Monthly Archives: July 2021

30 July 2021

Posted on July 30, 2021 by simon

• HEADLINES: Chicago sharply lower on fund selling/profit taking ahead of the weekend; Midday GFS weather forecast drier for S MN/IAS with hot temperatures after August 4.

• Chicago futures are lower at midday with corn, soy and wheat values retreating ahead of the weekend and the end of the month. The volume of trade continues to be light/limited which is exacerbating daily trading ranges. The green radar blobs across South Dakota, Minnesota and NW Iowa have not produced much rain, but the radar has set the bearish mentality of Friday’s Chicago trade. Any rain is desired by Northern Plains farmers, but totals of 0.1-0.6″ are just not enough.

• Neither the bulls nor the bears have been able to make headway this week. Hot/dry weather has harmed US corn/soybean yield potential but measuring the impact on final 2021 US yield has been hardly debated in the industry. What is not being debate is the ongoing/widening loss of 2021 world grain/oilseed production. The total 2021 world grain losses will soon exceed last year’s 47 million mt, which will shift trade demand to the US. It is the fall in Brazilian corn, Russian wheat, and the dire Canadian drought which will support a demand led US bull market into 2022. It is August when US demand will start to build.

• Chicago oat prices have risen to their best levels since 2014 at $4.70/bu this week amid the worsening Canadian drought and the growing shortage of feed. North American 2020/21 small grain stocks are at a record low which places growing importance on 2021/22 US corn supplies. Canadian/Northern Plains farmers will be feeding additional corn to make up for loss of forage. Canada continues to seek US corn, a demand trend that should lift 2020/21 US corn export estimates by 100-125 million bu in the coming monthly USDA reports.

• Brazilian corn reached record levels at $8.50/bu before retreating on pre-weekend profit taking. Brazilian interior corn prices are rising daily, and farmers have shut down selling with many unable to fill existing sales contracts and rolling the unfilled sales forward to 2022 new crop production. Brazilian corn loadings are well below last year with annual exports unlikely to surpass 20 million mt. Brazil exported 36.25 million mt of corn in 2019/20 and is forecast to export 28 million mt this year by the USDA. Parana’s Deral cut their corn crop estimate to 6.1 million mt from 9.8 million in June. Mato Grosso farmers report that late planted corn having yields of just 30-35 bushels/acre.

• 36% of the US corn and 31% of the US soy seeded area is in drought in the case of corn, 20% of the acres are in severe/extreme drought and 16% in moderate drought. 100% of N Dakota corn, 98% of S Dakota and Minnesota, and 67% of Iowa corn is impacted by drought. Unless soaking rain falls in the next 2 weeks, we estimate that 40-43% of US corn crop will be affected by drought. US corn good/excellent ratings to fall 2-3% on Monday.

• The GFS weather forecast is consistent with prior runs in producing rain across SW/S Iowa and through Missouri with totals of 0.25-1.25″ and several locally heavier amounts via convective thunderstorms. The rain stops before reaching the MO/IL border. A lasting period of dry weather follows through the N Plains/W Midwest. The 8–9-day period dry weather is a concern for the 60-65% of the Midwest that misses this weekend’s rain.

• Midwest high temperatures cool in the 70′s to lower 80′s into Thursday with strong warming pushing back into the N Plains/W Midwest late next week. A high-pressure ridge rebuilds through the Central US which is anchored by a trough west of the PNW. High temperatures in the Plains/W Midwest return to the 90′s to the lower 100′s. A few light showers are possible across the Lake States on ridge riding storms during August 9-10, which is too far out to have any confidence in.

• You can’t keep the wheat bull market down as Russian/Canadian/Brazilian crops decline in a world short of hi protein wheat. We are surprised by the weakness in corn/soy amid the ongoing fall in world feed supplies and threat posed by a hot/dry Central US weather forecast into Aug 10. US corn/soy conditions and yield estimates will be in decline into mid-August. US soybeans are the cheapest in the world beyond August and with this week’s big cash meal trade in China, it is likely that further weakness will produce new demand for US soybeans on the Chicago break. China is off for the weekend at midday, but any fresh weakness early next week should spark new demand. China’s time to secure large amounts of US soybeans is fast approaching. This is not a market to be selling amid the sharp fall in world grain production and threatening Central US Weather Pattern into mid-August.

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

Weekend summary 30 July 2021

29 July 2021

Posted on July 29, 2021 by simon

• HEADLINES: Wheat, soyoil lead midday rally; GFS weather forecast trends drier next 10 days; Brazilian corn market at new record high.

• Chicago futures are higher at midday, led by wheat and soyoil. This week’s tour of North Dakota’s spring wheat crop has validated the USDA’s decision in early July to peg national US spring wheat yield roughly 40% below trend, and the trade is well aware that near-identical weather has plagued much of the Canadian Prairies since late spring. EU and Canadian rapeseed/canola futures are today’s laggard amid talk that China is selling reserve rapeseed oil into its domestic market, but there is little doubt that higher spring wheat/canola future lie in the offing as supply rationing begins this autumn.

