- Today’s early decline in prices in Chicago failed to hold with the funds once again moving in to buy, which saw prices move into positive territory, although not convincingly higher. Discussion on yield and weather has moved up a gear following Friday’s USDA report and is the current “hot topic”.
- The bulls are arguing that US 2015 corn yield will be below 160 bushels/acre, and the bears are calling for trend or better. In fact, the USDA type corn yield model based on Central US rainfall and precipitation that has occurred and what is forecast for the next 2 weeks argues for a US corn yield of 172-173 bushels/acre – a record! To counter this, growers are citing record rains that have caused significant losses and a below 160 bushels/acre yield. Some areas have seen soybean and corn crops washed away by rain, but this is only in localised areas. It appears that you pay your money and take your choice. In corn, will the yield be above 170 or below 160? That is the question!
- Today’s crop condition report may help to strengthen one or other side of the debate, and we will report the figures tomorrow, but for now it appears the trade is looking for a 1-2% decline in good/excellent rating in both soybeans and corn. This is probably one of the reasons for the funds to be adding length to their positions.
- It should be noted that both crops have historically suffered more in hot and dry conditions rather than in wet conditions and the likelihood of wet conditions lasting through the remainder of July and August is remote. It should be borne in mind that the wet conditions will likely leave corn and soybean crops with shallow root systems as they have not had to “search deep” for moisture! A change to hot and dry conditions could leave such shallow rooted crops vulnerable to stress, but it is far too early to be considering such matters just yet.
- In Paris the Matif wheat market fell to 2-week lows as harvest moved ahead without interruption and demand patters remained thin to say the least. Both Russian and Ukraine harvests are reported to be slower than last year but both are reporting higher overall yields. However, the Russian export tax position continues to be a lottery and a meeting between the government and customs officials may (but we are sceptical) bring a resolution.
- The potential Greek deal (potential as it needs ratification by the Greek government) brought little relief to the strained €uro and Greece has yet to find interim financing – no easy task. It should be noted that the Greek Finance Ministry has effectively surrendered all control to the Troika as Tsipras caved in on just about everything!