• China trade war fear has sparked widespread selling/liquidation at the CME with US farmers trying not to panic while end users are passive about taking too much coverage ahead of an expected Trump announcement on Friday. The fear of a trade war is actually more troubling for the market than knowing that the US/China are in one. Currently, anxiety from ag producers is extremely high.
  

• Soybeans, soy products and corn have pushed to new lows with July Chicago wheat falling below its recent support. The charts have turned bearish with funds active in their selling. We estimate that funds are now net flat in soybeans, but are still holding a sizeable long in soymeal, corn and wheat. The China trade war won’t have much of an impact on the US grain exports (since China is not a large US importer of corn/wheat), but traders fear that China will rescind their offer to end duties on US sorghum, and place a 25% tax on US soybeans and other ag products. The market is clearly signalling their expectation that President Trump will announce $50 billion of trade tariffs on Friday. China this morning reminded the US that it will retaliate and that their offer of securing an extra $70 billion of US ag/energy products will be off the table. The imposition of actual tariffs will cause a hardening of positions, with some in China advocating for a boycott of US products. US farmers hope is that President Trump keeps his promise and quickly offers a program of compensation or market stabilisation following any retaliatory measure by China against US ag products. Rising US interest rate costs along with the 50% drop in net farm income will push some US producers into acute financial stress without almost immediate White House assistance.

• We hear that the US and China are still in negotiations on how to avoid the US tariffs although it is President Trump that has the final say. State Dept head Pompeo is in China. The Chinese are pushing for a win-win in offering to boost their purchases of US goods -including agricultural and energy. Pompeo also met with Chinese President Xi for dinner. And in the background US trade are the issues of ZTE and China’s needed help with North Korea. The Trump Trade Team is arguing for tariffs, but President Trump could allow for negotiations to run for another 180 days if he sees progress.

• The US$ is sharply higher following news that European Central Bank commented that interest rates will be on hold at low levels thru the summer of 2019. The US economic outlook is bright and further rate hikes lie ahead. The EU, Japan and much of the emerging markets cannot afford to raise rates.

• The midday central US midday GFS forecast is wetter across Minnesota/Wisconsin as a storm system rides over the top of a ridge of high pressure this weekend. The ridge of high pressure progresses slowly east over the next four days to a mean position across the Midwest. This ridge causes warm to hot Central US temperatures with highs ranging from the upper 80’s to the upper 90’s into mid next week. A cold front compresses the ridge and produces a few showers late next week.

• Soybeans are down $1/bu while corn prices are below last year, when US and world stocks were forecast to be much larger. The Black Sea weather forecast is warm/dry which is harming their corn crop. Chicago has fallen sharply based on the expected US announcement of tariffs against China. Political markets are impossible to trade unless you use options. Our hope is for political clarity.

• By any fundamental measure, the world wheat balance sheet has tightened considerably since 2006. World stocks remain a near record large 266 million mt. But 139 million (52%!) are stuck in China. China will not be an exporter of wheat, and so available exportable supplies are down sharply from recent years. This has been included in USDA WASDE reports since May, but we look for yet further contraction in the months ahead. The two primary areas of concern are the Black Sea and Australia. Apr-Jun precipitation in S. Russia (the country’s winter wheat belt) and NSW in Eastern Australia are both historically low. The USDA has not really begun to adjust yield in Russia (only acres were lowered on Tuesday), and further production declines lie ahead. Note also that ABARES in Australia lowered its Aussie production forecast to 22 million mt, vs. the USDA’s 24. It is rather easy to strip another 4-5 million mt from major wheat exporter production.

• The USDA in its June report left major exporter stocks/use unchanged at 14%. This compares to 17% in 2017/18, which is a significant change. Whether domestic use in Russia declines by 5 million mt, which the USDA forecast, remains to be seen, and some contacts argue that this will be difficult. Regardless, assuming further downgrades to Russian, Australian, and very likely Ukrainian production, we expect major wheat exporter stocks/use to test the recent low set in 2007. $10 plus wheat (like in 2017) is of course not expected, but world cash markets will likely rally into the latter part of summer. There is just no incentive for exporters to chase breaks. Since 2016, major exporter wheat production will have fallen 23-25 million mt. No longer does price need to find demand. This is an important change that has developed.