• The overnight rally in Chicago markets has been extended despite another round of weak weekly export sales. Through the week ending July 22, exporters recorded net cancellations of old crop corn worth 4 million bushels and net old crop soybean cancellations of 3 million bushels. Importers response to lofty prices has been to seek cheaper feed wheat/Argentine corn, while Brazil continues to ship modest tonnages of soybeans.

• Yet, the forward US export outlook is brightening as feed wheat prices continue to rally as exporter milling wheat supplies tighten, and as Sep-Oct Brazilian soybean fob basis reaches new seasonal highs.

• We note that Black Sea wheat futures are up $8 per ton today. Feed wheat follows milling wheat values higher into late 2021 and are projected to reach parity with US Gulf corn offers by late August/early September. The cost of Argentine corn is rising as vessel loads are restricted by historically low river levels and as Brazil reaches for Argentine supply to bridge current supply gaps. Safrinha corn in Parana is only 7% harvested, which is an abnormally low figure. Many questions remain as to final safrinha production in Southern Brazil has been impacted by widespread damaging frost. Like a broken record, Brazil’s interior corn price index is again higher at $8.48 per bushel, a new all-time high despite the ongoing safrinha harvest.

• New crop US corn sales totalled 21 million bushels, a 9-week high. New crop soybean sales were 12 million bushels, a 4-week high. Exporters this morning sold two cargoes of new crop beans to unknown destinations, likely Europe. US wheat sales through the week ending July 22 were an impressive 19 million bushels, vs. 18 million the previous week and included two cargoes sold to China. The USDA’s all-wheat export forecast of 875 million bushels is easily obtainable, despite lofty US premiums to other origins.

• Extreme heat and a lack of precipitation returns to major corn producing regions of Southern and Central Russia over the next 10 days. Ukraine avoids the worst of this heat, but modest net draws in soil moisture persist there. This is important as the world needs record Black Sea corn output following historic yield loss in Brazil.

• The midday GFS weather forecast is drier across the Northern Plains and Great Lakes Region than the overnight release and allows extreme heat to return to the Dakotas, Minnesota and Iowa beginning early next week. Temperatures cool in all areas briefly Aug 1-3, but expansive high pressure ridging resumes its influence on the N American climate thereafter. High temperatures in the 90s/low 100s returns to the N Plains/N Midwest next Tues-Sat. Concern is also growing with respect to widespread lack of meaningful rainfall projected over the next 10 days. Notice that rainfall in excess of 1″ will be rigidly confined to a small region encompassing southern Iowa and Missouri. Concern over soil moisture in August stays elevated.

• Exporter wheat surpluses are in fast retreat, while two-week US forecasts bode poorly for maximising yield potential. A massive N American pattern change is needed no later than mid-August to prevent an acceleration in the addition of weather premium. Continue to use breaks to add to supply coverage.

28 July 2021

Posted on July 28, 2021 by simon

• HEADLINES: Chicago mixed at midday as traders wait to buy the market after Thursday’s poor weekly export sales report; Midday GFS weather forecast drier for Plains/Lakes.

• Chicago futures are mixed at midday with an early rally failing in soy/corn {same as yesterday). Traders are not willing to chase a rally with showers falling across East Central and South Central Minnesota (and potentially far NE Iowa) this afternoon. The green radar blobs limited traders in chasing the early Chicago rally, but old/new crop cash markets are starting to show some independent basis strength. The bears argue that E Midwest yield gains will surpass the losses in the west, but amid a deepening drought across Iowa and the N Plains, this argument is weakening.

• We continue to doubt that Chicago breaks can be sustained amid a midday GFS forecast that offers dry weather for most of the N Plains and the W Midwest (excluding Missouri) for the next 10 days. A Thursday recovery is possible as traders look to position long following another disappointing weekly export sales report. Monday’s NASS Crop Condition report is expected to show that US corn and soybean good/excellent ratings drop another 1-3% which will nudge the industry’s US corn/soybean yield discussion down heading into the August 12 USDA/NASS crop report. How deep of a fall in US corn/soybean yields will all depend on August weather conditions across the Central US.

• Chicago brokers estimate that funds have bought 2,200 contracts of corn, 1,100 contracts of soybeans, and 3,200 contracts of wheat. In the products, managed money has bought 2,900 soyoil while selling 2,700 contracts of soymeal.

• Bunge’s CEO Heckman indicated that they expect China’s big corn import program in 2020/21 will be repeatable/sustainable. We have noted that vessel counts and China’s own import data show that China will take 29-31 million mt in 2020/21 and a record 48-51 million mt of total feedgrains. We believe that China’s COFCO booked US new crop corn yesterday, but because COFCO is also a US grain merchant, the buying does not have to be announced until it hits the books of the exporter division.

