- HEADLINES: Macro markets in recovery mode; GFS weather forecast stays hot; Global uncertainty ramps up.
- Chicago grain prices are sharply higher at noon as traders react to sliding Northern Hemisphere grain production due to extreme heat while a sinking US$ sparks a fresh appetite for risk. The volume of Chicago trade has expanded on the morning rally with short covering noted in wheat.
- Crude oil, raw material and equity markets are all moving in tandem with the US Central Bank telegraphing that it will raise its lending rate by 0.75% on July 28. Whether Russia turns on the gas to Europe through the Nord Stream pipeline looms large on Thursday. No gas would produce a threatening structural event for the EU with winter ahead and their economy moving closer to recession. And Ukraine is becoming pessimistic on Russia’s adherence to its security concern regarding the grain export corridor. Russian troops are slowing seizing a larger share of Southern Ukraine and Kiev cannot allow losing the port of Odessa. We remain sceptical that a UN deal can be brokered and more importantly work amid the ongoing hostilities of war. Russia’s weekend ramp up of rocket strikes of Odessa and Central Ukraine does not bode well for a pact to be signed later this week or next.
- Chicago brokers estimate that funds have bought 7,300 contracts of wheat, 8,800 contracts of soybeans, and 6,600 of corn. In soyoil, funds have bought 7,300 contacts of soyoil and 1,900 contacts of soymeal. Funds have been on the buy side across Chicago since the opening.
- There has been talk that China has booked 6-8 cargoes of Brazilian soybeans for February/March. China crush margins are positive in the back end of the market, and they are taking coverage of S American supply. There have been rumours that the US sold a few cargoes in that same position, but we cannot confirm the trade. However, China’s return to securing new crop soybeans is welcomed following weeks of modest buying,
- US weekly export inspections for the week ending July 14 were mostly uneventful, though the US does remain active in shipping previously purchased bushels of corn. Corn inspections through the period totalled 42 million bu, vs. 38 million the previous week and unchanged from the same week in 2021. Soybean inspections were 13 million bu, fractionally higher than the previous week. Wheat inspections were a meagre 7 million bu, vs. 11 million the prior week.
- For their respective crop years to date, exporters have inspected for export 1,980 million bu of corn, down 17% from last year, 1,930 million bu of soybeans, down 9%, and 77 million bu of wheat, down 23%. Yet, given the discrepancy between inspections and Census, weekly corn inspections of 33-34 million are required to meet the USDA’s forecast.
- The midday GFS weather forecast is similar to the morning release in featuring meandering high pressure aloft the Central US throughout the next two weeks. Scattered showers will continue to ride along the northern and eastern edges of this ridge, with the best rain chances offered to the far pockets of MN, IA and OH into July 28. Precipitation accumulation elsewhere will fall well short of evaporation rates as max temperatures across the Plains and Delta reach into the upper 90s/low 100s on a daily basis. The GFS forecast maintains max temperatures upwards of 104-115 degrees in TX, OK, KS and NE as early as Wednesday. Unfortunately, there is not yet any indication that this upper air pattern will be disrupted.
- Uncertainty abounds! Mother Nature will be stripping yield potential from Europe and a sizeable portion of the US corn/soy belt, while macro concerns will continue indefinitely as questions over Black Sea grain exports and European energy supplies will go unanswered until at least late this week. It is unlikely that a lasting trend is established until late Jul/early August, but we continue to advise users to add to coverage on these price corrections.