- HEADLINES: Chicago wheat near limit up as Russia threatens Black Sea vessel movement; GFS weather forecast unchanged in projecting extreme Central US heat.
- Chicago futures remain firm at midday but have fallen from session highs. At centre stage is the market’s focus on escalating war in Ukraine, with newswires this morning reporting that the Russian military moving forward will consider any vessel traveling to Ukrainian ports a threat, and the countries whose flag sits atop those vessels as party to war. This follows attacks in Crimea and Southern Ukraine overnight. Spot Chicago briefly this morning was limit up. Corn and soy have ebbed and flowed as the market awaits details, and likely actual readings, surrounding this weekend’s/next week’s soaring temperatures. Recall the EU and GFS forecasts are at odds over exactly how extreme heat will be across the Central Plains and Midwest, but there is little doubt that a pattern of rapid/massive soil moisture loss lies ahead. Conditions are fine today, but the gut slot of reproductive stages are due in the next 2-3 weeks.
- Paris milling wheat, corn and rapeseed markets have been less willing to ease at midday. Black Sea grain flows will be challenged, but we would reiterate that it is military action in the region that is most concerning.
- It is also noteworthy that Brazilian corn futures have followed grain markets elsewhere higher. Sep corn in Brazil is up $0.18/bu at $5.26. Nov corn in Brazil at midday sits at $5.52/bu. The Brazilian market’s inability to fall to new lows at harvest is important and suggests global corn markets don’t have to do much to encourage the return of enlarged demand.
- US ethanol production in the week ending July 14 was a larger than expected 315 million gallons, vs. 303 million the previous week and slightly above the pace needed to hit the USDA’s new annual target. The outlook for corn grind into late summer is positive amid ongoing year on year expansion in gasoline use and rising gasoline and ethanol prices. The ethanol swap market has recovered rather quickly from weakness in early July, with spot ethanol today quoted at $2.49/gallon. WTI crude is up $0.30/gallon at $76.10.
- The US dollar index has stabilised, but a more supportive global ag tone remains in place amid chaos in the Black Sea and numerous weather issues. Coming US heat/dryness is priority number one, but Argentina’s new wheat growing season ends with subsoil moisture almost completely absent. Developing dryness in W Australia must be monitored.
- There is little to new say regarding Central US weather as the GFS weather forecast is unwavering in projecting max temperatures next week at 105-115 across the Central Plains and into western Illinois throughout the second half of next week. Light/scattered showers may dot parts of the Midwest into the weekend, but nothing heavy is indicated outside of far W KS and IN/OH. The midday GFS forecast keeps in place expansive high pressure ridging into Aug 1, which limits meaningful precipitation to eastern North America. Debate is warranted over temperatures next week, but our concern is that of a near complete lack of precipitation over the next two weeks.
- Ukraine’s maritime shipments of wheat, corn and vegoils has ended, and while land movement westward is expected the cost and uncertainty of Ukrainian supply availability has risen. This along with threatening US and global weather patterns warrants end user coverage on corrections.