• By our count, China has already booked 12.5-13.0 million mt of US with 4-6 million mt  of Ukraine corn for 2021/22. Thus, China’s total world corn purchase pace is 16.5-19.0 million mt for the 2021/22 crop year. We expect that China is well on their way to taking 29-33 million mt of corn from all sources and 18-24 million of corn from the US in 2021/22.

• The US weekly ethanol grind produced 298 million gallons of ethanol or 4 million less than the week prior. The US needs to average 289 million gallons in the remaining 5 weeks to reach the 2020/21 USDA forecast. US gasoline consumption was down just 2% from 2019 with US ethanol stocks rising to 955 million gallons. The USDA is understating the US corn grind for US ethanol production by 25-40 million bu which will result in reduced 2020/21 US corn end stocks.

• The forecast is consistent with the overnight run with another 10 days of arid weather for Iowa, the Dakotas, Minnesota, Nebraska, Kansas, and most of Illinois. Showers will be focused on Wisconsin/Michigan and far S lowa/N Missouri (0.25-2.00″ of rain from late Friday into Saturday). 60-65% of the Midwest will be missing the rain with heat returning in the 11-15 day period. Iowa, Minnesota, the Dakotas, and Nebraska are the concerns where high temperatures will be in the 90′s to low 100′s into Friday. The 10-15 day period stays dry for the Plains, Canadian Prairies, and Iowa. Our worry for US corn/soy yields is rising as some areas have not enjoyed any meaningful rain in 3 weeks. The heat/dryness is rapidly pushing crop maturing.

• The forecast is concerning for the first week of August as declining soil moisture elevates crop stress across a broad area of the Plains and W Midwest (Missouri excluded). Canada’s drought is worsening with livestock feeders searching for feed. Our view is bullish on the sharp fall in world grain production since June.

27 July 2021

Posted on July 27, 2021 by simon

• HEADLINES: Chicago retreats from opening rally amid Central US weather pattern uncertainty; Midday GFS weather forecast dry for N Plains/W Midwest next 10 days.

• Chicago futures are higher at midday, but well off their opening rally top. Corn and soybean futures pushed sharply higher after the morning opening with corn gaining 12 cents and soybeans up just over 30 cents on active fund buying. The weather forecast turned drier for the Central US, but the bulls desire to see confirmation in the midday run before chasing a rally. For most of June/July it has not paid to chase a rally or push sales in a decline. And traders want to be careful not get too bullish until they can itemise US yield declines. Remember that crops will hit a “moisture wall” in early August with Iowa/Minnesota being where crops have to the most to lose on condition/yield potential. Amid this week’s hot/dry weather forecast, our bet is that US corn conditions and yields are in decline, which begs a trading stance of buying sharp Chicago breaks. Funds are looking at the long side of commodities heading into August but will wait until the new month. And China needs to get started being a more aggressive buyer of US ag commodities. We look for a mixed Chicago close today.

• Chicago brokers estimate that funds have bought 1,200 contracts of corn and 1,900 contracts of soybeans while selling 900 contracts of wheat. In soy products funds have sold 3,400 soyoil and bought 1,900 contracts of soymeal.

• Talk is ongoing that China booked US corn, it is just that the tonnages are not adding up more than 2.0 million mt. China is said to be below the market with additional buying. And remember that Brazil has sold its soybeans to China for September, which pushes China’s soy buying from the US into August, about 2-3 weeks later than last year. 1.5 million mt of China corn demand would lift their US corn purchases to around 13.0 million mt, a record before the crop year has even started.

• With 32% of the Russian wheat crop harvested, yields are disappointing and argues against Russia harvesting a wheat crop that is more than 80 million mt. Unlike last year, there will be a drag on spring wheat yields due to regional dryness and excessive heat. The 2021 Russian wheat crop is estimated to be in a range of 76-80 million mt. Remember that the USDA has the Russian wheat crop at 85.0 million mt. We look for a cut in the August 12 report. The combination of massive wheat imports by Iran/Pakistan, along with a bigger import need from Turkey and the smaller Russian crop is turning world wheat prices bullish.

• The two weeks before and two weeks after pollination are when corn yields are determined. Corn can lose 15% of yield in the fill stage but yield losses will be mitigated once the crop reaches dent. If you split the US 2021 corn crop in half via the Mississippi River, some 7.6 billion bu is grown in the west. A 5% yield loss here would equate to 380 million bu, which could partially be made up by solid E Midwest yields. How much rain falls across Iowa, Minnesota, and Nebraska in the first half of August will be key to determining the final 2021 US corn yield. Dakota corn yields will be off 15-30% amid their dire drought.

