• November Canadian canola futures soared to contract highs on the increasing drought stress that is being placed on the crop. This week’s extreme heat, wind and dryness will knife Canadian crop ratings next week. And the forecast is arid/warm for another 2 weeks.

• Time is running out for drought stunted Canadian crops which are starting their reproduction phase. Ongoing dryness will have a sizeable negative impact on N American oilseed/grain supplies.

• Canola oil can be used in US biodiesel production while Chinese import demand is record large. The loss of Canadian canola comes at a time when world vegoil stock/use ratios are at record lows, maintaining bullish price trends.

• Soybeans traded quietly ahead of the holiday weekend and marked strong weekly gains at Friday’s close.

• May soymeal exports were reported at 1.05 million short tons, 97% of last year but right in line with the 5-year average. Weekly FAS reporting showed a sharp decline in soybean meal exports through June, as S America ramped up production and exports. Based on the FAS data, we estimate that June meal exports fell below 1 million short tons for the first time since June 2019. Nevertheless, cumulative meal exports at 10.8 million tons will be the largest since 2014/15.

• S American basis has rallied sharply in the last month, raising the odds that the US picks up additional late summer soymeal export business.

• This week’s USDA reports showed old crop stocks were tighter than expected, and farmers did not expand their acreage. This places greater importance on the need for a national yield above 50 bushels/acre and supports November soybeans above $13.75. A late summer weather problem could drive November back to $16 (or higher) amid an acute need to ration demand.

• Dec Chicago corn ended 11 cents lower as Trump’s summer E15 mandate ended for the summer of 2022 and as very light showers are probable across the drier areas of eastern Nebraska and Iowa next Tuesday-Thursday. Rainfall there of 0.25-0.75″ will not materially alter soil moisture and more important over the weekend is whether a pattern of heat/dryness persists across the Plains and W Midwest into the second half of July. Model guidance on Sunday afternoon/Monday morning will begin to peek into post-July 15 precipitation and temperatures.

• We have reduced 2020/21 US corn exports to 2,925 million bushels. However, this is still 75 million above USDA’s forecast, and ethanol’s demand draw in May was revealed at 448 million bushels, a post-Covid high. June ethanol use is pegged at 445 million. Similar disappearance is expected in Jul-Aug, which suggest USDA’s industrial use forecast is 25-40 million bu too low. And US feed/residual use will also be raised 50 million bu. Today’s E15 decision does not impact US corn demand longer term.

• The market trades weather exclusively into late month. Our bet is that a pattern of stagnant heat/dryness persists across the Plains amid deeply negative soil moisture anomalies. Breaks early next week are buying opportunities.

• US wheat futures ended mixed, with Chicago/KC contracts down 13-21 cents and spring wheat futures firm. Downside in spring wheat futures is severely limited as N American yield potential erodes further. We expect the US winter harvest to reach 50% this weekend. Stocks peak in the weeks ahead and supply pressures ease beyond mid-July. We also note that interior HRW basis remains firm despite the advancing harvest. Wheat-specific news on Friday was absent. The market follows corn and soy more directly as row crop reproductive periods lie just ahead. Sep KC’s premium to Sep Chicago corn is a weak $0.27 per bushel, and recall KC does not trade below corn for any length of time. Managed funds were flat in Chicago on Tuesday, and the risk is that substantial new buying emerges if soaking rain and cooler temperatures fail to materialise across the Plains and NW Midwest.

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