Monthly Archives: June 2023

29 June 2023

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  • HEADLINES: Chicago markets mixed at midday; Heavy rain/thunderstorms move into Western IL; US export sales lacklustre as expected.
  • Chicago ag markets are mixed at midday, with corn slightly weaker, beans slightly higher and wheat caught between. Volume has been mediocre, and we continue to highlight the recent plunge in open interest, which exacerbates volatility. Stocks and seedings data drives price action on Friday/Monday, but thereafter it is all about the fine-tuning of coming Midwest precipitation.
  • The importance of this weekend/next week’s rain event cannot be overestimated given current moisture deficits and expanding Midwest drought. As of Tuesday, 70% of the US corn crop, 63% of soybean and 55% of US sorghum were facing drought conditions, coverage not seen in late June since 1998. A further rapid depletion of soil moisture occurs in KS, MO and southern IL as temperatures reach into the 90s/low 100s today and tomorrow.
  • Model guidance into the weekend will be changeable on exactly where rainfall in excess of 2” occurs. The midday GFS forecast into Tuesday keeps soaking rain more scattered in IL and IA and has trended wetter in the 6-10 day period. Rainfall of 1” is likely to blanket the Central and Eastern Midwest, but the details will matter, and the risk of severe weather is elevated.
  • A lasting period of dryness is projected to return to Canada, the N Plains and Upper Great Lakes, with abnormal warmth to stay in place across the Canadian Prairies throughout the next 10 days. Canadian acreage has been maximised but the next 30 days there are critical weather-wise. The Indian monsoon continues to perform poorly, particularly in major oilseed production areas. N Hemisphere weather problems are numerous.
  • US export sales in the week ending June 22 were weak as expected. Corn sales in the period totalled 5.5 million bu, vs. 1.4 million the previous week. Soybean sales were 8.8 million bu, vs. 18.0 million the previous week. Wheat sales totalled 5.7 million, vs. 4.0 million. For their respective crop years to date, exporters have sold 1,527 million bu of corn, down 36% year on year, 1,923 million bu of soybeans, down 13%, and 155 million bu of wheat, down 27%. It is probable USDA trims 2022/23 US corn exports another 25-50 million bu, and we note that Black Sea/EU barley prices are somewhat deflated on building stocks and the looming harvest, and this adds to already cheap Brazilian corn offers. Changes to soybeans, meal or wheat exports are not anticipated.
  • Safrinha corn harvesting in Mato Grosso last week was 19% complete and it is estimated tat progress this week will reach 26-33%. Final total Brazilian corn production is estimated at 129-130 million mt.
  • EU and Canadian rapeseed prices have recovered following bearish Stats Can data on Wednesday.
  • Radar maps show rain/thunderstorms working across eastern IA/MO and into far Western IL, and an enhanced risk of extreme weather is in place today for N MO, IL and southern IN. An active pattern of showers is forecast into next Tuesday. The heaviest rainfall is still projected to favour portions of IL and much of IN. A drier trend is offered to the principal Midwest in the 6–10-day period, while soaking showers/extreme weather is funnelled westward into the Central Plains.
  • Yield and US/global end stocks estimates will remain highly variable and even crop ratings/drought in the next 10 days will vary wildly by county. Speculative positions will be kept small, and open interest is unlikely to increase prior to autumn. This leads to ongoing volatility.