• Egypt’s GASC booked 180,000 mt of Ukraine/Romanian wheat at $245.39/mt basis fob for late September, $14/mt above their last tender. This was the fourth tender in a row that Russia did not participate. And the freight rate rose to $34.02mt, the highest cost in over 6 years. Freight rates will stay high for some years in our opinion.

• The weather forecast is consistent with 10 days of dry weather for Iowa, the Dakotas, Minnesota, Nebraska, Kansas, and most of Illinois. Showers will be focused on Wisconsin/Michigan and far S lowa/N Missouri (0.25-1.50″ of rain from late Friday into Saturday) on ridge riding systems. 60-65% of the Midwest will be missing the rain with heat returning in the 11–15-day period. Iowa, Minnesota, the Dakotas, and Nebraska are the concerns where high temperatures will be in the 90′s to low 100′s into Friday. A front produces rain for Iowa in 11-12 days, but it is too far out for confidence. The EU weather model will be watched for confirmation of this front on August 7-9.

• China corn demand is below the market, but bears want confirmation of the US August weather pattern before being chased out of their positions. ADM’s CEO has claimed that the world has lost 15 million mt of grain production in July which enhances US export demand from August onward. Our trading view is to buy Chicago breaks as US corn and soybean conditions and yield potential are in decline. How big of a decline will be determined by August weather conditions.

26 July 2021

Posted on July 26, 2021 by simon

• HEADLINES: Chicago bounces on rain shift south and west on midday GFS forecast and talk of interest from China for Jan-March soybeans; US crop conditions decline?

• Chicago futures are mixed at midday with consumer demand noted on the early break which has steadied values heading into the noon hour. China’s big meal trade overnight (600,000 mt) and their resulting purchase of US soybean futures (January/March) along with cash talk that China has new interest in US corn on weakness has underpinned Chicago.

• Traders also understand that it is only late July and there is an entire month of important US weather ahead with ENSO readings indicating that La Niña is coming on fast. Last year, La Niña slowed the early soy seeding campaign in Brazil which resulted in their winter corn supply woes. Brazilian interior corn prices rose to record highs this morning at 100+ Reals/bag which is occurring even with massive imports. Brazil will be lucky if it exports more than 20 million mt of corn in their local crop year, substantially below the USDA estimate.

• The Central US weather risk and the arrival of demand is enough to produce a sideways Chicago as US corn/soybean yields are assessed. Traders correctly assume that big US crops are being made in the E Midwest, the unknown is the W Midwest/Plains yields and how far off trend could be they be. For now, it is a balancing act, but we anticipate that demand led bull markets are ahead as world grain demand is pushed to the US.

• Chicago brokers estimate that funds have been buyers of a net 1,500 contracts of corn and 2,500-3,200 contracts of soybeans, while selling 1,800-2,500 contracts of wheat. Funds have sellers of 2-2,500 contracts of meal while buying 2,400 contracts of soyoil. The volume on the break and the rally has been nothing to write home about. The summer doldrums are underway unless there is a big shift in the Central US weather pattern to lasting heat/dryness.

• US export inspections for the week ending July 22 were 40.8 million bu of corn, 8.9 million bu of soybeans, and 17.6 million bu of wheat. All were close to expectations, but the corn total came in below weekly vessel counts. This likely will produce an upward revision next Monday. Last week’s US corn exports were revised up 3 million to 42.4 million bu. China was the biggest destination for US corn of 489,000 million mt which is keeping up with their weekly averages.

• We understand that Brazil’s strong demand for Argentine corn in taking at least 1 million mt last week. Argentina is down to where its remaining unsold corn is just 2.0 million mt with additional Brazilian demand noted this morning. We estimate that Brazil will import 3.0 million mt of world corn in 2021/22 with potentially 500,000 mt coming from the US. Exportable corn commitments are getting whittled down in Argentina which should soon shift demand back to the US. Canada due to its acute drought is also seeking US corn for October/November. World feed demand heading into 2022 will be strong.

• The midday weather model is substantially drier across Iowa/Illinois/Indiana and Ohio than what was offered overnight. The midday GFS forecast has pushed any heavier rain south and west into Kansas. The model has extracted 1-2.50″ of rain for the heart of the Midwest which along with the coming 5-6 days of heat will drop soil moisture.

• Highs in the 90s to low 100′s will be commonplace this week with moderation on the weekend and next week. The E Midwest never gets into the extreme heat with highs in the 80′s to the lower 90′s. The extended range 10–15-day period offers a high-pressure ridge across the South-Central US with heat returning to the N Plains and the E Midwest. US crop condition ratings should decline for the next few weeks.

