Monthly Archives: July 2020

30 July 2020

Posted on July 30, 2020 by simon

• Chicago markets are mixed at midday with soybean/corn and wheat/corn spreads being unwound. The volume of trade has been limited with a 2 million mt sale of US corn to China not sparking any excitement. Traders appear to be unwinding long anything vs corn and there is a weak under-tow to midday valuations. We look for a steady to slightly lower Chicago close with large pending supplies acting to cap rallies as seasonal price trends are bearish into the end of August, and the arrival of deliveries against September futures.

• Chicago floor brokers estimate that funds have bought 6,200 contracts of corn, a net 900 contracts of wheat and 7,800 contracts of soybeans. In soy products, funds have sold 1,100 contracts of soymeal while buying 2,700 contracts of soyoil. Funds are at the sell side of Chicago at midday in lite volume.

• FAS confirmed that the US sold 1.937 million mt of US corn to China and 130,000 mt to an unknown destination. Commercials suggest the buyer and seller is COFCO, which introduces some mistrust, except that COFCO often acts as agent for private Chinese companies. The sales are for 2020/21 with known China corn commitments rising to 6 million mt of US corn (or 236 million bu).

• No US soybean sales to China were announced, which would have been more important with commercial traders suggesting that the China corn purchase occurred weeks ago. This is now the third consecutive day that China has not secured US soybeans. We noted earlier this week that China booked a few US cargoes, but that the tonnage levels may not have exceeded 100,000 mt from each seller which would trigger a daily sales announcement. China needs to be booking 1.5-1.7 million mt of US soybeans weekly to have any chance of reaching its Phase One ag obligation.

• US Weekly Export Sales for the week ending July 23 were; 24.9 million bu of wheat, -1.2 million bu of old crop corn and 25.1 million bu of new crop, and 9.5 million bu of old crop soybeans and 122.9 million bu of new crop. The huge new crop sales of soybeans were well telegraphed by the daily sales announcements. Nonetheless, any week that that US can say that sell 135 million bu of soybeans is a solid week of demand.

• For their respective crop years to date; the US has sold 353 million bu of wheat (up 27 million or 8%), 1,718 million bu of corn (down 244 million or 12.5%), and 1,719 million bu of soybeans (down 71 million or 4%). We look for US 2019/20 soybean exports to be cut another 25-40 million bu while WASDE holds US corn/wheat exports steady in the August report.

• Midwest farmers are showing considerable interest in seeding SRW wheat this autumn based on current wheat/corn and wheat/soybean price relationships. August Chicago prices will determine the winter wheat revenue insurance price in mid-September. But based on Dec 2021 corn futures at $3.62, the interest in SRW is high. And Southern US farmers are looking at double crop wheat with beans.

• The midday GFS weather forecast is consistent with the overnight run with soaking rainfall for the southern 2/3′s of the Midwest, Delta and the SE US. The forecast is drier across the NW Midwest where rain totals of 0.15-0.85″ are offered. The 10-15 day period offers improved rain for the NW Midwest, but temperatures will be seasonally cool ranging from the 7O’s into the mid 80′s. The midday GFS forecast keeps any high-pressure ridging located across the SW corner of the US into mid-August. There is no evidence of any extreme Midwest heat.

• The demand bulls are disappointed by Chicago corn market performance with values only slightly higher at midday. Key for soybean prices will be if FAS/USDA confirms new Chinese purchases on Friday. Otherwise, this week’s China demand is disappointing. Demand bulls must be fed every day and amid record large US corn/soy yields, such demand becomes more important into harvest. Chinese corn import demand is not based on market relationships, but Government policy.

29 July 2020

Posted on July 29, 2020 by simon

• Chicago markets are mixed this morning with wheat holding in the green while corn/soybeans sag on favourable Central US weather and rising yield potential. USDA/FAS did not announce any new Chinese purchases of US soybeans, for the second day in a row. It appears that China’s buying has slowed since late last week with there being no new interest in US corn/wheat purchases. The volume of Chicago trade has slowed at midday with interest waning. End users already have strong forward coverage in corn/wheat amid summer declines. The end users will have to see even cheaper values to extend their forward coverage into Q1 2021. We anticipate a mixed close wheat gaining on the summer row crops going home.

