- HEADLINES: Chicago extends overnight rally as GFS weather forecast stays dry, very hot into early August; Spot crude up $1.50/barrel.
- US spring wheat futures are lower following Monday’s somewhat unexpected boost in crop ratings, but otherwise US and global ag markets are adding risk/weather premium. Wheat futures in the US and Europe have largely shrugged off talk that Russia would waive its current tax on wheat exports to ‘friendly nations’ and focus instead remains on the rapid escalation of war in Ukraine. We have highlighted previously that, on paper, the corridor won’t materially obstruct Ukrainian shipments given reduced Ukrainian grain output, but vessel movement in the Black Sea will be challenged by missiles/drones and there is some increased measure of risk in maritime exports from both countries. Additionally, forecasts in the US and large parts of Europe keep in place a pattern of widespread dryness and increasingly warm temperatures into the opening days of August. Regular rain is still needed in all but the eastern Midwest to fully salvage yield potential.
- Global rapeseed and canola markets have been the bullish leader of the oilseed space in recent weeks as the loss of just 2-3 million mt of Canadian canola production would be highly disruptive. November canola at midday is up another $1.50/mt and has rallied 12% since June 30. August Chicago soybeans are down 5% in the last 30 days, and so similar to 2021/22 the world’s minor oilseed markets are providing a pillar of support to the soy complex. Spot cash rapeseed oil in N Europe today sits at an equivalent $0.51/lb, up 6% in the last 30 days.
- Interior US corn bids have been firm this week, especially at/near ethanol plants, with Cedar Rapids basis rising to $1.03 over, and with spot cash corn in the W Midwest above $6.20/bu for the first time since the release of NASS’s stocks and seedings data. Central Midwest soy bids have rolled to November, but flat prices are still well above $15/bu for Jul-Aug delivery. It remains that there is limited tolerance for yield loss, even corn, which makes the next 2-3 weeks of growing conditions critical. Current subsoil moisture is lacking or absent entirely in pockets of the Central and Northern Plains and Northwest Corn Belt.
- Export demand is struggling but domestic processing margins are elevated. Spot futures-based soy crush at midday is $1.85/bu, vs. $0.40-0.80 in mid-June. Ethanol margins remain profitable amid relative strength in cash ethanol prices.
- The midday is GFS weather forecast is consistent with morning output, and unfortunately maintains a pattern of lengthy and widespread dryness and a growing likelihood of extreme heat throughout next week. High pressure ridging currently aloft TX and the Southwest expands rapidly into Central Plains and far W Midwest this weekend. The GFS forecast keeps this ridge in place across the western part of the US Ag Belt into August 1-2. The GFS is unwavering in projecting max temperatures across TX, OK, KS, NE, MO and parts of IA at 96-107 degrees, which is probably overdone but there is agreement that a much warmer temperature profile impacts the Central US in late July. Meaningful precipitation will be confined to W KS and the mid-South. The outlook is threatening.
- Midwest rain in late June/July was welcomed, but heat/dryness in the second half of July is as or more threatening than early-season drought. There is a more broadly supportive tone to the global ag market amid ongoing firm prices in India, rising interior prices in Russia, firm South American corn fob basis the return of adverse US conditions.