• The market is hearing some fresh interest on the demand side which has caused a pause in the weather-related selling of recent days. We look for more of a two-sided trade into early August unless the forecast maintains dryness across the N Plains, Minnesota, and Iowa. Longer term, we see the return of a demand led bull market much like last year amid the crop losses in Brazil, Canada, and the EU. Don’t chase rallies or sell sharp breaks would be our best advice.

23 July 2021

Posted on July 23, 2021 by simon

• HEADLINES: Chicago slides on wetter midday GFS weather forecast for IA/W IL/TN late next week; Brutally hot through the Plains/limited rain; Chart selling accelerates.

• Chicago futures are mostly lower at midday on bearish technical momentum and weather-related long liquidation ahead of the weekend. Traders are waiting to see which extended range weather model is correct before placing any new bets. The bulls are worn out by the inability of the market to rally and are getting out. The bears are pleased with the break and argue that any early August rain can still produce a trend line yield. Following weeks of on and off again weather, traders are worn out and waiting for the August USDA Crop Report.

• It is the stale long liquidation that is pulling Chicago values lower at midday. US farmers are having a hard time understanding the late week Chicago decline other than to suggest that the “rain had better fall, and fall soon to preserve their crop yield potential”. Another 10 days of hot/dry weather is not what is needed to produce trend corn/soybean yields. That early August rainfall is so important in preserving good US corn/sorghum and soybean yield potential.

• Chicago brokers estimate that funds have sold 4,500 contracts of corn, 2,500-3,200 contracts of soybeans, and 1,300-1,500 contracts of wheat. Funds have sold 3,100 contracts of meal while buying 2,900 contracts of soyoil.

• Mexico purchased 100,000 mt of US soybeans. But other US demand is slow/quiet. China purchased soybeans from Argentina this week, while US vessel loadings indicate that China could take more than 1.0 million mt of US corn in Monday’s inspection report. US corn exports on Monday could return to 60-70 million bu and stay at an elevated weekly level into the end of summer.

• Typhoon In-Fa is expected to produce heavy rainfall for Taiwan and Coastal areas of Central China in the province of Zhejiang on Sunday. The Government there has raised their flood warning risk to the second highest level calling on local ministries to take preventative measures. Flooding this week struck Henan and likely adversely impacted 15-17% of China’s 2021 corn crop. No damage assessments for the Chinese crop are offered by the Government tapping down on information flow to stymie rising inflationary pressures.

• Brazilian corn prices are just below their record high at over $8.00/bu as domestic end user reach for a sharply curtailed 2021 winter corn harvest. End users understand 2.5-3.0 million mt of corn imports are required for the domestic market with traders estimating that Brazil purchased 17-20 cargoes of Argentine corn early this week. Elevated imports from Argentina and the US are forecast while the Brazilian corn export pace slide to 20-21 million mt. Brazil will fall to the world’s third largest exporter in 2021/22, behind Argentina.

• We estimate that US good/excellent corn/soy condition ratings will hold steady or decline 2% on Monday. Spring wheat ratings hold steady at a low 11%.

• The midday weather model is wetter across Iowa/West Illinois than what was offered overnight. The model tries to forecast several ridge riding storm systems that produce isolated to widely scattered showers across MN/WI this weekend and then IA/MO/IL late next week.

• The ability of the model to forecast ridge-riding storms more than 24-48 hours in advance is poor which produces a low confidence rainfall forecast.

• The one forecast certainty is brutally hot temperatures that exist for the next 9-10 days across the Plains/W Midwest. Highs in the 90s to low 100′s will be commonplace with some areas enduring 105-110 degrees. The hardest hit states will be Kansas, Nebraska, and the Dakotas. Crops in these areas will be under extreme stress. The Iowa rain will help, but the area covered will not be extensive. The GFS forecast may be overdoing the heat, but it is going to be hot in the Central US.

• It is an important weather weekend with the market extracting weather premium from price for the past 2 days. Whether this extraction is right is debatable. Extreme heat/limited rain for the us Plains/Canadian Prairies is a certain forecast. And the Central US ridge is not going to go away during August, the forecasts offer high odds that it will stick around without tropical storm development.

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

Weekend summary 23 July 2021

22 July 2021

Posted on July 22, 2021 by simon

• HEADLINES: Chicago recovers after a morning of heavy fund selling as midday GFS weather forecast takes out rainfall for Plains/W Midwest; US weekly export sales disappoint.

• Chicago futures are sharply lower at midday with funds massive sellers on liquidation. Midday price direction has been basically momentum. The market was unable to gather any rally early this week on threatening Central US weather and the bears sensed a chance to produce liquidation. Fund selling ensued with the wetter 11-15 day extended range European weather model in the background providing fundamental fodder for the algo weather trading systems. It is now about the charts.

