- Chicago trade has been mixed at midday as traders await large US weekly export sales on Thursday morning. FAS daily sales totals along with rumours that China has booked a sizeable number of US soybean cargoes this week has supported the expectation that US bean sales could near or exceed 1.5 million mt with US corn sales at 1.5-2.0 million. US wheat sales continue to plod, but the theme of improving US export demand shows no signs of abating in the summer row crops. The combination of large US sales and new fund money inflows has been the supportive fundamentals for Chicago prices this morning. However, this is the third day of fund buying and following Thursday’s USDA export sales report, we anticipate that Chicago values will sink into the weekend as needed rains are slated to drop across Argentina. Although it ss late in the growing season, trade sensitivity persists for Argentine weather. Moreover, traders understand that if China were to respond to actual and threatened US trade tariffs, those announcements are usually made on the weekend. The bulls will want to pull in their horns heading home on Friday. Research argues that Chicago futures are range bound awaiting the USDA Stocks and Seeding Reports and the new N Hemisphere planting season. US old crop corn, soybean and wheat end stocks remain historically sizeable.
- Chicago brokers estimate that funds have bought 3,200 contracts of corn, 1,600 contracts of soybeans, and 900 contracts of wheat. In soy products, funds have bought 2,400 contracts of soymeal and sold 2,100 contracts of soyoil. The US$ is in recovery with strong economic data and an expected rise in US interest rates helping to support the greenback. Until there is clarity on the timing of the passage of a new US infrastructure package (deeper US deficit), we look for the US$ to be rangebound.
- Some early harvest data is starting to emerge from Argentina and initially, crop yields are running better than expected. Corn yields are down 2-5% from trend with soybean harvest just starting in the far north. There is not enough data to make a trend, but early harvest yields are better than expected which is producing caution about a further drop in private crop forecasts. Many traders remember the dire 2012 Midwest droughts and that corn/soybean yields did not fall nearly as much as feared late in the season. Some traders wonder if that same trend could be evolving in Argentina.
- French fob wheat prices have been sagging on their large old crop supply as world wheat export demand starts to fade seasonally. This is the first time during the 2017/18 wheat crop year that French fob wheat offers compare with Russian. The competition will likely produce a seasonal top in Russian wheat with warming temperatures helping to source supply from the farmer. N African demand is largely filled into May, and the new winter crop is starting to green.
- The weekly US ethanol report posted record large US ethanol stocks at 1,020 million gallons. This the first time that US ethanol stocks have risen above 1,000 million gallons. The US weekly ethanol corn grind was down to 301 million bu from 311 million in the week prior. The weekly data was deemed slightly bearish for corn prices.
- The midday S American GFS weather model is similar to its overnight with showers/storms possible across much of Argentina on the weekend with totals of .5-2.00”. A few days of dry weather follow with some light showers late next week. The extended range 11-15 day forecast offers another chance of showers/storms. Near to above normal rains persist across the northern half of Brazil which favours their winter corn crop.
- The Trump Administration is threatening new tariffs against China, while most of the Argentine crop loss is known. US corn and soybean export demand has stepped up, but amid surplus old crop US stocks, one wonders quite how much additional upside market risk exists. This is not a place to be overly bullish or bearish of Chicago grains. Our bet remains one of sideways trade awaiting N American planting weather.