- Chicago futures are mixed at midday in thin volume as traders await the yield results from IL/IA and try to gauge the extent of the current dry spell. The forecast has rain starting August 28 and nearly all the models are on board for a wetter pattern than recent weeks. Yet, the details of rain location/ amounts have yet to be worked out by each model. The rain must be pulled forward in the forecast for traders/producers to have any confidence and with 3 tropical systems in the Atlantic, uncertainty persists. The trade will continue to closely monitor weather forecasts and the results of the Pro Farmer Tour. The yield impact on soybeans will be greater than corn amid maturity.
- We look for a mixed close without much fanfare with the weather forecast for next week keying price direction into the weekend.
- Chicago brokers report that funds have sold 2,400 contracts of corn, while buying 600 contracts of soybeans and 2,700 contracts of Chicago wheat. In soy products, funds have bought 2,600 contracts of soymeal and 1,900 contracts of soyoil.
- FAS reported that 192,000 mt of US soybeans were sold to China in the 2020/21 crop year. We estimate that China has now taken 17.5-18.0 million mt of US soybeans.
- Contrary to cash rumours, FAS did not report that several cargoes of US hard wheat were sold to China. It is possible that the sales were done individually through differing exporters so that they will be covered in the weekly (not daily sales report), with the buyer said to be Hong Kong Mills. Wheat futures initially fell on the lack of confirmation but have bounced into midday. Black Sea wheat fob values are stable today at $202/mt.
- The 2020 Ukraine 2020 grain crop was estimated at 70 million mt according to the economy minister. This would be down 5 million from 2019 which likely includes a 35-37 million mt corn crop. This compares to a USDA corn crop estimate of 39 million mt. The Ukraine Government and market participants agreed to export 17.5 million mt of wheat in the 2020/21 crop year. The export estimate was in line with USDA and industry expectations.
- Rumours abound in Argentina that the Government is considering cutting export taxes for processed soybean products to make the country more competitive in world soy product trade. Rumours have the cuts at 3-5% compared to whole soybeans. The timing of any new tax changes is said to be in December/January.
- The August Cattle on Feed report is expected to show on feed supplies at 101% of last year, placements of 106% and marketings at 100%. The report will be released Friday and is expected to start a trend of rising US feeder cattle placements in coming months. Kansas wheat pasture is expected to be in high demand this winter as a cheap feed source.
- The midday GFS weather forecast is wetter in IA/IL late next week but is otherwise unchanged. Mostly dry/warming conditions are projected throughout the next 10 days, with a much wetter pattern likely thereafter. Soaking rainfall of 1-3″ is forecast across SD, NE and a bulk of the Midwest Aug 28-31. We have previously mentioned that this wetter shift is probable, but confidence in forecast details is low. Note that the GFS forecast brings a tropical storm into FL and the Southeast Aug 30-31. Exact Midwest precipitation totals in late Aug/early Sep hinge upon the placement of Gulf storm activity, which exacerbates forecast uncertainty.
- Rallies or breaks will not carry through until Pro Farmer offers you a final 2020 US corn yield for Iowa on Thursday. The Tour is in the western end of IA and eastern end of IL today. On Friday, Pro Farmer will release its Final Tour corn yield. US farmers are using this rally to part with additional old crop corn (on basis contracts vs September futures and cash corn in the bin). Few want to aggressively buy the market with the harvest weeks away. Yet, dry weather is limiting selling based on the worry over yield declines. The market is likely to keep rising until there a more definite chance of rain in the 7-day forecast.