of the Central US.
- Egypt’s GASC secured 2 cargoes of Russian wheat at $219.60/mt basis C&F, down $8.89 from their last tender just last week. Only Russian and Ukraine wheat was offered with the freight cost being $14.10/mt. GASC used 180-day credit financing which implies that the real fob value for Russian wheat is $4-5/mt lower at $200.50-201.50/mt. The odds are high that Russian wheat prices will slide to test support against $194-196/mt, the spring lows.
- China is rumoured to have secured another 3-6 cargoes of US soybeans this morning for new crop delivery. FAS confirmed the sale of 132,000 mt this morning.
- The midday GFS is drier across the Central Midwest with better rains for OH and the Delta. The GFS weather forecast has been erratic as of late and is not performing up to prior standards. The best rainfall looks to drop across the E Dakotas/MN and through the OH Valley. Temperatures will be seasonally cool ranging from the 70′s to the mid 80′s. Corn/soy crops need another 1-2 good rains to finish out the 2020 growing season. The lack of heat will help fill pods and ears. The overall Central US weather forecast is helpful to US yields, but a wetter pattern is desired.
- Wednesday will start the statistical process of determining how big is big in terms of 2020 US corn/soy yields. If trade guesses of 180 bushels/acre on corn and 51 bushels/acre are near correct, traders will add back yield before the September estimate. A US soybean yield of 53-55 bushels/acre is not impossible this year which would swamp existing Chinese demand. Research (and the industry) expects that the US/China will repledge to work together on Phase One in their meetings this weekend.