- HEADLINES: Wheat falls on new Ukraine wheat corridor talk; GFS wetter this weekend; Hot/dry follows.
- Another Putin/Erdogran wheat corridor meeting, USDA report ahead; GFS wetter nearby; Drier longer term
- Chicago futures are mixed at midday. The summer row crops of corn and soybeans are holding firm while wheat futures sag. The volume of Chicago trade is down from prior days amid the USDA July Report which will be released tomorrow. It is expected that NASS will raise its all-wheat crop due to better than trend HRS wheat yields, while also proving class breakdowns that are supportive to HRW futures. Paris wheat futures are holding firm with US wheat being becoming even more cheaply priced. The Russian Ruble has fallen to 62.6:1 or by 1.8% that will further raise the Russian wheat export tax. The break in wheat makes little sense with Russia exporting just 150,000 mt of wheat during the first week of July. The volatility of the Russian wheat export tax makes it nearly impossible to price Russian wheat for export beyond the next week.
- Also, wheat futures fell on algo headline selling with Turkish President Erdogran holding another telephone meeting on a Ukraine grain export corridor with Russian President Putin. The phone call took place ahead of a Russian/Turkish Summit to be held soon. Turkey and Russia have been talking for months over a Ukraine grain export corridor to no avail (Ukrainian representatives not invited!).
- Russia and Turkey keep talking so that Russia can continue its rhetoric of blaming western sanctions for the world grain shortage. Like all the other talks beforehand, Russia will demand that NATO members drop economic sanctions for Ukraine marine grain exports to be restarted. We note that cash prices to interior Ukraine farmers are in the tank due to soaring costs including transportation. New crop wheat offers rest at $76/mt or $2.07/bu with new crop corn bid at $45/mt or $1.14/bu. At these low cash prices, one wonders why a Ukraine farmer would even take make the effort to harvest wheat.
- Chicago brokers estimate that funds have bought 7,200 contracts of corn and 3,900 contracts of soybeans, while selling 7,600 contracts of wheat. In the soy products, funds have bought 2,400 soyoil and 3,800 contracts of meal.
- US export inspections for the week ending July 7 at 36.7 million bu of corn, 13.1 million bu of soybeans, and 11.4 million bu of wheat. The US has exported 1,937 million bu of corn (down 397 million or 17% from last year), 1,917 million bu of soybeans (down 206 million or 9.7%) and 70.6 million bu of wheat (down 16 million or 18%). So far, the Russian war against Ukraine has not boosted US corn or wheat exports.
- Argentine political and economic stability is being questioned amid rising debt, a falling Peso and new protests following the resignation of the country’s economic minister last week. Argentina is considering several economic measures to preserve dollar holdings. Argentine farmers sensing a deeper devaluation of the Peso have started to hoard old crop cash grain.
- The midday GFS weather model offered soaking rain from E Iowa and across the northern third of IL/IN this weekend which was a wetter change. Rain totals are estimated in a range of 0.5-2.00”. The GFS ensemble model is drier in this slot and like the overnight run. We suspect that the GFS midday forecast is too wet, but the forecast models have trouble in forecasting ridge riding rainfall systems. Thereafter, the forecast is hot/dry for the Plains and the W Midwest with the mean position of the ridge progressing eastward to the Plains and the W Midwest. Extreme heat will be the result across most of the Central US. The extreme heat looks to persist into July 25.
- There is just no room in the US or world balance sheets for any adverse Central US or EU weather. July USDA Crop reports tend to be a non-event and after its release, the market’s attention quickly returns to weather. We doubt the wetter midday GFS model since it is not backed up by the Canadian or the GFS ensemble models. The tropical system forming along the Gulf shore is causing the model fits. The best rain chances will be across the Northern Lake States and Ohio. Otherwise, hot/dry weather will likely drop US crop conditions and yield estimates. Oiur concern for US/EU weather remains high.