- HEADLINES: Chicago wheat rallies on German flooding and need for protein wheat; Midday GFS weather forecast hot/dry, how long will the Central US ridge last.
- It is a mixed midday Chicago session with US wheat futures rising while corn/ soybean futures hang in the red in low volume trade. Wheat/corn spreading has been active with excessive European rainfall starting to inflame wheat crop quality concerns. The big export seller of world wheat for August/September has been Germany as their wheat was the cheapest in the world.
- However, the German/Baltic wheat harvest is delayed by excessive rainfall/flooding, and questions abound on whether German/Baltic hi pro wheat can make export grade. With Russian farmers holding cash wheat off the cash market via lower than expected yield and their floating export tax rate, a quick rise in world wheat fob prices could develop should the EU wheat deteriorate via quality amid cool/wet weather. Importers and end users are short of forward wheat coverage with recent world wheat tenders for nearby or even spot shipment. As we have previously highlighted, world wheat values have formed their seasonal lows and the dire drought in Canada and the flooding in the EU is offering upside market potential into October.
- Chicago corn/soy futures are slightly lower in a correction of 3 days of rally. Chicago needed a technical breather, the big question for Friday is who will want to be short heading into an important weather weekend with extreme heat forecast. There are suggestions that extreme heat/dryness for 4-6 days would limit US corn yield losses across the Dakotas/Minnesota to 150-300 million bu (these states account for 19.5% of seeded acres). But should the high-pressure ridge hold into August, US corn and soybean production losses could be much larger. As of Sunday, just 8% of the North Dakota corn crop, 5% in South Dakota and 16% in Minnesota was pollinating. The coming heat could not come a at worst time in the last week of July when 40-60% of this areas crop will be in pollination. It is the duration of the NC US ridge that will key prices.
- Chicago brokers estimate that funds have bought 2,100 contracts of wheat and sold 2,700 contracts of corn and 3,100 contracts of soybeans. In soy products, funds have sold 1,200 contracts of soymeal and 2,100 contracts of soyoil.
- US weekly export sales for the holiday week ending July 8 were 15.6 million bu of wheat, 5.5 million bu of old crop and 5.2 million bu of new crop corn, and 800,000 bu of old crop and 10.7 million bu of new crop soybeans. The sales were poor as expected due to the US holiday. US export interest is expected to improve with it now costing $1.05/bu to top off Argentine corn boats. We believe that Brazil purchased just over 500,000 mt of Argentine corn yesterday.
- NOPA’s June crush rate was 152.4 million bu, a 2 year low and some 7.0 million bu less than trade expectations. June NOPA member soyoil stocks were 1.537 billion. The lower-than-expected June NOPA crush of 152 million bu was bullish soy products, but bearish of soybeans. However, Midwest crushers are raising their spot soybean basis bids amid a tightening soybean supply. Bids rest at $0.45-0.65 over August futures are noted. This has limited the bearish aspect of the NOPA report with future weather forecasts driving Chicago soy price direction.
- The midday GFS weather forecast is slightly drier across E Iowa and the northern Eastern Midwest compared to the overnight run. The forecast holds just a few spits of rain for drought stricken Canadian Prairies, the N Plains, and the NW Midwest. Iowa holds in a dry weather trend for the next 10 days. Extreme heat will prevail across the Plains and into the Canadian Prairies with intrusions into Iowa/Missouri. High temperatures on numerous days will reach into the mid 90′s to lower 100′s. The jet stream is pushed far to the north and is lazy which allows Central US ridge stability into August.
- Our concern over North American weather is high with the Canadian drought to worsen while extreme heat catches the pollinating corn crop across the Dakotas/Minnesota. A Central US high pressure ridge is the new US weather pattern unless a tropical system can dislodge it in August. The risk in Chicago is to the upside, it is just that market participants are worn out by the back and forth of weather markets.