- World ag markets continue lower on expanding Northern Hemisphere wheat harvest and concern that US-Chinese trade talks are not making much progress. The Chinese trade team today has taken a harder stance on potential concessions, with reports suggesting talks are moving backward, not forward. Ocean freight indexes are rising but cash grain basis levels in S America and the Black Sea are signalling weak global consumptive interest.
- Note that spot corn basis in the Eastern Midwest remains strong. Basis in in Central OH has climbed another $0.10/bu to $0.60 over Sep Chicago. Basis in IL is firm at $0.15 over, vs. $0.15 under in May and $0.23 under in mid-July a year ago. Farmer selling has evaporated amid this year’s enlarged yield and production risks. Yet the futures market is more closely eyeing late July/early August weather, and the near term boost in soil moisture scheduled across Northern Plains, Upper Midwest and IN/OH over the next 3-5 days.
- The midday GFS weather forecast is much wetter in IA and northern IL this week as projected rain will drop further south than previously indicated. The EU model this afternoon needs to confirm this wetter outlook, but the market is somewhat sensitive to improved weather forecasts amid the slowdown in US export demand.
- Argentine corn is offered at $0.53-0.65/bu below US Gulf corn well into autumn. The USDA has Argentine corn ending stocks in 2018/19 rising to 4.6 million mt, with 2019/20 Argentine corn stocks rising to 6.1 million mt. At the right price Argentina can export a record 35-36 million mt in 2019/20, vs. USDA’s projected 33.5 million.
- Russian winter wheat yields continue to decline and now sit slightly below a year ago. However, Ukrainian yields are performing much better and so far validate the USDA’s projected 10% boost in wheat yield. It is just tough to find a major crop problem outside of the US Corn Belt.
- The GFS weather forecast is also much wetter in France in the 6-10 day period. This reflects an abrupt change from the morning run and the EU model’s morning output. The Western European corn crop in recent weeks has been plagued by dryness and record/near record heat. Rainfall in late July will stabilise corn yield potential. World wheat prices have moved lower along with the US, and so Gulf wheat remains expensive.
- The midday Central US GFS weather forecast projects soaking rainfall across IA, WI and northern IL. Confidence in such a shift is low, but other model forecasts will be followed closely this afternoon and overnight. The theme of the midday forecast is that a more pronounced NW upper air pattern will be established early next week. As high pressure moves westward, cooler/wetter air will flow across the Principle Corn Belt on the weekend. Drier weather resumes next week, but a lasting period of normal/below normal Midwest temperatures is forecast July 21-30.
- Falling US corn and soybean production potential have been the bullish linchpins of world ag markets this spring and summer. Much uncertainty/risk remains. But bullish markets need constant fuel, and outside of a wetter midday US forecast fresh news is absent.