- Chicago mixed at midday as traders sell early Chicago rally on cool temperature forecast: US weekly ethanol grind third best on record; Midday GFS weather forecast little changed.
- It is a battle of US supply vs rising US and world cash premiums in Chicago.
- The bears talk about record large US corn, sorghum, and soy yield potential, and that the coming cool Central US temperatures with widely scattered showers will further boost potential. WASDE pegs the US corn yield at a record 181 bushels/acre, but the marketplace is trading/discussing a corn yield of 182-184 bushels/acre and a soy yield of 53-53.5 bushels/acre. WASDE has the US soybean trend yield at 52 bushels/acre.
- Corn is a crop of July, and the weather has been favourable. How high is high in the 2024 US corn yield, which will hinge on the filling stage and foliar disease pressures. Last year’s US corn crop witnessed limited foliar disease amid low humidity and the residual smoke from Canadian wildfires that produced a record large US ear weight. It was record 2023 ear weight that surprised the farmer.
- The bulls point to surging US cash market basis and that (low) price is doing its job of stimulating use. The morning Chicago corn/soybean rally was sold on nearby non-threatening weather forecasts. The Western Canadian Prairies, the Northern US Plains and the NW Midwest can endure another 7-10 days of dry weather without undue crop stress. These are areas to monitor into August.
- Plainly stated, if Chicago is to score new lows it will be based on the US corn yield rising above 184 bushels/acre or soy above 53.5 bushels/acre. Such big yields are possible amid improved July weather, but there are a key 6-7 weeks of Central US weather remaining. How big is big is the question for US corn/soy yields. However, one eye must be kept on corn foliar diseases and their early arrival.
- The bulls point to rising cash markets and improving demand. Interior US cash corn/soybean basis keep on strong soybean crush/ethanol production margins. And refilling the US soymeal pipeline has been a lot more difficult than expected, especially with 3 new Midwest crush plants taking an extra 375,000 bu/day of US soybeans each day by October. The point is that world corn and soy product values are historically strong with Brazilian corn $1.00 over the Gulf and Brazilian soyoil +1 cent over Chicago August futures. And even Argentine cash soymeal has stayed stout with Sept at $15/mt over. Black Sea wheat values are steady/higher with Russian/Ukraine farmers not selling to replace yesterday’s GASC purchase. US Gulf corn is offered at $0.77-0.80 over. The point is that world/US cash basis bids are strong on demand.
- The US ethanol grind was the third largest weekly total on record at 325 million bu. This big corn grind was a bullish surprise. Yet, hefty US ethanol production was not a surprise with margins exploding to the upside. And weekly US ethanol stocks fell 19 million to 972 million gallons. We maintain that WASDE is too low by 15-25 million bu on the 2023/24 corn grind.
- The GFS weather forecast is slightly cooler for the next 10 days, but little changed in the outlay of precipitation. The only forecast change is slightly drier for the S Plains, with limited rain for the Northern Plains and the NW Midwest. Heavy rain totals are forecast for the Gulf States and the SE US. The Western US and the Canadian Prairies hold in an arid forecast trend. Our future crop risk concern is the N Plains and the NW Midwest. High temperatures hold in the 70’s/80’s with high humidity levels.
- Chicago is cheaply priced relative to the future supply risks ahead amid surging Brazilian and Black corn and oilseed basis bids. And look for Russian wheat fob values to score a bottom in the next few weeks. Unfortunately, Black Sea crop losses will worsen with an ongoing arid trend. If you are bearish, it is a bet on record large US corn/soybean yields. The market has already priced large US stocks and yields, can they grow even larger is the difficult question.