• November soybeans have fallen back to support at $13.25-13.50 while December corn uncovered buying below $3.50. So far, December corn has been able to hold Monday’s low, a positive sign. And the big declines in highly charged speculative weather grains like canola and spring wheat futures, has added to the Chicago selling. We doubt that the Chicago break can be sustained, but momentum trade has been a summer theme.

• Chicago brokers estimate that funds have sold 8-9,500 contracts of corn, 12,500-14,000 contracts of soybeans, and 5,400-5,800 contracts of wheat. Funds have sold 5,500-5,800 contracts of soyoil and 4,100-4,600 contracts of soymeal. Funds have been aggressive sellers of soybeans/soyoil on liquidation.

• Weekly US export sales for the week ending July 15 were 17.4 million bu of wheat, 2.3 million bu of old crop and 6.5 million bu of new crop soybeans, and net cancellations of 2.1 million bu of old crop and sales of 6.5 million bu of new crop corn. China cancelled just over 2 cargoes of US old crop corn which fuelled the net corn cancelations for the week.

• For their respective crop years to date, the US has. sold 279 million bu of wheat (down 46 million or 14%), 2,278 million bu of US corn (up 1,026 million or 60%), with US soybean sales at 2,278 million bu (up 574 million or 34%). The wheat sale included 4.2 million bu of US HRS wheat with crop year sales at 84 million bu. Somehow through spreads and price, the US HRS market must see US HRS exports slowed.

• US export demand has been stalled for weeks as Gulf/PNW fob price offers for corn/soybeans have been well above Argentina/ Brazil and the Baltic on wheat. This has slowed US export demand and left the weather algos to run Chicago price direction. However, US corn sales are record large in an old crop position with new crop sales record large for the middle of July at 635 million bu. US new crop soybeans are not record large, but they are sizeable at 362.5 million bu.

• We expect that the Chicago break combined with the sharp rise in Brazilian fob corn/soybean export offer prices should push back world demand to the US on corn and soybeans on the US’s newfound competitiveness. There is talk that China has become interested in securing US soybeans for an October forward timeslot. Monitor the daily sales report for new buying.

• The midday weather model is drier across Minnesota, Iowa, W Illinois, and Wisconsin and more like the overnight EU model forecast. The model has taken out a good 1-2.00″ of rain. The forecast is wetter through the Delta/SE US where rains should be regular. A strong high-pressure ridge holds across the Plains, the Delta, and lntermountain West next week. This is a 594 millibar ridge and capable of producing heat/dryness for an extended period. High temperatures will be in the 90′s to lower 100′s across the Plains/W Midwest starting tomorrow and continuing next week. It is a hot/dry Plains/W Midwest forecast. It has not rained across lowa/Minnesota/S Dakota in over a week. The coming forecast is stressful and crop ratings will decline.

• When November soybeans fell below the 50-day moving average overnight it triggered a slew of sell stops that dropped values a quick 10 cents and sparked the massive fund sales of nearly1 4,000 contracts this morning. Corn/wheat selling followed. The midday GFS weather forecast is dry for the N Plains and the W Midwest, and Canadian Prairies into August 1. US and Canadian crops are not getting larger with temperatures in the 90s/100s. We continue to see the weather as crop threatening.

21 July 2021

Posted on July 21, 2021 by simon

• HEADLINES: Low volume Chicago trade at midday as traders debate Central US weather; Soyoil drop based on sharp canola losses.

• The bears/bulls have been battling with corn, soybeans, and wheat trading on either side of unchanged. Minneapolis wheat is lower on spread unwinding while canola falls to sharp losses on the rain that fell across S Saskatchewan and Manitoba. The biggest Chicago volume was on the early break as Dec corn failed to fill its open chart gap at $3.735, while November soybeans failed to take out their overnight highs. That failure turned the momentum down with fund selling following. Exceeding either technical point will determine the next corn/soy move. Traders are unwilling to sell Chicago with threatening weather across the Central US next week. A bearish weekly export sales report will provide a chance to position for a hot/dry Central US weekend. A higher Chicago close is expected with the midday GFS weather forecast showing consistency from the hot/dry overnight run.

• Chicago brokers estimate that funds have bought 2,600 contracts of soymeal and 2,200 contracts of Chicago wheat while selling 2,100 contracts of corn, 1,500 contracts of soybeans and 5,400 contracts of soyoil. The biggest selling this morning has been in soyoil with the cash market said to be unbending. The delay in US biofuel mandates from the Biden Admin will not impact demand.

• China purchased 4-6 cargoes of Argentine soybeans yesterday and is showing improved interest for US soybeans off the PNW for late September/October this morning. The changing cost (almost daily) of grain transit via 77-year lows of the Parana River makes it difficult to calculate the delivered cost of Argentine soybeans to China. However, the point is that China has cleaned out Brazil and is now turning to cheaper Argentine offers before US interest is expected to emerge in coming weeks. A year ago, China started its massive US soybean buying program in late July.