• There is a pretty strong correlation between major exporter stocks/use and average cash prices in Russia. Recall Russian prices are the benchmark for the rest of the world. Assuming major exporter stocks/use forecast of 13%, Russian prices in 2018/19 will likely average $225/mt, vs. $198 so far in 2017/18. There is potential for seasonal highs to be set at $230-235/mt. At this point Gulf HRW competes for world market share at/below $5.40. Gulf wheat is expensive currently, but we fully expect world cash prices to rally in the weeks ahead. Fob lineups will probably look very different 4-5 weeks from now. It is the goal of the market to encourage N Hemisphere producers to expand acres. If sizable expansion (2-3%) is not found, major exporter stocks contract further in 2019 assuming trend yields. Breaks in wheat are opportunities for end users to extend coverage.
  

• Chicago has fallen on renewed selling as traders generally expect/fear President Trump to apply $50 billion of tariffs against China on Friday. The media campaign for positive US trade balances by the administration along with insider news reports from agencies like Politico, has spurred expectations. We note that soybean prices have been compressed by $.85/bu by the China trade tariff fears which is further cutting into US farm income. Corn and wheat have followed the demise of soybeans, but since China is not a big importer of either grain, it’s a “me too” price reaction. We have no way of knowing whether President Trump will impose $50 billion dollars of tariffs following just three meetings of negotiation with China. However, China has pledged to QUICKLY retaliate against a host of US ag goods which worries Midwest farmers. We would note that spot Chicago soymeal has fallen back to $347/ton which fills an open chart gap left before the dire Argentine drought. The fear of China trade tariffs has been an anchor on Chicago. Bullish world balance sheets for corn/wheat have not offered solace.

• We would remind that Trump has promised compensation. Questions are circulating whether that Trump tariff compensation will be in the form a direct cash payment, or the CCC (Commodity Credit Corporation (CCC) is a wholly owned US Government corporation that was created in 1933 to “stabilise, support, and protect farm income and prices”) buying US ag goods and storing them like what occurred following President Carter’s embargo against Russia in 1980. (Although we doubt this is either realistic or feasible). Historically, the fairest way to support farm income has been for CCC to secure US farm goods and store them (to sell back to China in future date). CCC buying commodities raises the ag market value to all producers. Trying to gauge damage/compensation to individual farmers is an inexact, tiresome and almost an impossible task. We have no way of knowing when/where or what the administration will announce on a program of compensation. But, as Chicago has fallen sharply in the trading sessions leading up until Friday’s potential tariff announcement, farmers are anxious to hear compensation program details. We would note that as US soy prices dive, it benefits Chinese buyers/ importers. A 25% retaliatory tax by the Chinese allows their buyers to secure ag products across the world at a cheaper price. This benefits China, and we are sure that the Trump Administration is against that. The big loser would be the US farmer, who has already seen their net income fall 50% since 2013.

• The WASDE balance sheets of Tuesday reflected falls in 2018/19 world wheat, corn, and soybean end stocks. And most argue that Black Sea wheat/corn crop forecasts have further to fall. Tariffs aside, there is a grain bull story.

• The midday weather forecast is little changed from the overnight solution and is similar to the EU model. A ridge of high pressure progresses slowly east over the next four days to a mean position across the Midwest. This ridge causes warm to hot Central US temperatures with highs ranging from the upper 80’s to the upper 90’s into next Wednesday. Rains will fall around the ridge with active showers noted across the Dakotas and the Gulf States. An upper level trough compresses the Midwest ridge southward late next week allowing for improved showers across the N Midwest. A tropical wave causes moderate to heavy rains across the Plains which will slow the US HRW wheat harvest. However, this moisture will aid summer row crops. The clouds here keep temperatures at seasonal 80’s/90’s. The ridge does rebuild in amplitude in the 11-15 day period and likely returns to the Plains/W Midwest.