• There are rumours that Brazil booked 2-3 cargoes of US HRW wheat in the past 24 hours. This along with private analysts cutting their French/EU wheat crop estimates on disappointing yields has helped US/French wheat futures rally. Brazil has been booking Russian wheat, but based on CIF costs, it appears that some of this demand is being pushed back to the Gulf. US wheat remains expensive in the world market, but Mexico and Latin American buying has supported recent price breaks.

• For the second day in a row, China is a “no show” for US soybean buying. FAS announced no new sales of US grain or soybeans under the daily reporting system. China is being a more measured buyer of US soybeans this week with traders estimating the purchase of 2-4 cargoes since Monday. Yet, a few days is not enough to make trend and traders will stay laser focused on China interest as other key world soy/grain importers are being impacted by Covid-19 and a deepening world recession.

• Chicago traders estimate that funds have sold 4,700 contracts of corn and 400 contracts of soybeans, while buying 4,200 contracts of Chicago wheat. In soy products, funds have sold 1,200 contracts of soymeal and bought 2,000 oil.

• The EIA Weekly Biofuel report was supportive with production reaching a post Covid-19 high and getting closer to the weekly level needed to validate WASDE’s 4,850 million bu 2019/20 corn grind. We now estimate 2019/20 US corn ethanol grind at 4,800 million bu based on this week’s data. US ethanol stocks recovered slightly to 852 million gallons, up 20 million on last week, but down 17% from last year. The US summer driving season will be ending by the middle of August, with miles driven normally in decline into September.

• The midday GFS is consistent with the overnight run and further north with rains into W/S IA this weekend. Rainfall totals for parched W IA are estimated in a range of 0.4-1.25″ which would go a long way to stabilising corn/soy crops. Otherwise, the rainfall forecast is little changed from the overnight run with 0.5-3.00″ of rain expected across the Central Plains, the Delta and the southern half of the Midwest. Little rain is expected north of 1-80 into August 8, but soil moisture there is adequate with seasonally cool temperatures. The midday GFS forecast keeps any high-pressure ridging located across the SW corner of the US into mid-August. There is no evidence of any Central US extreme heat into August 13.

• Other than unexpected Chinese demand for US corn or wheat, it is hard to find another fundamental that alters the bearish supply theme. Whatever US corn/soy yields that come out in the Aug 12 NASS report, traders will add to it based on normal/ favourable August weather conditions. This means that seasonal lows could be forged in mid-September or mid-October following updated NASS crop estimates. How big is big is the question that every farmer and grain traders is now pondering on yield.

28 July 2020

Posted on July 29, 2020 by simon

• Much has been made of the decline in the US$ index in recent weeks. The €uro currency has outperformed the US$ as it appears that the EU economy will grow at a faster GDP rate than the US. The EU has combated Covid-19 more effectively and the EU’s $2 trillion stimulus package will kick start growth. However, not all currencies are created equal and the ag commodity currencies have languished. The Brazilian Real has bounced as have the Russian Ruble and Argentine Peso. For a lasting ag rally to unfold requires a 20-30% rally in the ag currencies. US ag commodity trade with the EU is restricted, so a further recovery will not have much Chicago impact.

• A sharp rise in US good/excellent soybean ratings sent Chicago futures lower. November soybeans finished down 12 cents. The USDA did not announce any new soybean sales to China, though there were rumours that China was in the market for 2-5 cargos of US soybeans. Chinese crush demand remains strong, with estimated processing rates totalling a record large 20 million mt in the last 10 weeks. A year ago, the crush rate was 16.6 million mt during the same time. Meal demand remains elevated with year to date disappearance from inner coastal crush facilities estimated at 57.5 million mt versus 55 million last year. The cumulative disappearance is now above the previous record that was set in 2017. Meals stocks peaked 4 weeks ago at just over 1 million mt and are in decline. China’s crush/import demand have been surprisingly strong in recent months. The July WASDE put total soybean imports at 96 million mt versus the August 2019 WASDE estimate that pegged imports at 87 million. Ultimately, it will be the record-large US soybean yield and expanding S American acres that drive Chicago prices. We remain bearish on rallies. It is possible that a seasonal high was formed on Monday based on favourable Midwest weather.

