- Grains sag while soybean bounces on sale of 510,000 mt to unknown destination; Wheat protein spreads to widen amid low test weight EU wheat crop; GFS weather forecast more like EU Model.
- The battle is ongoing in rising new crop US supply vs strong US/world cash premiums. Rumours have China back in the US market for soybeans with 510,000 mt reported sold for 2024/25. The sale was to an unknown destination. There was also a sale of 150,000 MTs of US soymeal to an unknown destination for 2024/25. We believe that China is asking for additional soybean offers off the Gulf and PNW for October/November. Chinese and US crush margins are strongly positive, and China is a price buyer with values at 3-year lows. Chicago soybean futures have been able to recover on the news, with soymeal holding strong on record large cash premiums and ongoing new demand as Argentine sales and offers are well below expectations.
- Corn and wheat futures are mixed to weaker on mild Midwest temperatures which could produce a larger yield. The corn market is falling on the potential for a record US corn yield and how big is big. Current values are pricing in a US corn yield of 182-184 bushels/acre, or some 5-7 bushels/acre above last year’s record. The corn market is searching for a low that deciphers this year’s US corn in the backdrop of rising Brazilian/Ukraine fob offers. Brazilian corn is offered at $0.96-1.05 over for August/September, $0.20-0.24/bu above the US. The weakness in corn has pulled Chicago wheat values back into the red.
- Chicago brokers estimate that the managed money has sold 5,600 contracts of corn, while buying a net 2,100 contracts of soybeans and 1,200 contracts of wheat. In the products, the managed money has bought 2,200 contracts of soymeal and 1,700 contracts of soyoil.
- US weekly export sales for the week ending July 11 were 21.3 million bu of wheat, 17.2 million bu of corn, and 13.2 million bu soybeans. For their respective crop years to date, the US has sold 284 million bu of wheat (up 93 million or 49%), 2,154 million bu of corn (up 589 million or 38%), and 1,667 million bu of soybeans (down 264 million or 14%). A US 2023/24 soybean export estimate of 1,675-1,700 million bu is realistic with corn at 2,200-2,250 million bu.
- China is way behind on its US new crop soybean purchases, something that we have been reporting for some weeks. There is talk that China is adding to their soybean purchases, but nothing near the volume of the past 36 hours. Traders are questioning whether China steps forward and catches up on its soy purchase pace with US tariff levels known into February. China needs US soybeans since Brazilian offers are limited beyond the next 60 days. If China wants to place itself in a strong trade negotiating position with the US, they will increase their soybean import needs into early 2025. We suspect that China will be a more active buyer following the Milwaukee Republican Convention. Time will tell, but some traders are exiting long corn/short soybean spreads amid the potential for China to be a larger buyer of US Sept-January soybeans. Also, we suspect that 2 cargoes of US old crop sales, are new crop and misclassified.
- World wheat protein spreads are expected to gain amid the reported poor quality of the French/German wheat crops. And if yield cuts are produced by dry weather across Canada and the Northern US Plains, spring wheat protein supplies will be tightening. 12% Russian, US HRW/HRS and Canadian/Kazakh wheat will be sought. The EU will likely feed more low-quality wheat in 2024/25.
- The Central US GFS weather forecast is more like the EU model solution and drier across the W Midwest, the N Plains, and the Canadian Prairies than it showed overnight. Limited 10-day rainfall of traces to 0.6” is forecast above the NW Midwest and the N Plains, while heavy totals of 2-6.00” drop across the Gulf States and the SE US. Flooding will become an issue across the Gulf States with the corn harvest set to begin in 2-3 weeks. No extreme heat is forecast with Midwest high temperatures to hold in the 70’s to the upper 80’s.
- Black Sea weather is the biggest threat to world crop production with corn/sunseed crops in decline and the midday GFS forecast returning drier. The non-threatening Central US weather forecast caps Chicago rallies. Traders will be closely following net short corn, soybean, and wheat positions in Friday’s CoT report. The market is excessively bearish, but a US supply threat is lacking amid uncertain future Chinese demand.