28 June 2023

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  • HEADLINES: Chicago correction extended at midday as GFS weather forecast features drought-busting precipitation accumulation; US ethanol production stays elevated.
  • Chicago ag markets have extended overnight weakness as radar maps show light rain working across northern MO and into IL, and as the midday GFS forecast continues to add to 10-day cumulative precipitation. US ethanol production remains seasonally strong, and margins have soared following the break in corn. Soybean crush margins, both futures-based and in the physical cash market, are rising. But it is all Midwest weather into late July, particularly following widespread crop stress, and decades-low corn crop ratings.
  • Only one year was there material improvement in corn and soy crop ratings from late June to late July, 1992, when July rainfall in IA and IL reached 7-9”. Such is the burden this year, but NOAA’s’ QPF and the midday GFS forecast both offer at least the chance that rainfall this weekend/next week in IL, IN and OH reaches 2.00-4.00”, and so a stabilisation/recovery in soil moisture lies ahead. We would maintain that national US corn yield potential of 165-175 bushels/acre remains intact, but exactly where final yield falls within this range has major implication on US and global balance sheets. This will be a challenging markets and risk management remains difficult.
  • The US drought monitor Thursday morning is expected to show an intensification in drought conditions across E KS, MO, southern IA, IL and IN, but improvement the following week if 7-day forecasts verify. Extremely close attention will be paid to radar maps beginning Friday. Additionally, we note that max temperatures in the 90s/100s are probable in KS, MO and W IL prior to this pattern shift. The growing season into early July will have been highly variable.
  • US ethanol production in the week ending June 23 totalled 309 million gallons, unchanged from both the previous week and the same period in 2023. This is right on track to meet the USDA’s forecast, and USDA may opt to leave industrial use unchanged in its July WASDE. Ethanol stocks last Friday were up 1% year on year at 965 million gallons, but the market remains balanced as gasoline use has now exceeded year-ago levels in each of the last six weeks. Spot WTI crude oil at midday is up $1.70/barrel as stocks last week were drawn down nearly 10 million barrels. Seasonally, US crude stocks decline to early/mid-autumn.
  • The midday GFS weather forecast is wetter in the Eastern Midwest, with rainfall of 2-3” expanded into IN and OH in the 6-10 day period. A pattern of dryness and extreme warmth will be in place across the southern Ag Belt into Sun/Mon, but thereafter a series of light but continuous rainfall develops across the Plains and Midwest into July 8. The GFS and Canadian forecast models are at odds over coverage/amounts, and the GFS is unwavering in projecting a tropical storm making Gulf landfall July 6-7, but the best rain in months lies ahead for a wide swath of the primary Corn Belt. The GFS’s solution implies an easing or near elimination of drought in parts of IA and western/southern IL.
  • The break has been as swift as mid-June’s rally. The evolution of the coming forecast should be digested by Thursday, with focus thereafter shifting to old crop US corn/soy stocks and the actual performance of rainfall in the first week of July. Wide swinging markets will persist into late summer.

27 June 2023

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  • HEADLINES: Risk off ahead of month end with Midwest rain forecast helping the Chicago rout; GFS weather forecast stays wet at midday, Canadian model drier.
  • Sharply lower Chicago grain futures exists at mid-session amid the prospect of improved Midwest rain starting this weekend and continuing next week. Rain makes grain and the market was able to look past the near record low crop ratings released late Monday.
  • Corn, soybeans, and wheat crops have suffered from record dryness since mid-May which stunted corn/soybean and spring wheat crops. How much yield damage has occurred is impossible to determine, but soil moisture levels below 2012 argue that the coming Midwest rains must be widespread soakers. Hit and miss thunderstorms will not produce enough rain to salvage US corn/soy yield with the reproduction phases underway. And importantly, soybeans will need weekly regular rainfall due to the lack of surface water through late August. There will be additional twists and turns to Central US weather, and it is too early to declare that Mother Nature will be kind from here forward.
  • We have warned of extreme market volatility and recent week price action has not disappointed. The problem is a lack of resting orders above and below Chicago and that open interest has dropped to the lowest levels since 2014 (corn/soybeans) as the back-and-forth fray producer, trader, and fund manager’s nerves. And key NASS reports are out Friday that will delineate US 2023 US major row crop seeding and June 1 stocks. The gains in the July/December corn spread and July/November soybean spreads argues to be careful about being too bearish on June 1 US grain stocks..
  • Producers report that crops continue to suffer with upper 90’s to lower 100’s to cover most of OK, KS, MO, and S IL from today through Friday before there is any relief. To date, Midwest crops have sidestepped any extreme heat, but that will change as South-Central US high pressure ridge builds northward. The heat/dryness will cause a fresh decline in US corn/soy/wheat crop ratings next Monday. Thereafter it is all about the coverage of meaningful rain as Central US temperatures stay warm to hot into July 10. Midwest rainfall must average 1-1.50” per week just to counter soil moisture loss due to evaporation as crop moisture needs reach their peak prior to pollination or the soybean pod set stage. This raises the need for regular meaningful Midwest rain each week.
  • Chicago brokers report that fund have managed money has sold 5,600 contracts of Chicago wheat, 19,200 contracts of corn, and 9,400 contracts of soybeans.  In the soy products, funds have sold 4,600 contracts of soymeal and 1,200 contracts of soyoil. Oil share spreading continues to hold on breaks with an additional 22 soyoil deliverable receipts cancelled on strong cash bids.
  • Russian fob wheat offers have been rising on the worry that the initial Russian harvest will not produce the same high protein wheat that has become commonplace and accepted during the 2022/23 export season. We believe the Russian 2023 wheat crop at 83-84 million mt due to a smaller spring wheat yield and a near average winter wheat yield. Russian farmers are not expected to be active sellers of their new winter harvest as price is estimated below their cost of production. However, an advancing harvest will boost total supplies.
  • The midday GFS weather forecast is more like the EU model with drier weather for the NW Midwest and wetter weather for the SE Midwest (S IN/OH) than was shown overnight. The rain starts Friday and persists into the weekend with accumulations of 0.15-1.25”. We see the coverage of rain greater than 1.00” at no more than 20% of the E Midwest. The NW Midwest is largely missed with the SE US starting a drying trend.
  • The next system is evident Wednesday/Thursday which catches more of the NW Midwest and includes N Illinois. This ridge riding system produces another 0.25-1.25” of rain across the NW and E Midwest. The system weakens and slowly pushes east and south during Friday (July 7). A trough over Central Canada keeps the South-Central US high pressure ridge from building north.
  • Some of the Midwest is drier and some wetter vs the overnight model run. The message is that meaningful rain will fall across 35-40% of the Midwest. We doubt that the coverage will be as widespread as depicted by the GFS model.
  • It is a risk off day as green blobs on the Midwest weather forecast spurs liquidation. Yet, this looks to be the best rain event since April, but regular weekly rain is needed through the remainder of the 2023 growing season. Ahead of key NASS reports, market volatility will remain acute and some of the selling today is funds selling out positions heading into the end of the month. Again, resting orders are lacking and producers are sceptical of crop saving rains with the calendar on the doorstep of pollination. Key support rests just below current levels at $5.50-5.60 Dec corn and $12.50-12.75 Nov soybeans.