• Chicago corn futures fell 4-5 cents on Tuesday. Fund selling resumed following Monday’s larger than expected boost in US crop ratings. With Central US weather predicted to be favourable into mid August, the market’s goal is now to find all potential demand to prevent US end stocks from reaching well above 3.0 billion bu. Wednesday’s EIA report is expected to feature flat week-over-week ethanol production and gasoline consumption. RBOB gas futures have been unmoved for 4 weeks. Mobility data suggests there has not been a major trend change in US miles driven since June. The futures-based ethanol production has improved amid declining corn values, but work continues to suggest that sub-$3.35 spot corn is needed to provide ethanol plants incentive to produce. Rallies in crude/gasoline markets will be hard-fought with OPEC production rising by 2 million barrels/day on Aug 1. Improving Chinese weather and sizeable boost in Brazilian supplies in the next 30 days will weigh on global feed markets. Rallies will likely be limited to 4-6 cents with late summer lows forecast at $2.90-3.00 basis September futures.

• US wheat futures ended weaker amid negative seasonal trends as Black Sea exporters remain aggressive. Weakness in the Ruble along with rising Russian winter wheat yields has caused exporters to search for demand. Work suggests that world wheat trade in July will be the weakest since 2012. Covid-based demand destruction is a growing concern. Egypt’s GASC purchased a sizable 470,000 mt of Russian and Ukrainian origin. Egypt paid an average fob price reported at $217/mt. This compares to $211/mt last week. World fob offers have declined slightly. Spot Russian and German wheat sit at $208-211/mt vs. $210-216 last week and vs. Gulf HRW at $215. Chicago futures have digested tight SRW stocks. A new demand spark is needed to sustain fund buying. Rising N American spring wheat yield potential and weak importer demand suggests rallies could well be selling opportunities. We look for a weakening wheat price trend into a September seasonal low.

27 July 2020

Posted on July 27, 2020 by simon

• Chicago grain markets are mixed at midday. The grains (wheat/corn) are lower while the soybean market tries to hang in the green and measure Chinese interest. IKAR, a respected Russian ag consultancy, raised seeded/harvested wheat area while there is no indication that China is showing interest for US/world corn. USDA did announce the purchase of 2 cargoes of US soybeans, but US commercials expect that Chinese demand/interest will wane in coming weeks. The Chicago market focus is shifting back to looming record large US corn/soybean yields and an abundance of world wheat in a time of rising Covid-19 infections with US farmers sitting on a large supply of old crop corn stocks. We look for a mixed to slightly lower Chicago close today.

• Chicago brokers estimate that funds have bought 2,900 contracts of soybeans while selling a net 1,20 contracts of corn and 3,500 contracts of wheat. In soy products, funds have sold 3,300 contracts of soyoil and 1,900 contracts of meal. The tone of the market is heavy with midday volume in decline.

• The USDA announced that China secured 132,000 mt while Mexico took 250,371 mt of 2020/21 soybeans. No new corn, wheat/soy product sales were confirmed.

• Chicago brokers/traders have spent considerable emotional energy on trying to understand the relationship between record high Dalian corn futures and China’s feedgrain imports. History shows that China corn prices and purchases are based on policy, not margin or price. After the last recession in 2008/09, Chinese corn prices rallied sharply on speculative fervour only to collapse amid the coming harvest. USDA data on estimated 2020/21 Chinese wheat, rice and corn stocks does not suggest a grain shortage. In fact, there is abundance. China holds enough wheat/rice stores for a year of use while corn stocks are at 2/3′s of a year use. The point is that China is not facing a dire shortage of grain. If they were, they would drop their countervailing duties against DDG’s, the cheapest source of feed grains today. China is likely keeping corn prices high to aid their farmers who have been suffering amid reduced profit margins for several years. With a new corn harvest just weeks away, China is unlikely to make large/new US corn purchase orders.

• US weekly export inspections for the week ending July 23, the US exported 31.4 million bu of corn, 17.4 million bu of soybeans, and 20 million bu of wheat. All were on the low side of expectations. China did ship out 3.7 million bu of US soybeans and 2.5 million bu (one cargo) of US corn.

• With just over 5 weeks left in the US corn/soybean old crop years, the US needs to average around 45 million bu/week on soybeans and little over 60 million bu on corn to reach the annual WASDE forecast. We maintain that WASDE is 25-40 million bu too high in soybeans and 50 million bu too high on 2019/20 corn export estimates.