• Trade politics are impossible to forecast or trade. We have no guess on whether tariffs are on or off against China. The market trades like they will occur, but we doubt that decision has been made, our view is that it is 50:50. Current Chicago prices are too low based on the WASDE balance sheets, assuming the US does not seek a China trade war. All bets are off until we see the outcome of tariff news likely to be released on Friday.

• Fear and fund liquidation has pushed Chicago sharply lower this morning with funds exiting stale long positions ahead of the Singapore Summit and the USDA June Crop Report on Tuesday. We would note that CONAB will also be out with their Brazilian crop updates tomorrow morning. A cut in the Brazilian corn crop of 2-4 million mt is expected from their prior forecast of 87 million. This coming summit/USDA report and Central Bank meetings make this a very important week for data heading into the end of the month and quarter.

• Chicago brokers estimate that funds have sold 17,000 contracts of corn, 8- 9,000 contracts of soybeans, and 4,700 contracts of wheat. In soy product futures, funds have sold 6,200 contracts of soymeal and bought 1,700 contracts of soyoil. Funds are shedding long stale Chicago grain and soymeal positions.

• Traders fear that the US/North Korean Summit will not conclude in agreement with both President Trump and Kim expected to only meet for several hours and then depart. We do not expect that an agreement will be reached. Rather, we expect that both leaders will decide that it is in their best interest to keep talking and more fully engage their staffs on nuclear disarmament.

• A future of ongoing US/North Korean talks would keep the Chinese engaged and likely slow or even prevent the US from imposing $50 billion of trade tariffs on Chinese goods as US seeks their involvement/support. Kicking the North Korean can down the road would be the best-case outlook for US ag goods, and allow the US/Canada/Mexico to work on NAFTA and allow more time for US/Chinese negotiators to work on intellectual property rights (beyond the standing Chinese offer to secure an extra $70 billion of US ag and energy goods). We would see a Singapore Summit deal of “dialog” as positive for US ag commodities.
  

• NASS is likely to find a bigger US winter wheat crop in Tuesday’s report, but declines in Black Sea, European and Aussie crop estimates should more than offset the US gain. Russian wheat traders are off today for their Independence Day holiday, but we expect that the ongoing dryness across Ukraine/W Russia/N Europe will likely cause the world wheat stock/use for major exporters to decline near the 2007 low. We doubt that Black Sea wheat prices can fall very far this harvest amid exceptionally tight old crop stocks in the area surrounding the Black Sea, and the reduction in new crop supply. Black Sea wheat futures argue that their fob cash market is too cheap at $205/mt.
  

• The midday GFS North American weather pattern forecast in the US has the GFS drier in parts of WI and IL this weekend, but is otherwise unchanged. The model maintains the return of expansive high pressure in the 6-10 day period. This will trigger another round of widespread Central US dryness Jun 13-20. Temperatures in the Plains again reach into the mid/upper 90s. Our confidence beyond even a few days remains low, but the difficulty in establishing a weather trend will keep volatility high. The EU model will be watched closely. Key is whether high pressure ridging returns in the second half of the month. Five-day precipitation suggests much of Corn Belt will be well watered in the near term.

• The fear of a poor outcome of the US/N Korea Summit and Chinese trade tariffs later this week has engulfed Chicago this morning. Adding to the bearishness is the rains that are expected to fall across the Central US in the next ten days. However, Black Sea and European wheat crops are in decline, and a Russian 2018/19 wheat export estimate of 30-33 million mt are now being embraced, which is down from 40-41 million mt this year. The world wheat market has a bull story.

• Trade issues, weak currencies, and a likely El Niño this autumn has weighed on prices. Longer term, drought in S America next winter is not expected, but falling Black Sea grain potential and uncertain US weather in mid to late summer leaves questions that are tough to answer at this time.