• Chinese sources also claim widespread crop and infrastructure losses due to flooding rains that fell within a matter of hours across Henan. Livestock and crops were adversely impacted while drought across northern crop areas is also gaining in importance. With the typhoon season starting, the worry for Chinese crop production is starting and it is something that Asian sources report to be worth following.

• US weekly sales are estimated at 140-200,000 mt of old crop corn and 350-500,000 mt of new crop, 50-100,000 mt of old crop soybeans and 200-350,000 mt of new crop, with wheat at 300-420,000 mt. Soyoil sales are -10,000 mt to +5,000 mt with soymeal at 80-140,000 mt in the new crop position. The sales report is expected to follow prior week totals and be non-inspiring. Brazilian corn wash outs are not yet being transferred to the US with their being no new daily sales announcements.

• The primary weather models are going to have great difficulty in calling the location or rainfall totals of ridge riding short waves. There will be several chances of light shower chances in the next 2 weeks for the Lake States, but rain location/amounts are impossible to call. The midday GFS weather forecast is drier through the N Plains and Wisconsin, while being wetter across Minnesota and E Iowa. The models are struggling with the position of the high-pressure ridge after August 1. The GFS weather model sees the rain as being cantered on Wisconsin/Michigan/Northern Illinois and Indiana. Otherwise, the Plains and the remainder of the W Midwest are dry.

• High temperatures will be in the 90′s to lower 100’s across most of the Plains and W Midwest starting Friday and continuing next week. This is a hot Plains forecast.

• The midday GFS weather forecast is arid, but cooler for the Plains/W Midwest in the 10–14-day period. The GFS/EU models differ on the amplitude of a high-pressure ridge in the extended 10–14-day range. The GFS forecast is further south and less amplified with the ridge, while the EU model has the Central US baking under a strong ridge. The EU model has the strong track record of late. We look for the heat/dryness to extend into August.

20 July 2021

Posted on July 20, 2021 by simon

• HEADLINES: Chicago corrects morning gains as midday GFS weather forecast is slightly cooler with rain for Iowa in days 9-11; Central US ridge shows no change into August 4.

• Chicago futures are higher at midday with corn /soybeans pacing the rally. The wheat market also jumped with Minneapolis September testing its prior contract high set yesterday at $9.445. Threatening Central US weather is the catalyst for the Chicago rally as traders can look past Monday’s macro financial market meltdown. A strongly higher Chicago close is expected with December corn nearly filling its gap while November soybeans pushed back above $14.05.

• The DOW has a recovered over 600 points of Monday’s decline while US Treasury yields continue to decline on economic slowing worry due to the Delta Covid variant. Stock/commodity investors are putting risk on as Monday’s decline was overdone. The options market in stocks/commodities was laden with short put holders that were forced to sell futures/stocks to raise cash. That option related selling pressure has subsided, at least for now. The US 10-year note is trading at 1.2% which has some wondering about a US and world economic growth scare. It is way too early in this growth cycle to worry about an economic slide, the Delta Covid cases need to be monitored. With 68% of Americans vaccinated, the prospect of a US Covid closure is extremely low. Vaccinated Americans will strongly avoid any closure to gain any economic traction.

• Managed money has bought 3,500-4,000 contracts of wheat, 7-8,200 contracts of corn, and 5,500-6,000 contracts of soybeans. In soy products managed money has purchased 2,300 contracts of soymeal and 4,000-4,400 contracts of soyoil.

• Russian wheat yield data continues to be disappointing, but it is too early to make any final conclusion on  the crop. We suspect that the final Russian wheat crop will be under 80 million mt, as spring wheat yields struggle on heat/dryness.

• There is talk that China is again looking for US wheat, this time US HRW wheat for September/October. We cannot confirm that any wheat has traded, but we wanted signal China’s ongoing interest for US wheat. The China wheat demand shows that China is real about complying with its Phase One Pledge and would like to get into negotiations over Phase Two ag trade details.

• Changeable US weather and its importance to yield and price has caused the implementation of weather trading algos that buy or sell Chicago depending on whether the latest Central US weather forecast is warmer/cooler drier/wetter. The overnight run was warmer/drier while the midday was slightly less warm with rain for Iowa beyond the next 9.5 days. Confidence for Iowa rainfall 10 days from now is low. The forecasts are always in flux, but the overall pattern of a Central US ridge and generally hot/dry weather conditions for the next 2 weeks has not changed. Do not get caught up price action produced by the weather algos, on the other side of this weather market is tight world grain stocks and a demand led bull for US corn, soybeans, and wheat.

• The midday GFS weather forecast is drier through Wisconsin/Minnesota/North Dakota and wetter through W Iowa, Missouri, and the Delta. Otherwise, the entire Plains, the Canadian Prairies and the remainder of the W Midwest are devoid of meaningful rain.

