- Ag futures today are mixed but little changed. Fund selling has taken a pause as the EU and GFS weather models look to end the day in disagreement on near-term precipitation in IA and northern IL this weekend. Dryness there has become a new threat to yield potential, and it is important that some amount of rain occur there prior to late July.
- The other highlight today is market talk centred on Prevent Plant acres. Data gatherers suggest that RMA (Risk Management Agency) insurance policy and indemnity numbers as of July 15 suggest Prevent Plant in corn will be 7-8 million acres, with soybeans reaching upward of 2-3 million. USDA undersecretary Northey previously stated that USDA expects total PP acres to exceed 10 million. These have been long held estimates by the market, and we would note that FSA (Farm Service Agency) determines prevent plant data, while RMA data sets are separate. Clarity will be found via FSA’s initial prevent plant numbers in mid-August, but amid elevated PP claims, a more accurate picture of planted, failed and prevent plant acres won’t be available until October or November. Still, FSA data next month will provide a solid benchmark from which to compare NASS’s forecast. The response to talk of PP acres has been muted by overnight declines in S American corn basis and ongoing aggressive wheat offers out of the Black Sea and Northern Europe.
- This week’s EIA energy report is mixed. US ethanol production through the week ending last Friday totalled 313 million gallons, vs. 308 million the prior week and unchanged from mid-July a year ago. The summer ethanol grind has been better than previously expected. However, ethanol stocks last week were up 14 million gallons to 981 million, by far a record for July. US ethanol stocks have increased a sizeable 75 million gallons in the last three weeks. There is no shortage of near-term ethanol supply. We suspect ethanol export demand continues to fall behind year-ago levels. Enlarged supplies of ethanol will weigh on price as well as spot production margins. US motor gasoline stocks were up 3.6 million barrels on the week to a 4-week high. The build in gasoline stocks has weighed on energy markets at midday.
- Egypt’s GASC bought just one cargo of Russian wheat at $201/mt, basis fob, despite cheaper offers out of Ukraine. GASC was offered 765,000 mt of wheat between $199-210/mt, basis fob. Gulf HRW is quoted at $210-212.
- Corn basis in Central IL on Tuesday weakened, and we hear that elevators across the Eastern Midwest are beginning to reduce bids. A close eye will be kept on the direction of E Midwest basis in the next few days.
- The midday Central US GFS weather forecast is wetter in eastern IA and maintains widespread precipitation across IA, MN, WI and northern IL through the coming weekend. The primary theme remains a westward shift in the mean position of higher pressure ridging. The jet stream beginning next week will flow across the N Plains and into the Great Lakes. This will allow cooler/wetter air to move across the heart of the Corn Belt July 22-31. Excessive heat is still indicated across the whole of the Central US into Saturday.
- The supply-driven rally began 10 weeks ago. Another shock is needed to form new seasonal highs. This may come in the form of NASS’s August crop report, but the market has been disappointed in the lack of follow-through in world grain markets. A more favourable US weather pattern lies ahead.