• Ag markets are steady to weaker at midday, with wheat leading the way down on long profit taking. Corn and soy futures today have found new 4 or 5-month lows, while July Chicago wheat rallied 30 cents in the first week of June. We expect this evening’s CFTC report to include a very modest net managed fund long in Chicago wheat. On the week, July corn is down 14 cents, wheat is down 5, with beans down 51. Otherwise, it is still all weather and global trade. Radar maps at midday show moderate rainfall working across northern IA, WI and northern IL. These areas have seen rainfall so far in late spring, but it is likely that some of the driest areas of IL get a boost in moisture in the next 72 hours. The GFS maintains widespread shower activity across the Corn Belt into next Mon/Tues. The G7 meeting in Quebec will be ongoing today. NAFTA discussions will be separate from this, but rhetoric remains of escalating tensions between the US and others. The US$ has maintained its overnight strength. Other macro market are little changed from earlier in the morning, with crude down $.40 and equity markets unchanged.

• The Brazilian Real is sharply higher this morning as the country’s Central Bank pledges to do all it can to fight inflation and ongoing currency weakness. Another $20 billion will be used to strengthen the Real by the end of next week. Contacts suggest this is true, but whether the efforts are sustainable is less certain. Interest rates cannot be raised amid economic contraction. On the margin in the last 2-3 months, currency action indicates a boost in non-US acreage in 2019.

• This week’s Plains HRW harvest report indicates protein levels are rather higher (not surprisingly given recent heat/dryness), but that NASS’s first yield estimate in OK is accurate. Harvest has started in KS, and amid lower planted acres should be move quickly. Abandonment needs close watching. Russian cash wheat prices end the week unchanged from recent days, but a touch higher on the week. There is quite a spread developing between world exporters. Russian fob is offered at $205/mt for August. Gulf HRW is offered at $240, with Australia at $260 and Argentina at $285/mt. With Russian dryness ongoing, and as it is the world’s cheapest origin (by far), we expect Russian wheat prices to form a bottom in the next 1-2 weeks.

• The midday GFS weather forecast is wetter in Central Ukraine, but maintains complete dryness across the whole of Russia’s wheat/corn belt into June 20. The corn market will pay much more attention to Black Sea dryness if it continues into the early part of July.

• The midday GFS North American weather pattern forecast is cooler and slightly drier for the N and W Midwest over the next ten days. The mean position of the high pressure ridge is farther south and less amplified. Rains will fall across the western fringe of the ridge which looks to produce an abundance of rain for; IL, IN and the Ohio Valley. In the 11-15 day period, the model forms a high pressure ridge across the SE US which would push an abundance of humidity into the Central allowing for widespread and soaking rains. The 11-15 day forecast is wetter than what was offered overnight (which offered a tropical storm for the Florida Panhandle). Our confidence in the GFS forecast beyond the next seven days remains low.

• No bull likes uncertainty in trade or the weather. The US and EU weather forecast models have been in poor agreement for weeks, and our confidence in the GFS is low. And the US is missing its largest buyer, China. If the US made trade progress with NAFTA or China, a strong and quick rally would unfold in Chicago. World wheat trades know the importance of declining Russia and European wheat crop sizes.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 8 June 2018

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions disaggregated data

• The funds are out selling the summer row crops, corn and soybeans, this morning as the US$ surges and trade worries between the US/Canada/Mexico and China increase heading into the G7 Summit and next week’s US/North Korean meeting in Singapore. US trade policy uncertainty and the lack of Chinese demand for US soy are the two primary ingredients that are causing July soybeans to fall to the next chart based support at $10.60. The Brazilian Real has fallen to 3.92:1 this morning, and is likely heading to 4:1 as Brazil’s economy flounders ahead of the October Presidential election, without a clear favored candidate to help their future. The weakness in the Real is pushing Brazilian new crop prices to farmers higher with forecasts growing to 119.5-122 million mt of production with 2018 Brazilian soy seedings to expand nearly 5%. The falling value of the Real, Peso and Ruble are all stimulating non-US production for the next growing cycle. The rising greenback against the ag currencies act to collectively cap Chicago rallies. Chicago charts are down, US trade worries persist, and the Central US weather forecast is favourable for the next ten days. Chicago is searching for demand.

• Chicago brokers report that funds have sold 11,000 contracts of corn, 9,000 contracts of soybeans, while buying 6,700 contracts of wheat. In soy products, funds have sold 4,700 contracts of soymeal and bought 900 soyoil.

