- HEADLINES: Chicago mostly weaker; GFS weather forecast trends cooler in extended range; Egypt cancels wheat tender.
- Egypt’s GASC cancels Sunday tender, to announce new direct tender Tuesday including Russia/Europe. risk off ahead of Russian decision on Nord Stream restart. Central US rainfall debate in 10-15 day period.
- Chicago grain prices fell to sharp losses at midday on the forecast of improving Central US weather and the fear that the US$ could rally sharply if Russia does not turn on the gas following the maintenance of the Nord Stream pipeline. The US$ is weaker at midday, but macroeconomic concerns have been directing Chicago prices since the last 10 days of June. The back and forth of the market has limited trader/fund participation in recent days. We look for a lower close without conviction as the trade worries about sluggish US export sales for the third week in a row. Weekly US ethanol production, to be released Wednesday, will also be uneventful amid current large stocks and difficulties sourcing remaining old crop supplies from the producer. Uncertainties abound.
- Egypt’s GASC cancelled its tender for North and South American and Australian wheat supplies. This was not completely unexpected as it was suspected GASC was simply checking on non-EU and non-Black Sea cash prices. Recall there have been few to no offers from the Americas and Australia in recent tenders. However, GASC will buy additional wheat via direct deals on July 20, and our work suggest Egypt is wise to boost supply coverage into latter part of autumn. A purchase of US SRW remains possible following Egypt’s lowering of moisture standards and as US Gulf SRW remains comparable to EU origin.
- There remain many unknowns over the near-term creation of an export corridor in the Black Sea. Europe will reportedly ease sanctions placed upon Russian banks in order to facilitate the movement of grain and fertiliser more easily. Otherwise, Putin stated he expects additional talks over the safe passage of Ukrainian grain, but no other details are available.
- We do note that Russian interior cash wheat prices are up sharply this week amid strength in the Ruble. Best guesses on Russian fob wheat sit at $375/mt for late summer and autumn, and based on current interior prices, downside risk is low when accounting for normal costs/freight and an export tax of $85/mt. Russian wheat is not overly cheap an sits some $10/mt above hi-pro wheat in Germany and the Baltics. Black Sea exports will stay challenged for some time.
- The midday GFS weather forecast is much warmer in the Plains, MO and IA this week, but has added rainfall to NE and the E Midwest beyond July 26 as the mean position of high-pressure ridging meanders into the Southeast. If verified, this will allow for regionally better rain chances across the eastern half of the US Ag Belt. This will also allow temperatures to moderate to more normal levels in the 8–15-day period. We would advise caution into putting too much faith on weather details beyond 5-7 days amid fluctuating model performance, but in the last 18 hours, forecasts have trended cooler/wetter in late July.
- Markets appear to be finding some measure of near-term equilibrium at $5.80-6.20, Dec corn, $13.20-14.00, Nov soy, and $8.00, Chicago wheat. Stability in wheat is notable given the time of year and wheat will be the first to score a lasting bottom. It is critical that mild temperatures and regular rain are established well into late August following recent heat and rapid soil moisture loss across the Plains/SW Midwest and mid-South. We remain sceptical that the US weather pattern changes outright prior into late summer.