• Better yields and an expansion in harvest area has private Russian crop watchers talking a wheat crop of 77-78 million mt according to Russia’s IKAR. Such crop would allow Russia to export 36-37 million mt of wheat. World wheat demand is tepid on Covid-19 and amid the spring stockpiling. World wheat importers will be patient to wait for lower prices into early September.

• The midday GFS weather forecast is wetter across the W Midwest with rain chances returning to the dry areas of W IA/SD early next week. Otherwise, the S and E Midwest has chance of 1-4.00” of rain which will be ideal for filling corn and reproducing soybeans. Midwest high temperatures range from the mid 70′s to mid 80s. No extreme heat is foreseen. The rain and seasonally mild temperatures bodes favourably for US corn/soybean yield potential.

• Record large US corn/soy yields are in the making and China’s Government is unlikely to see the rise in Dalian corn futures as a reason to secure US corn beyond the latest demand under TRQ’s. Russian wheat production estimates are rising and a story for US wheat export demand is being shelved. China may secure additional US soybeans, but we doubt in the quantities of recent weeks. We remain generally bearish and would caution against chase rallies at this time.

23 July 2020

Posted on July 23, 2020 by simon

• Chicago values have posted a modest midday recovery and “shaken off” the rising political tensions between the US/China. Short covering in corn/wheat has fuelled the upside recovery from recent day lashings, but a trend reversal does not appear to be in the offing amid improved Central US weather. We view today’s Chicago recovery as nothing more than a bounce, with prices to fall into a price pattern of declines early and late week with a recovery in the middle. We anticipate a mixed Chicago close today.

• Chicago brokers estimate the funds have bought 3,300 contracts of wheat and 4,100 contracts of corn, while being early sellers and midday buyers of soybeans (net flat on the day). Funds have been sellers of 2,900 contracts of soyoil and buyers of 1,900 contracts of soymeal. July soybean still has an open chart gap at $300/ton which should act as strong resistance.

• The Chinese Government is said to be ready to announce that it will be releasing old/stale wheat/rice stocks to become livestock feed. China has more than one wheat crop in storage (150 million mt total) with some of the Government stored supply more than fiver years old. The stale wheat/rice stocks will be fed to livestock.

• The Chinese Government did not announce tonnages of reserve wheat/rice that would be released, but this could be an outlet for large foodgrain supplies that are not long fit for human consumption. Feeding this wheat/rice to livestock makes perfect sense to quell rising domestic corn prices.

• We also hear that Ukraine new crop corn is being offered by a seller with Chinese documents back into their market today. So far, bids have been scarce. China in early July secured 40-60 cargoes of Ukraine corn for new crop delivery by COFCO. It is possible that COFCO could be trading out of the position and willing to accept a profit.

• FAS announced this morning that China booked 453,000 mt of US soybeans for 2020/21 shipment. We are told that China is still seeking US soybeans with a few cargoes sold this morning, but cannot confirm any Chinese interest in US grain.

• US ethanol production and gasoline consumption declined last week for the first time since April. The decline is related to rising US Covid-19 cases with regional economic slowdown. Note that the US ethanol production is falling below the level needed to reach the annual WASDE estimate while this week’s pace would forecast an annual 4,850 million bu demand pace for 2020/21.

• The weather forecast is highly favourable for US summer row crops with cooling temperatures with regular rainfall. Below normal temperatures will be a big help for ear filling corn while soybeans see organised rain across the SW Midwest/Delta. The forecast even holds the prospect for moisture across W IA on the weekend (a crop area where light showers have fallen), but more rain is needed. Any warmth will be confined to the next 5-6 days before the mean position of the high pressure ridge shifts west and holds across the Inter-mountain West. This allows a favourable NW upper air flow through the Central US, with near to below normal temperatures and frequent rain episodes. Weather during the first half of August favours US corn/soy yields.

• Amid improving Central US weather and cheaper price offers for corn/wheat from other non US exporters, it is going to be difficult for Chicago grains to sustain rallies. Consumers will likely not chase the rally amid the the high costs of elevation for export. Gulf soybean and corn fob basis is at or above $1/bu which makes US corn/soy/wheat expensive. US farmers don’t want to sell the break, but US ethanol demand looks to retreat on slowing US gasoline demand. We doubt that December corn can rise much above $3.38 and November soybeans above $9.05 without adverse Central US weather. The forecast looks to be a favourable cool/wet.

