- Chicago values are mixed to sharply higher with wheat gaining on both corn/soybeans at midday. Rumours abound that China may have secured 2 cargoes of US SRW wheat which has pushed Chicago wheat into buy stops with spot futures are their best levels since March. September Chicago wheat is back testing key chart-based resistance at $5.50 after pushing through the 200 day moving average at $4.35. Research looks for the rally in Sept Chicago wheat to pause against $5.50-5.60 until there is confirmation of the Chinese purchase and the size of the 2020 Russian/Ukraine wheat crops.
- Midwest cash wheat sources are less sure why China would be securing the highest cost and lower protein wheat in the world. China’s need is more for a protein wheat that would add to milling quality. Cash confirmation is lacking, but traders will be looking to the weekly export sales report for confirmation since the total is at or below the 100,000 mt that must be reported daily.
- Corn/soy is being pulled upwards with wheat on diminished fund selling. The funds are not as aggressive in selling the summer row crops with wheat up $0.18/bu.
- Chicago brokers estimate that funds have bought 9,400 contracts of wheat and 3,200 contracts of soybeans, while buying 2,300 contracts of corn. Funds have come back and repurchased all early corn sales. Funds have also bought 3,600 contracts of soyoil while being flat in soymeal. The US farmer has been a modest seller of soybeans on the rally while waiting for better levels in wheat/corn before engaging again.
- FAS reported that China booked 132,000 my of new crop corn, and 389,000 my of US soybeans. The US soybean sale was well rumoured in prior days and cash sources argue that China is finished with its TRQ buying in corn. China strictly controls the importation of GMO corn with a license needed. Along with 2 cargoes of US wheat, there are rumours that China may have interest for US soyoil, no sales tonnages are mentioned. A few additional US soybean cargoes may have been sold to China today, yet US exporters report that their interest is diminished as prices have rallied.
- EIA reported that the US produced 274 million gallons of ethanol last week, up 5 million gallons from the prior week, but below the 28.
- NOPA’s June soybean crush rate fell to 167.3 million bu, the third straight monthly decline. US soyoil stocks were pegged at a bullish 1,778 million pounds which was lower than expected on better domestic use.
- Welcome/needed rain is falling across the key production areas of; N MO, C IL, and S IA with amounts ranging from 0.5-2.50″. The timing of the rain is ideal for corn pollination. The midday GFS weather forecast calls for IL/IN to receive 2-4.00″ of rain over the next 10 days with nearby totals of 0.5-2.50″. Any high-pressure ridging is elongated across the Delta/SE US States which will act to shunt upper air moisture north into passing Midwest cold fronts. Convective Midwest thunder storms are forecast daily. Soil moisture builds will occur into August. Temperatures will stay warm, but no excessive heat is foreseen. The W Midwest and N Plains will be relatively cool with lows in the 50′s/60′s.
- The upside in Chicago wheat becomes limited above $5.50-5.60 until more is known about Black Sea wheat crop sizes. Weather is favourable for US summer row crops and how big is big will soon become the yield question for traders. Our stance stays bearish on corn/soy bounces. We see US ethanol production stagnating between 260-275 million gallons going forward into new crop. The big seasonal push for gasoline will be ending in early August. We would caution against chasing wheat here with producers contemplating sales in another 5-15 cents.