- HEADLINES: Chicago corn/wheat rally strongly on fall in private Brazilian corn estimates; Egypt’s GASC books just 60,000 mt of Romanian wheat; Midday GFS weather forecast drier.
- Chicago futures are higher at midday as the overnight selling pressure abated. Grain futures rallied sharply which has pulled soybeans higher on China Covid related selling amid the fear of economic slowing. The volume of Chicago trade today is well above late last week as a new month starts.
- Wheat has been the Chicago upside leader on rising Black Sea wheat values and the lack of participation in today’s Egyptian GASC tender. Only 5 offers of fob wheat were pushed at GASC, well down from recent tenders where 12-18 offers were common. And two of the Russian multinational export offers were well above the cash market at an estimated $270/mt basis FOB. Rumours of poor-quality EU wheat via excessive July rainfall along with the decline in the Russian wheat crop has spiked world wheat prices upwards, a trend that we expect will persist as importers and end users having limited forward coverage beyond September.
- Corn rallied as commercial US crop tours reported less than expected yield potential in the E Midwest and amid a sharp fall in Brazilian corn crop estimates. Private forecasters have knifed their Brazilian corn estimate to 82.7 million mt. AgRural went a step further and cut their Brazilian 2020/21 corn crop estimate to 77.5 million on poor yields amid the damage produced by drought and two hard freezes. A Brazilian corn crop of 77.5 million would be 15.5 million mt below the USDA’s July forecast and drop Brazilian corn export estimates to 12-14 million mt from the USDA’s 28 million. Most of Brazil’s corn export loss would be pushed to the US as China is rumoured to have bought additional Ukraine corn for October-November on Friday. The bid/offer on Ukraine fob corn is a wide $0.40/bu today. Few Ukraine farmers/commercials are looking to sell additional corn for harvest delivery with a big China program already underway.
- Chicago brokers estimate that managed money has booked 6,500 contracts of corn and 4,700 contracts of wheat, while selling 1,900 contracts of soybeans. In the products, funds have sold 4,100 contracts of soyoil while buying 1,900 contracts of soymeal.
- US weekly export inspections were larger than expected in corn with China taking 32.6 million bu. For the week ending July 29, the US shipped out 54.5 million bu of corn, 14.2 million bu of wheat, and 6.6 million bu of soybeans. For their respective crop years to date, the US has exported 2,472 million bu of corn (up 973 million or 65% from last year), 2,139 million bu of soybeans (up 692 million or 32%), and 138 million bu of wheat (down 35 million or 20%). We note that US Census monthly corn exports are 173 million bu larger than FGIS Monday inspection data which means that the US must equal just north of 51 million bu to reach the USDA’s annual US 2020/21 corn export forecast of 2,850 million bu.
- The GFS weather forecast is vastly drier across the Southern Lake States and does not break out meaningful rain for S Iowa and C Illinois until August 11. N Iowa stays dry. A few showers will dot N Minnesota/N Wisconsin, but the rains will be north of key corn/soy areas. The best chance of rain is with a system that pulls across S Iowa and C Illinois on Aug 12, the tenth day of the GFS run, which is too far out for any confidence. Otherwise, the forecast is arid with limited rain chances for the Plains and the NW Midwest. Soil moisture levels will continue to fall. Midwest high temperatures will be cool in the 70′s to lower 80′s into Wednesday with warming pushing back into the N Plains/W Midwest thereafter. A high-pressure ridge rebuilds through the Central US which is anchored by a trough west of the PNW. High ttemperatures in the Plains/W Midwest return to the 90′s to the low 100′s. E Midwest temperatures hold in the 80′s to lower 90′s. The W Midwest/ Plains are they dry into Aug 15.
- Chicago has been focused on Central US weather and each raindrop that falls. However, it is the sharp drop in 2021 world grain/oilseed production that should captivate the market with demand pushed at the US over the next 6-9 months. World falls in corn, wheat and canola (rapeseed) crops are massive with end stocks in fast retreat. A demand grain led bull market is ahead with corn/wheat being the upside leaders. We look for a fall in good/excellent crop ratings later today with StoneX estimating the US 2021 corn/soybean crop sizes on Tuesday afternoon. StoneX has a history of pegging the final US crop yield, not what the USDA will say in August.