22 July 2020

Posted on July 22, 2020 by simon

• Chicago values have posted a modest midday recovery and “shaken off” the rising political tensions between the US/China. Short covering in corn/wheat has fuelled the upside recovery from recent day lashings, but a trend reversal does not appear to be in the offing amid improved Central US weather. We look at today’s Chicago recovery as nothing more than a bounce, with prices to fall into a price pattern of declines early and late week with a recovery in the middle. We anticipate a mixed Chicago close today.

• Chicago brokers estimate the funds have bought 3,300 contracts of wheat and 4,100 contracts of corn, while being early sellers and midday buyers of soybeans (net flat on the day). Funds have been sellers of 2,900 contracts of soyoil and buyers of 1,900 contracts of soymeal. July soybean still has an open chart gap at $300/ton which should act as strong resistance.

• The Chinese Government is said to be ready to announce that it will be releasing old/stale wheat/rice stocks to become livestock feed. China has more than one wheat crop in storage (150 million mt total) with some of the Government stored supply more than five years old. The stale wheat/rice stocks will be fed to livestock. The Chinese Government did not announce tonnages of reserve wheat/rice that would be released, but this could be an outlet for large foodgrain supplies that are not long fit for human consumption. Feeding this wheat/rice to livestock makes perfect sense to quell rising domestic corn prices.

• We hear that Ukraine new crop corn is being offered by a seller with Chinese documents back into their market today. So far, bids have been scarce. China in early July secured 40-60 cargoes of Ukraine corn for new crop delivery by COFCO. It is possible that COFCO could be trading out of the position and willing to accept a profit.

• FAS announced this morning that China booked 453,000 mt of US soybeans for 2020/21 shipment. We hear that China is still seeking US soybeans with a few cargoes sold this morning . We cannot confirm any Chinese interest in US grain.

• US ethanol production and gasoline consumption declined last week for the first time since April. The decline is related to rising US Covid-19 cases with regional economic slowdown. Note that the US ethanol production is falling below the level needed to reach the annual WASDE estimate while this week’s pace would forecast an annual 4,850 million bu demand pace for 2020/21.

• The weather forecast is highly favourable for US summer row crops with cooling temperatures with regular rainfall. Below normal temperatures will be a big help for ear filling corn while soybeans see organised rain across the SW Midwest/Delta. The forecast even holds the prospect for moisture across W IA on the weekend (a crop area where light showers have fallen), but more rain is needed. Any warmth will be confined to the next 5-6 days before the mean position of the high pressure ridge shifts west and holds across the Inter-mountain West. This allows a favourable NW upper air flow through the Central US, with near to below normal temperatures and frequent rain episodes. Weather during the first half of August favours US corn/soy yields.

• Amid improving Central US weather and cheaper price offers for corn/wheat from other non US exporters, it is going to be difficult for Chicago grains to sustain rallies. Consumers won’t chase the rally amid the the high costs of elevation for export. Gulf soybean and corn fob basis is at or above $1/bu which makes US corn/soy/wheat expensive. US farmers don’t want to sell the break, but US ethanol demand looks to retreat on slowing US gasoline demand. We doubt that December corn can rise much above $3.38 and November soybeans above $9.05 without adverse Central US weather. The forecast looks to be a favourable cool/wet.

21 July 2020

Posted on July 21, 2020 by simon

• Chicago values are again mixed at midday. Row crops have added to overnight losses as better than expected rain works across Central IL and as midday weather updates lack sustained heat and dryness into the opening days of August. Recorded precipitation in the last 24 hours now includes totals of 0.50-1.00″ across MN, NE, KS, N MO and W IL. US wheat futures found buying this morning following purchases from Egypt and Jordan.

• FAS through its daily reporting system announced that US exporters sold 306,000 mt of soybeans to China and unknown destinations for new crop delivery. Exporters also sold 207,880 mt of corn to unknown destinations, of which 25,400 is for old crop delivery. We hear that the corn sale was likely made to one or more Latin American countries.