• The USDA weekly export sales report for the week ending May 31 reported new sales of; 33.0 million bu of corn, 9.2 million bu of wheat, and 6.1 million bu of old crop soybeans. The wheat and soybean sales were disappointing.

• China shows no interest in securing US soybeans amid the uncertainty of forward tariff/tax rates. There are rumours that China’s Government will soon start to release or auction off reserve stocks of rapeseed/canola oil to meet domestic demand. Their soymeal market is oversupplied, but Chinese crush margins have pushed back near the black. China is active in booking Brazilian soybeans for July and August amid the US uncertainty on pending trade tariffs.

• The Black Sea weather forecast maintains mostly dry weather over the next 10-12 days with uncertain/better rain chances thereafter. The dryness persists across Ukraine, Poland and much of Germany. Temperatures will be warming this weekend

• The midday GFS North American weather pattern forecast is cooler and slightly drier for the N and W Midwest over the next ten days. The mean position of the high pressure ridge is farther south and less amplified. Rains will fall across the western fringe of the ridge which looks to produce an abundance of rain for; IL, IN and the Ohio Valley. In the 11-15 day period, the model forms a high pressure ridge across the SE US which would push an abundance of humidity into the Central allowing for widespread and soaking rains. The 11-15 day forecast is wetter than what was offered overnight (which offered a tropical storm for the Florida Panhandle). Confidence in the GFS forecast beyond the next seven days remains low.

• No bull likes uncertainty in trade or the weather. The US and EU forecast models have been in poor agreement for weeks, and our confidence in the GFS model is low, and the US is missing its largest buyer, China. If the US made trade progress with NAFTA or China, a strong and quick rally would unfold in Chicago. World wheat traders know the importance of declining Russia and European wheat crop sizes.

• It has been a mixed morning with corn/soy futures generally weaker, while wheat futures have pushed to double digit gains. The volume of trade has been more active than expected with funds buying new length in wheat, while shedding exposure in the summer row crops. We maintain that until more is known about US/China and NAFTA Trade pacts or a drought threatens the Central US, the market will continue its chop. There is just too much uncertainty for any Chicago trend to be maintained.

• The US exported an all-time record large 304 million bu of corn during April! That export pace was up 60 million bu from March, and double the export pace of 2017. Weekly shipping data called for a big number, but one must be impressed with world corn export demand. We note that it is the sky-high price of minor grains, feed wheat, barley and even sorghum that is allowing US corn exports to soar. There just are no substitute feeds for livestock feeders. The US exported 71 million bu of wheat in April, down 8 million from March, 20 million bu below last year. The US wheat export pace remains disappointing and WASDE is likely to adjust their 2017/18 US wheat export estimate downwards in its June report next week. The US exported 79.6 million bu of soybeans in April, down 39 million bu from March, and down 35 million bu from 2017.

• The US April soybean export pace was disappointing as China secured record soy totals from Brazil as the US threatened a trade war. The US exported 212 million pounds of soyoil and 1.03 million mt of soymeal during April, close to a year ago.

• Harvested OK HRW wheat yields continue to impress with totals often 2-5 bushels/acre above expectations. The better than expected OK yields has many wondering if the trend can push into Kansas, and raise US HRW wheat production. So far, the OK crop is impressive and likely offers a clue as to what will be found in Tuesday’s NASS report, a bearish surprise is possible. No real heat (lack of a high pressure ridge) across Black Sea wheat area has allowed crops there to wait for rain. The key unknown is whether such rain will return in mid June. The GFS forecast is wetter after June 13.

• The midday GFS North American weather pattern forecast is wetter with soaking rain across much of the Central US. The rain is farther south as the mean position of the ridge sinks. Rain totals should range from 0.5-3.00” with locally heavier amounts. Even Kansas would be slated for a soaking rain. The forecast is cooler with more of a zonal flow in the 11-15 day period. A trough of low pressure replaces the ridge which would offer cooler temperatures and near to above normal rainfall. We see no real weather threat in the midday forecast with abundant rainfall and cooler temperatures in the 9-15 day period.

