• Chicago soars as China starts a new crop purchase program from the PNW; Midday GFS weather model shifts rain to the E Midwest; West short changed.

• A bullish day, demand surfaces from China and Chicago grows horns; Chicago futures are sharply higher at midday with new crop corn/soybeans the upside leaders.

• Chicago volume has been more active than Thursday with yesterday’s sellers returning as today’s buyers. Note that Chicago markets lack bids and offers under and above the market that exacerbates daily price ranges. Brokers are struggling amid margin calls amid the huge daily/weekly price ranges.

• The drier forecast for W Iowa, W Minnesota and the Plains placed a bid under Chicago values this morning. Also, China has shown up asking for new crop US soybean offers. We understand that China has booked 6-8 cargoes of US soybeans with the Government of China (Sino Grain) rumoured to be the buyer. This would be the first China purchase of US soybeans in some weeks, and likely starts a lengthy campaign of demand. We believe that China will book/import 40-44 million mt of US soybeans in 2021/22, which will push US soybean exports above 2,200 million bu for the second year in a row. China is intent on meeting its commitment on its Phase 1 Trade Pledge to get to Phase 2 negotiations and a new trade deal that could reduce tariffs. The US/EU’s deal to end tariffs via airline production offered China hope for 0% tariffs.

• An extremely volatile Chicago trade is expected Sunday evening. Key will be amounts/locations of Midwest rainfall this weekend. Moreover, the extended range forecast looking into July will play large as corn pollination starts across the Southern Midwest/Central Plains right after the July 4 holiday. The US corn/soy markets cannot afford to lose a single bushel of production due to record large demand. This week’s Chicago break has allowed end users to extend their forward coverage well into early 2022. Strap in for high octane markets in July when each and every raindrop will be counted and measured against yield.

• Somewhat surprising is that on this week’s sharp futures break, Chicago open interest had not liquidated more. As spot soyoil futures fell nearly 10 cents/pound, open interest was down just 12,000 contracts. July soybean futures dropped $1.50/bu with open interest down just over 11,800 contracts. July corn is down over $0.50/bu with Chicago open interest down 50,000 contracts. We aretold by large institutional traders that index fund money is still pouring into the raw material space that likely replace the selling from faster moving managed money. Most fund managers report that they will hold onto “net long” ag positions into the heart of the growing season in July.

• The weather risk of a Russian Sukhovei is growing and being closely monitored by Black Sea traders. A Sukhovei is a weather phenomenon in which crops can be decimated in a matter of days due to hot/dry weather and wind. Such weather has knifed Russian wheat crops by 10-20% in a matter of days. KC wheat has recaptured all of Thursday’s loss as it most closely reflects Russian wheat.

• The midday GFS weather forecast is drier than the overnight run for the W Midwest with the model’s homing in on the potential for better rains for the E Midwest vs. the West. The Central US Plains stays dry with continued warm to hot temperatures. Crop areas west of the Mississippi look to receive limited 0.25-1.50” of rainfall through June 30. That is not enough to slow or end the drought.

• It is the Western Midwest that needs the rain as the dire drought of the west will continue its slow progression eastward in the coming weeks. July weather then becomes critical as the corn crop starts its pollination phase with soil moisture limited. The extended range forecast calls for a ridge West/trough East which follows prevailing soil moisture trends. Heat will back from west to east and our view is that the GFS midday weather model is not warm enough for the Plains and the W Midwest. Our concern for West Central US weather remains extremely high.

• “Wax off/Wax on” has been the trend of Chicago grain markets in recent days which is producing large liquidity holes. The midday models shift the rain trend to the E Midwest to the worry of W Midwest/Plain’s farmers. Ongoing dryness in the Plains/W Midwest will cause yields here to fall off the table. We stand by our longer term view, do not rule out new contract highs.

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