• Egypt’s GASC this m morning secured 115,000 mt of Ukrainian wheat for late August delivery, and only Black Sea origin was offered. The tender’s details were absent as of now but the cheapest Ukrainian offer was quoted at $209/mt, basis fob. Egypt’s fob purchase price last week $212. Ukraine’s lowest offer is viewed as aggressive given Black Sea 12.5-pro fob quotes this morning of $206-207/mt.

• Other news is lacking and N Hemisphere weather will continue to drive daily price action. We note that updated EU model weekly guidance features normal precipitation and slightly above normal Central US temperatures throughout the next 30 days. Climate work further suggests that any sustained strong high-pressure ridging will largely avoid the primary US Ag Belt. Wet weather is most probable across the Central Plains and Upper Midwest into the second half of August.

• Updated crop maps from the USDA also include above average vegetation health across Europe and Ukraine. Crop health there has been maintained despite a pattern of below normal precipitation across Western Europe and much of Ukraine in the last 30 days. Heat has been absent from Ukraine so far in July. Subsoil moisture in Europe and Ukraine remains adequate. Time is running out for Mother Nature to materially reduce Northern Hemisphere corn yield potential.

• The EIA’s weekly petroleum report on Wednesday is expected to include another modest boost in (2-5 million gallons) in weekly US ethanol production. A more pronounced gain is unlikely as gasoline use stays plateaued. Energy markets have rallied this week as vaccine trials show promise. International travel in the near-term will remain severely reduced. Chicago ethanol futures through December exist in a range of $1.08-1.12/gallon. The recent break in ethanol prices has pulled futures-based production margins into negative territory.

• Radar maps continue to show light/moderate rainfall working slowly across the western and central Corn Belt. This system will progress across IL and into IN in the next 24 hours. Accumulation of 0.25-0.50″ is expected.

• The midday GFS weather forecast is warmer and drier in the 11-15 day period as it allows strong high pressure ridging to expand into the far Southwestern Midwest. This will be followed but confidence in extended range forecasts remain low. Otherwise, output is similar to prior runs through the next 10 days. A pattern of active rainfall will persist across the E Plains, Midwest and mid-South into Aug 1. Cumulative totals of 1.00-1.75″ will blanket a majority of the Corn Belt. Relative warmth resumes early next week but damaging heat is not indicated.

• The need to find corn demand has lingered in the background throughout the growing season. With pollination occurring under largely favourable conditions, demand will play a more central role in price determination. Rallies in all major crop markets will be laboured without a major threat to yield in August or during harvest.

20 July 2020

Posted on July 20, 2020 by simon

• Chicago values are widely mixed at midday. The grains lower while soybeans hold amid ongoing interest from China. Corn bounced from the morning lows on larger than expected weekly export inspections. December soymeal has an open chart gap at $300/ton which is solid resistance before the complex turns back lower.

• Wheat futures gapped lower on sliding interior Russian/Ukraine prices and more aggressive farm selling. KC September wheat is expected to at least retest its low at $4.25/bu. We would note that last summer KC wheat did not forge its low until September at a price of $3.75. It may be premature to turn too bullish of wheat. It is a bear supply story in corn, whilst world wheat lacks export demand and recent Chinese purchases of US soybeans underpins the complex along with rising Malaysian palmoil futures.

• Chicago brokers estimate that funds have sold 8,400 contracts of wheat and 4,000 contracts of corn, while buying 2,500 contracts of soybeans. In the products, funds have bought 2,600 contracts of meal and 1,200 contracts of soyoil. The funds are extending their long soybean/short corn spread.

• US weekly export inspections were large for corn, but modest for soy/wheat. The US exported a stout 45.3 million bu of US corn, 18.4 million bu of wheat, and 16.6 million bu of soybeans. The corn exports were larger than expected and included 5.7 million bu loaded to China. The US also sent 2.7 million bu of soybeans to China.

• For their respective crop years to date, the US has exported 1,430 million bu of corn (down 286 million or 17%), 1,407 million bu of soybeans (down 36 million or 2.5%), and 131 million bu of wheat (up 6 million or 4.5%). There are just 6 weeks remaining in the old crop years for corn and soybeans.

• FAS reported 132,000 mt of US soybeans sold for the 2020/21 crop year to China. US exporters report that they see no sign of China’s interest in US soybeans this morning.