• The market is waiting for clearer signs on the US/China trade dispute. However, US weather is less threatening and the Midwest crop has the makings of record yield potential. And with some rain for the Black Sea beyond the next 8 days, Chicago is likely to stay on defense until traders can confirm larger Chinese demand via some sort of trade truce. A real crop threat is needed for US corn or soybeans before a sizeable rally can unfold. Do not ignore the political and weather uncertainty.

• KC cash wheat basis has entered the new crop year at its best levels in four years. Kansas HRW cash wheat basis is just below par with spot futures, a big departure from recent years heading into harvest. Note that cash KC wheat basis seasonally declines from early June into September amid the sharp rise in supplies. However, this year the basis decline is expected to be less amid a higher protein wheat crop and the ongoing loss of Black Sea and European protein wheat. The world is facing a shortage of hi pro which looks to underpin spot KC cash basis bids.

• HRW crop ratings fell slightly amid last week’s heat. Another downgrade is expected next Monday. There has been talk of better than expected yields being reported in the far Southern Plains, but it is much too early to determine even a regional trend. US winter wheat harvesting is 5% complete; harvesting in TX and OK is just 35% and 7%, respectively. We expect another blast of heat this week to take a further toll on yield. The US spring wheat crop is rated as 70% good/excellent, right on average. A needed weather pattern shift in the Black Sea is becoming increasingly unlikely. Just 20- 40% of normal rainfall is forecast is E Ukraine/S Russia June 1-18. Russian cash wheat prices are forming a bottom.

• It has been a mixed Chicago morning with soybeans trading both sides of unchanged while the grain markets are mostly higher. New speculative demand is noted in wheat as concern builds around 2018 Black Sea production. Corn has followed wheat amid Monday’s rise in open interest (funds selling short futures to hedge up long call options) while the soybean market is trying to better understand what President Trump’s position is on US/Chines trade. Notes that the volume of Chicago trade is being curtailed by US/Chinese trade uncertainty. Whether you are a bull or a bear, no one wants to be caught the wrong way in a tweet or tariff announcement. Until there is clarity on NAFTA and US/China trade, traders are going to curtail their risk. A tweet from President Trump can change the price complexion of Chicago markets dramatically.

• Chicago brokers estimate that funds have bought 3,600 contracts of corn, and 3,100 contracts of Chicago wheat. Funds have been on both sides of the soybean market and are net sellers of 1,200 contracts. In soy products, funds have sold 2,200 contracts of soymeal and 900 contracts of soyoil. The interest at midday is in decline.

• The EU monthly weather forecasts are out this morning and call for general dryness across the Central US for much of the next two months. There is no doubt that the EU model is drier than the GFS has been in the extended range. If correct, it would call for some real concern for 2018 US summer row crop yields. The EU long range model track record is far better than the GFS and it is something worth watching close in the weeks ahead.

• There are a lot of numbers floating around on how much US ag goods that China has proposed taking from the US. We have no way of knowing what data set is correct or what dollar amounts have been put out for media consumption. All we know is that a $1 billion secures a rough 3 million mt of soybeans. Thus, if China were to boost its ag spending $15-30 billion from current levels, it would be a big deal for US agriculture. This is the “carrot” for the Trump Administration, with the difficult aspect (of negotiations) trying to tie it together with intellectual property rights and the subsidisation of China’s rapidly expanding tech industry.

• The 11-15 day GFS Black Sea weather forecast has added rain with totals of 0.5-1.25”. This would be the best rain that the area has witnessed in weeks. However, confidence in such rain that far out is low. The rain will have to be pulled forward in the forecast to be reliable. However, we did want to advise that some needed moisture is possible, and that the extended forecast will have to be closely monitored

• The midday GFS North American weather pattern forecast is wetter with “ring of fire” rains across the N, C and E Midwest into mid June. Rain totals should range from .5-3.00” with locally heavier amounts. The driest area will be closest to the mean position of the ridge (in the Plains). Extreme heat of 90-100’s will be felt in the Plains and the W Midwest with spikes of similar heat into the Delta. The warmth is likely to persist into late June. We note that the GFS model has been too wet for some time, but because of the frequency of the rains around the ridge, some significant totals are possible. The midday model removed the risk of a tropical storm in the Gulf in the 11-15 day period with the ridge strengthening across the Midwest.