• Ridge riding rains are difficult to forecast. The midday model is less amplified with the ridge (compared to the overnight run) allowing the rains that were forecast for Wisconsin to retrograde west. We would caution that these ridge riding rains are not widespread and impossible to forecast with any accuracy more than 48 hours in advance. We doubt the IA rains in 9-11 days and would strongly suggest that the rain location/amount will shift.

• High temperatures will be rising to the 90′s to lower 100′s across a vast majority of the Central US starting on Friday. There is no indication yet that a tropical system is forming in the Gulf that can dislodge the ridge with the hot/dry weather persisting into August 4.

• The midday forecast is a few degrees cooler (than the overnight) with rain forecast to drop across Iowa next week. Our confidence in the Iowa rain is low as ridge riding rains are difficult to forecast so far in advance. Do not sell breaks in this weather market.

19 July 2021

Posted on July 19, 2021 by simon

• HEADLINES: Chicago early rally fades on macro financial meltdown; Central US weather stays threatening at midday; Kazakhstan moves to limit grain trade.

• Chicago futures are mixed at midday as traders are unwilling to chase an early Chicago rally with the US’s macro financial markets in decline. A growth scare being offered by the Delta variant of Covid along with the expectation that US corn and soybean crop conditions will increase led to early Chicago weakness. The DOW is suffering losses of over 900 points, making it the largest daily loss for 2021 to date. Crude oil is down $5.00/barrel which pressured the biofuel crops of soyoil/corn. The macro weakness has cast a bearish pale across Chicago this morning, but no trader or farmer is willing to make fresh sales with a threatening weather forecast ahead. The selling has all been in relation of risk aversion and if the DOW/energy markets stabilise, a quick rally to the upside will ensue. The break this morning is ALL related to macro market declines and nothing to do with US/world corn, soybean, and wheat fundamentals. The weather and fundamental aspects of Chicago are bullish.

• Managed money has sold 6-8,000 contracts of soyoil and 2-3,000 contracts of soybeans. Managed money has bought 3,400-4,000 contracts of wheat, 2,400 contracts of corn, and 2,100 contracts of soymeal. Funds were active buyers overnight and then sold back some of those purchases this morning.

• The USDA/FGIS reported that for the week ending July 15, the US exported 39.4 million bu of corn, 5.3 million bu of soybeans and 18.1 million bu of wheat. For their respective crop years to date, the US has shipped out 2,368 million bu of corn, 2,123 million bu of soybeans and 103 million bu of wheat. Remember that US Census corn exports are running 173 million bu above inspections. We expect that China will be more robust in their US corn/soybean program during August.

• Kazakhstan has moved to limit their wheat exports amid a dire drought that has dramatically cut production and raised domestic prices. It is expected to move to limit wheat and ban animal feed exports starting on August 15. The decision was made at the meeting of the Multiagency Commission of the Government. The political decision will further raise grain prices for nearby importers, but the policy move will be reviewed in 6 months. The limitation of Kazak wheat (spring wheat) is another loss of a world hi-protein supplier.

• A weekend Brazilian freeze likely caused additional damage to corn and winter wheat crops according to sources. The cold could have nudged corn production downward by 500-900,000 mt and a yet to be determined loss in wheat. The cold onslaught produced freezing temperatures across the Southern third of Parana and through Santa Caterina/RGDS. The weekend cold offered another cut to the Brazilian corn crop which many now peg at or below 86 million mt. We now estimate the 2020/21 Brazilian corn crop at 85.9 million mt which could cut Brazilian corn exports through their local marketing year to just 18-20 million mt. Brazil may import 2-2.5 million mt of corn into southern livestock areas.

• The midday GFS weather forecast is drier through Iowa and the Northern half of Illinois with better rains across Wisconsin and Indiana compared to the overnight run. The entire Plains, the Canadian Prairies and the W Midwest are barren of meaningful rain. A high-pressure ridge that is located over the lntermountain West shifts south and east this week with temperatures rising into the 90′s to lower 100′s across a vast majority of the Central US. The GFS forecast continues to run hotter than other models, but this is a trend that now extends for days. The Western US high pressure ridge is progressing east due to the monsoonal flow out of Mexico. There will be ridge-riding rains across the N Lake States of Wisconsin/Michigan and Ohio, but Illinois will be on the dry side for at least 12-13 days. Our concern is that a tropical storm is needed to dislodge the ridge from its Central US location during August.

• It’s a macro-Monday with Chicago “risk off” the theme due to near 1,000-point fall in stock market and near $5.00 plus drop in crude oil values. The Central US/Canadian weather are threatening with hot/dry conditions. This is not a market to be short, when world financial markets stabilise, a sharp Chicago rally follows. The Canadian drought is one for the ages and US crop losses across the Northern Plains and the W Midwest will be building into August.