• There have been discussions on the impact of Central US heat on 2020 US corn yield. Most are nudging corn yields down on the warm temperatures. However, the warmth has not been lasting outside of the Central Plains (and at times in the Delta). The Midwest has endured several hot days, but the heat has not been extreme or lasting. This has allowed corn to respirate and move nutrients through the stalk. We would be careful about nudging US corn yield lower unless extreme heat develops/lasts during the fill stage. Thankfully, heat so far has not impacted pollination. The 50% pollination rate should be reached today with the kernel fill stage lasting into the middle of August. Any prior or coming heat will be less worrisome for US/Delta soybean yields in coming weeks.

• Needed rain is falling across S IA/ MO. The midday GFS weather forecast is cooler through the E Midwest/Delta and warmer in the Plains than the overnight run. Rains have been shifted southeast into the E Midwest and the Tennessee Valley from WI/MN/IA. The need for moisture is more acute across the E and S Midwest which will favour US crop yield potential. Any high pressure ridging is less amplified and further south which allows Midwest temperatures to retreat to the 80′s to the lower 90′s for highs next week. Seasonally cool temperatures will prevail this week through Friday with highs in the 70′s to mid 80′s. The extended 11-15 day forecast calls for a Central US high pressure ridge, but the forecast this far out cannot be trusted and stays erratic.

• Corn prices are back down testing last week’s low on the US and world oversupply. The rally in palmoil futures is sparking a soy rally, but it is doubtful that the tropical oil boom can persist. World wheat demand is struggling and the fall in futures reflects a Black Sea wheat crop that is similar to last year. Soybeans should be within a few cents of a top while the grains seasonally weaken into late August.

16 July 2020

Posted on July 16, 2020 by simon

• Chicago values are mixed at midday with corn/soybeans firm, while the wheat market sags on diminished fund buying. Spread unwinding has been the morning’s feature with wheat/corn and soybean/corn spreads being exited.

• The volume of trade is average, but few end users desire to chase corn/ soybean markets higher amid favourable Central US weather. And US farmers are more willing sellers of stored old crop grain now that more regular rains are making their new crops. Sweeping bins is something that farmers will be engaged in to prepare for a large coming new crop. We anticipate a mixed close with December corn and November soybeans up against resistance at $3.39 and $8.95-9.05, respectively.

• FAS confirmed the China booked 522,000 my of US soybeans with another were 351,000 mt sold to an unknown destination (thought to be China). Of the total, 197,000 my was for old crop with the remainder for new crop. China has become a much more regular soybean buyer this week, and the hope is that China will continue to book 1.5-1.7 million mt/weekly going forward. Exporters report that China continues to seek additional US soybeans, while interest in wheat, corn, and soyoil appears to have temporarily abated.

• Chicago brokers estimate that funds have bought 9,700 contracts of corn and 5,700 contracts of soybeans, while selling 6,600 contracts of wheat. Funds have bought 4,300 contracts ofsoyoil and 2,100 contracts of soymeal.

• US weekly export sales for the week ending July 9 were; 28.1 million bu of wheat, 38.6 million bu of old crop and 25.8 million bu of new crop corn, and 11.5 million bu of old crop soybeans and 28.2 million bu of new crop. The corn and soybean sales totals were large, and they will be big again next week following daily announcements this week to China.

• On a known basis, China has now booked 2.1 million mt of old and 1.8 million of new crop corn. Adding in this week’s daily sales announcements, China has secured around 5.8 million mt of US corn in both crop years combined. Based on poor 2019 crop quality, we would suspect that 1 million mt of the US the old crop corn sale could get rolled forward to new crop. This means that China has nearly booked 5.0 million mt of 2020/21 US corn or 196 million bu. In terms of yield, this works out to 2.3 bushels/acre of the 2020 US corn crop. China has only shipped out 16.6 million bu of 84 million of old crop purchases. Between the US and Ukraine, China has fulfilled its TRQ corn purchase commitment for 2020.

• The UN is warning of a knock-on impact of Covid-19 with falls in demand that could result in sharp falls in grain/food values. Egypt’s GASC wheat tender secured less than desired tonnages as credit was not available to make the full purchase. Outside of China, world commodity demand is in fast retreat.