• The market is waiting for clearer signs on US/China trade, clearer signals on US and Black Sea weather, and clearer signs on what the US Government would do, if tariffs were placed to support farm income. With Midwest rainfall slated through early next week and the June USDA crop report due out next Tuesday, our bet is for continued choppiness in Chicago. Mid June is a critical time as this is when the US can enact $50 billion of tariffs on Chinese goods.

• Although the US stock market (NASDAQ) is nearing new all-time highs and does not appear to care on US/China trade differences, Chicago does care, with sharp losses noted this morning with corn/soy pacing the decline. Wheat is following the summer row crops lower with some support offered by rising Black Sea wheat futures. The Russian dryness in west and wetness across Siberia is being noted. The time for getting the spring wheat crop in the ground is passing. Funds are liquidating stale Chicago length with US/China trade uncertainties and the US biofuel policy in focus. The charts are bearish and end user pricing is not enough to slow the decline. The next area of support is noted at $9.90- 10.00 in July soybeans, $3.77-3.80 July corn, and 4.95-5.05 basis July Chicago wheat. We expect that these support areas should hold with 80-85% of the summer row crop growing season ahead.

• Chicago brokers estimate that funds have sold 12,000 contracts of corn, 6,500 contracts of soybeans, and 5,200 contracts of Chicago wheat. In soy products, funds have sold 4,200 contract s of soymeal and 2,200 contracts of soyoil. End user pricing is the strongest in corn and soybean via feed demand.

• For the week ending May 31, the US exported 20.5 million bu of soybeans, 12.5 million bu of wheat, and 61.2 million bu of corn. The soybean and wheat export totals were on the lower end of trade expectations. US corn exports remain robust. For their respective crop years to date, the US has shipped ;1,552 million bu of US corn (down 185 million or 11%), 1,717 million bu of US soybeans (down 160 million or 8.5% from last year), and 1,010 million bu of wheat (down 134 million or 13% from last year). US old crop wheat and soybean exports need to be adjusted downward.

• US renewable fuels RIN prices hit a new five year low this morning as the Trump Administration prepared to announce that extra RINs would be available from US biofuels that are exported. The sharp fall in RIN values reduces the profit for blenders, hitting the biodiesel industry harder than ethanol. The expected announcement that E15 can be used year-round is not enough to alter the diminished margin for blenders. The abundance and cheapness of RINs will help the US fuels industry sidestep the yearly EPA mandate. President Trump tweeted this morning; “That US farmers have not been doing well for 15 years. Mexico, Canada and China have treated them unfairly. By the time I (President Trump) finishes trade talks, that will change”. We hope that US agriculture holds President Trump accountable on this promise! A meeting between Commerce Secretary Ross and President Trump will be held this afternoon. Our hope is that China’s offer to boost US ag purchases by $25 billion is accepted!

• The midday GFS North American weather pattern forecast is more amplified with a high pressure ridge which produces some “ring of fire” rains across the N and E Midwest this week. Rain totals should range from .3-1.25” with a few locally heavier amounts. The driest area will be closest to the mean position of the ridge in the Plains. Extreme heat of 90-100’s will be felt in the Plains and the W Midwest with spikes of similar heat into the Delta. Temperatures are warmer than prior runs and more in line with the overnight EU model. The midday model removed the risk of a tropical storm in the Gulf in the 11-15 day period with the ridge strengthening across the Midwest. The midday GFS forecast is more concerning for yield.

• A “give-up” mentality is noted across Chicago this morning as the bulls cave to the current break. We might agree with a bearish opinion if the date was July 4 rather than June 4! However, with dryness across E Australia, the Black Sea, the N China Plains and heat/dryness indicated for the Midwest, we feel that it is premature to be ultra-bearish. The US/China trade worry is the reason for the Chicago decline, and politics can quickly change. Our view is that weather will ultimately override politics. This is no place for new Chicago sales.