- Concrete evidence of a US-China trade deal is needed before the US soybean balance sheet is altered significantly. Still, rhetoric is improvement, meetings between lower level US/China officials are scheduled for Wednesday and Thursday, and there is talk of a meeting between Presidents in November.
- Soybeans rallied overnight on follow through technical buying, but gave back most of those gains through the day and ended just above unchanged. Midwest rains both over the weekend and forecast for this week, along with a drop in the wheat market weighed on the market at the start of the week. The weekly Crop Progress report showed national good/excellent crop ratings down 1% from last week at 65%. After falling 11% last week, ND marked another 8% decline this week, while SD and MN each fell 6%. The largest increase was in MI, where good/excellent ratings jumped 10%. The MO borders contain the poorest rated crop at 34%, and NE has the highest at 81%. National crop ratings are holding above both last year and the long term average, while crop condition yield model points to a Sep NASS yield estimate of 52 bushels/acre. Short and intermediate technical trends are still up, with initial support for November just below $8.90. The US yield debate, and upcoming talks with China, look to remain main price drivers.
- Corn futures were stuck between a plunging wheat market and a stronger soy complex. News from the Pro Farmer tour so far has been limited regional counts, and a close eye will be kept on daily yield estimates. The Pro Farmer’s tour has a relatively solid performance in estimating yield, which requires a string of reports much better than a year ago. Official crop ratings were down another 2% to 68% good/excellent. Nationwide, the crop is 44% dented, vs. 26% on average this week. Note that % mature will be reported next Monday. Other news is lacking. Black Sea feed wheat is unchanged at $205/mt. Black Sea barley is unchanged at $235-245/mt into Oct. Gulf corn this evening is offered at $177/mt. This is at parity with spot Argentina, but is otherwise by far the world’s cheapest feedgrain. The return of complete dryness is being watched in Ukraine. Price changes in corn will be rather dull into the second or third week of September. Dec futures seasonal low was likely scored in early August.
- US wheat futures fell sharply. This is partially due to a further parsing of Russian government comments, there will be no immediate cap on exports, and also partially due to renewed currency weakness. Non-US farmer profitability remains intact. However, a major re-shuffling of the world trade matrix needs to occur in 2018/19, and this problem isn’t being solved at current prices. In fact, ongoing aggressive spot Russian offers will only speed the rally in domestic bread prices there. The Australian weather forecast is slightly wetter in the driest areas of NSW and Queensland. However, coming moisture won’t at all solve longer term drought. Assuming the forecast verifies, Jul-Aug precipitation in NSW will remain historically low. Note too that overnight low temperatures will drop into the 30s in Argentina this week. Important this week will be whether weekly export sales match last week’s excellent 30 million bu. Gulf wheat is still offered above comparable Black Sea origin for Sep arrival, and so we doubt the lasting shift in demand has occurred just yet. But US wheat’s discount to EU origin is widening. Better demand is due by mid-autumn.