• Warm/wet is the GFS weather forecast over the next 14 days with the jet stream sagging further southward. The sagging jet stream allows temperatures to be slightly cooler (vs the overnight run) while providing a daily chance of Midwest/Plains rainfall. The 10-day rainfall outlook suggests that any heavy rain is focused across the Central and Southern Midwest. A front will hold across this area and became the focal point for frequent showers/storms. The regular rain along with modification in temperatures favours reproducing corn/soy crops. Crop condition ratings are expected to start rising again coming weeks. The 10-15 day forecast offers no extreme heat with ongoing rain. Midwest high temperatures hold in the 80′s to lower 90′s.

• The wheat market did not like that China did not show up as a buyer for 2 cargoes of US SRW wheat in the sales report. Soybean futures are firm on new fund buying while corn is supported by wheat/corn spread unwinding. The Central US weather forecast is warm/wet which favours yield. The long-range NOAA weather forecast did not offer any real concern for August rainfall or temperatures. Record US corn/soy yields are possible. We remain bearish amid large supplies/stocks.

15 July 2020

Posted on July 15, 2020 by simon

• Chicago values are mixed to sharply higher with wheat gaining on both corn/soybeans at midday. Rumours abound that China may have secured 2 cargoes of US SRW wheat which has pushed Chicago wheat into buy stops with spot futures are their best levels since March. September Chicago wheat is back testing key chart-based resistance at $5.50 after pushing through the 200 day moving average at $4.35. Research looks for the rally in Sept Chicago wheat to pause against $5.50-5.60 until there is confirmation of the Chinese purchase and the size of the 2020 Russian/Ukraine wheat crops.

• Midwest cash wheat sources are less sure why China would be securing the highest cost and lower protein wheat in the world. China’s need is more for a protein wheat that would add to milling quality. Cash confirmation is lacking, but traders will be looking to the weekly export sales report for confirmation since the total is at or below the 100,000 mt that must be reported daily.

• Corn/soy is being pulled upwards with wheat on diminished fund selling. The funds are not as aggressive in selling the summer row crops with wheat up $0.18/bu.

• Chicago brokers estimate that funds have bought 9,400 contracts of wheat and 3,200 contracts of soybeans, while buying 2,300 contracts of corn. Funds have come back and repurchased all early corn sales. Funds have also bought 3,600 contracts of soyoil while being flat in soymeal. The US farmer has been a modest seller of soybeans on the rally while waiting for better levels in wheat/corn before engaging again.

• FAS reported that China booked 132,000 my of new crop corn, and 389,000 my of US soybeans. The US soybean sale was well rumoured in prior days and cash sources argue that China is finished with its TRQ buying in corn. China strictly controls the importation of GMO corn with a license needed. Along with 2 cargoes of US wheat, there are rumours that China may have interest for US soyoil, no sales tonnages are mentioned. A few additional US soybean cargoes may have been sold to China today, yet US exporters report that their interest is diminished as prices have rallied.

• EIA reported that the US produced 274 million gallons of ethanol last week, up 5 million gallons from the prior week, but below the 28.

• NOPA’s June soybean crush rate fell to 167.3 million bu, the third straight monthly decline. US soyoil stocks were pegged at a bullish 1,778 million pounds which was lower than expected on better domestic use.

• Welcome/needed rain is falling across the key production areas of; N MO, C IL, and S IA with amounts ranging from 0.5-2.50″. The timing of the rain is ideal for corn pollination. The midday GFS weather forecast calls for IL/IN to receive 2-4.00″ of rain over the next 10 days with nearby totals of 0.5-2.50″. Any high-pressure ridging is elongated across the Delta/SE US States which will act to shunt upper air moisture north into passing Midwest cold fronts. Convective Midwest thunder storms are forecast daily. Soil moisture builds will occur into August. Temperatures will stay warm, but no excessive heat is foreseen. The W Midwest and N Plains will be relatively cool with lows in the 50′s/60′s.

• The upside in Chicago wheat becomes limited above $5.50-5.60 until more is known about Black Sea wheat crop sizes. Weather is favourable for US summer row crops and how big is big will soon become the yield question for traders. Our stance stays bearish on corn/soy bounces. We see US ethanol production stagnating between 260-275 million gallons going forward into new crop. The big seasonal push for gasoline will be ending in early August. We would caution against chasing wheat here with producers contemplating  sales in another 5-15 cents.