15 July 2022

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  • LIFFE closes attached. Once again, despite earlier suggesting otherwise, I have found a short window in which to gather together my daily market views as follows-
  • HEADLINES: Wheat sags on Russian willingness to sign export corridor pact; GFS midday forecast blazing hot for Midwest/Delta/Plains.
  • Tug of war between sagging wheat and summer row crop values that want to add premium for the coming extreme heat across the Plains/SW and W Midwest. NOPA crush data released early.
  • Chicago grain prices are mixed in light volume with the wild swings of the market exhausting traders. Supportive is the decline in the US$ and the surge in the US stock market as economists argue that the pre-recessionary decline in a host of financial and raw material markets has digested a moderate recession. The fall in US and world financial markets has been due to the fear of a coming US recession as the US and world Central Banks battle inflation. The fear has produced something of a collapse in commodity values over the past 3 weeks.
  • However, blast furnace heat is forecast across the Central US including the Plains, Midwest, and Delta according to the midday GFS weather model. It is a supply balancing act of how much has been lost in the Western US and can it be offset by improved weather in the NE Midwest. Showers are falling across N Illinois/S Wisconsin at midday. We fear that based upon the US weather forecast, US corn/soybean yields will be below trend. It is just a question of how far. Plains irrigation systems just can’t keep up with corn moisture needs. The Midday GFS weather forecast is brutally hot.
  • Chicago brokers estimate that funds have sold 9,500 contracts of wheat and 2,800 contracts of soybeans, while buying 3,400 contracts of corn. In soy products, funds have bought 4,700 contracts of soyoil and sold 3,200 contracts of meal.
  • FAS/USDA confirmed that China booked 2 cargoes of US corn (133,000 mt) for 2022/23. This helps confirm cash connected rumours of several days ago that private Chinese buyers were securing US corn. When China’s state buyers will secure US corn is unknown, but since Brazilian corn can’t be imported until 2023 from its next seedings, the US will gain most of the demand. WASDE has China taking just 18.0 million mt of world corn in 2022/23, which is down from the past few years. We Could argue that China will import 23-28 million mt, which would further tighten world corn stocks. The import margin of US corn into China is sizeable and hog feeders are making a profit.
  • NOPA reported a June soybean crush rate of 164.8 million bu, down 6.3 million from May (May had one more day of crush), but up 12.3 million bu from last year’s NOPA crush of 152.4 million bu. US soyoil stocks declined to 1.767 billion pounds, the smallest US soyoil end stock total since September. Biofuel demand for US soyoil stays strong amid strong margins. The fall in soyoil price has pushed renewable diesel demand to record large levels. The report was bullish soyoil.
  • How much could the Black Sea Grain Corridor agreement raise Ukraine wheat and corn exports in the 2022/23 crop year? USDA sees Ukraine exporting 10.0 million mt of wheat and 9.0 million mt of corn in their July WASDE. Due to lower transit cost, grain exports will be reduced through E Europe and move out of 3 functioning Ukraine ports if logistically open. The partial opening of Black Sea ports would allow Ukraine wheat exports to grow from 10 to 12.5 million mt and corn from 9.0 to 13.5-14.0 million mt. Chicago wheat values have been an elevator up-and-down with key support found at $7.50 on the spot weekly chart.
  •  Spot CBOT Wheat Weekly Chart:

Chart</p> <p>Description automatically generated” width=”408″ height=”313″ /></p> <ul> <li>Midday GFS weather comment: The best chance for rain is over the next 48 hours as ridge riding storm system pushes through the Eastern US. Rain totals should range from 0.25-1.25”. A dry weather pattern follows with blazing heat shifting from the Plains into the Delta/Midwest. The GFS forecast places an incredibly strong high-pressure ridge across the Mid-Mississippi Valley which propagates blast furnace heat across; MO, IA, AR, TN, KY and the southern halves of IL, IN, and OH into July 30. Unknown is whether the GFS forecast has the ridge too far to the east, but this is a highly concerning and extremely hot Midwest forecast.</li> </ul> <ul> <li>It is the hottest time of summer, but the midday GFS forecast has extreme heat that includes the Delta/E Midwest into the end of July with highs in the 90’s to lower 100’s. One does not know whether the model is crying wolf, but if correct, acute heat stress would be placed on corn/soy crops as the drought builds across the Plains/W Midwest. Don’t be short heading into Monday if the GFS weather forecast is even half correct, it is just that hot!</li> </ul> </div> </div> </div> </div><!-- .entry-content --> <footer class= This entry was posted in Daily Commentary by simon. Bookmark the permalink.