- The latest seasonal forecast from the IRI (International Weather Bureau) offers a trend of continued below normal rain for the Central US heading into October. Temperatures also hold above normal levels with the odds of such warmth being better than 60%. The upcoming spate of rain and coolness across the Central US looks to be an interlude, rather than pattern change. The key going forward is whether the drought stricken S Plains and the SW Midwest receives enough rain to reverse the ongoing dryness. HRW wheat seeding starts in just 8 weeks and moisture will be needed for germination.
- The soybean market continued it’s slow and steady recovery, marking another day of modest gains. Soymeal and soyoil followed soybeans higher, and crush spreads fell to new monthly lows. Funds were estimated buyers of 3,000 contracts each in soybean and soymeal, while selling 3,000 contracts in soyoil. US weekly export sales showed a US soymeal export total that was more than double the previous week and also at a marketing year high. According to the FAS’s count, cumulative soymeal exports for the year rest at 9.6 million mt, up 16% year over year. Outstanding sales at 2 million mt are also record large, and 16% larger. The current pace of exports and sales supports the USDA’s July forecast for record large old crop meal exports. On the other hand, new crop sales are the slowest since 2011. Heading into the end of the week markets will remain focused on US weather and international trade talk. A lasting market bottom requires a trade deal between the US/China.
- Slowly but surely, corn futures continue to extend their recovery. There are a few weather hot spots, namely the S Plains & SW Midwest. Our thesis is that corn is cheap relative to record large demand trends. Ethanol margins are healthy. Export potential is growing amid adverse weather in Europe and across Australia’s barley region. And funds are holding an unusual mid-July short futures position. US export sales through the week ending July 12 totaled 25 million bu. This was at the higher end of trade guesses, and is also double the pace needed to meet the USDA’s annual forecast. Argentina corn yields were lowered slightly. The Buenos Aires Grain Exchange cut its official production forecast to 31 million mt vs. 32 previously. Argentine interior cash corn prices are rising sharply as exporters search for supply. Dryness will be ongoing in France and Germany, plaguing both corn and spring barley. We would highlight the extreme tightness in Australia’s barley market. Complete dryness continues across E Australia into August. A vast majority of Ukraine’s corn surplus will likely now go to Europe. More world demand will be driven to the US Gulf and US 2018/19 corn exports could rise to a record 2,450 million bu.
- Wheat’s recovery continues amid firm world cash markets and mounting concern over Australian dryness. There’s zero rain offered to New South Wales through the next two weeks, and a developing El Niño will restrict any major pattern change into the growing season. Strong storms, hail and exceptional heat have been reported in Saskatchewan. US export sales through last Thursday were just 11 million bu. This is up 6 million from the prior week, but slightly below the pace required to meet USDA’s annual forecast. Russian exporters are active amid steep discounts to other origins. We note Gulf HRW’s premium to Russian drops to $10/mt for delivery in November. This spread will likely narrow even more in the weeks ahead. Note that Black Sea futures have hit new rally highs at $218/mt, basis September. Cash moved up to $208 spot. Fine-tuning the world trade matrix will be difficult amid the loss of yield in Europe and the Black Sea, and amid concern over quality in Central Russia. It remains that the US is in excellent position to boost market share beyond the next 30-45 days.