26 June 2023

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  • HEADLINES: GFS weather forecast is wetter in the midday run for C and E Midwest with 0.4-1.25″ of rain; NASS crop condition ratings in focus; Old/new crop spreads rally on order flow.
  • Chicago grain futures are firmer at midday, but well off their early morning rally high as uncertainty regarding US weather and key USDA crop reports later this week dominate trading activity. Few want to chase a Chicago rally or a break, leaving price to chop sideways until more information is available.
  • Soyoil appears to be the only Chicago market with strong domestic demand with deliverable receipts being cancelled into first notice day due to a strengthening cash market. US corn, soybean and wheat export demand is tepid with Russian and Brazilian fob grain offers well below the US Gulf. The US corn/soybean market lacks a demand story that makes the bulls nervous. The bears are nervous as too much Midwest real estate is dry and crop conditions are in decline. Until Midwest crop conditions stop declining, it is difficult to be overly bearish with several weeks of key growing weather ahead.
  • And the cries of worry are widespread from Midwest farmers that did not receive at least 0.50” of rain this weekend. Crop stress is rising and becoming acute with a 2-3-day period of intense heat just ahead. Key will be NASS crop condition ratings later today (yield determinations) which have been more important than Sunday night’s forecast in recent weeks. This is based on there being no “dome of doom”, a high-pressure ridge that produces heat/dryness.
  • Chicago brokers estimate that funds have bought a net 600 contracts of wheat, 2,600 contracts of corn and 4,100 contracts of soybeans. In the products, funds have sold a net 1,800 contracts of soymeal and bought 1,900 contracts of soyoil. The volume this morning has been rather slow from the funds.
  • US weekly export inspections for the week ending June 22 were 21.4 million bu of corn, 5.2 million bu of soybeans, and 7.5 million bu of wheat. The totals were disappointing and reflect the limited world demand for US crops due to non-competitive pricing. Russian wheat and Brazilian corn/soybeans are offered well below the US Gulf.
  • For their respective crop years to date, the US has shipped 1,278 million bu of corn (down 589 million or 31%), 1,806 million bu of soybeans (down 83 million or 4% and 27.8 million bu of wheat (down 21 million or 43% in the first month of the crop year. US corn, soybean and wheat export demand continues to struggle with US corn and wheat export estimates to be potentially lowered by USDA in July.
  • Old/new crop spreads have rallied strongly today on liquidation prior to first notice day on Thursday. There does not appear to any fresh news that would “hike” the spreads, and the rally is more an indication of order flow. Cash corn/soybean markets are trading marginally above Chicago July futures with Central IL spot soybean bids at $1.00 over August while spot corn is at $0.60 over September futures. It appears that the weakness in new crop futures is centred on the prospect of improving Central US weather.
  • The midday GFS weather forecast is wetter than its overnight solution for the E Midwest with a ridge of high pressure forming over the SE US on July 4 to shunt Gulf moisture northward into passing cold fronts. Other models do not offer a SE US ridge and we are in doubt about its correctness. However, the SE ridge placement is behind the better rain for the Central and Southern Midwest in the midday run, an area that missed the moisture on the weekend. The midday GFS forecast offers E Midwest crops 0.4-1.25” of rain during the July 4 holiday week. Limited rain is offered into the weekend with heat developing from Texas and pushing NE into Illinois with highs ranging from the mid 80’s to the upper 90’s. The coming heat/dryness will adversely impact Midwest corn/soybean crops that did not receive at least 0.50” of rain last weekend. A zonal flow pattern follows with near normal rain.
  • We look for a 2-4% fall in US corn/soy crop conditions today. Thereafter it is all about late week NASS stocks/seeding reports and Central US rainfall. The Canadian model forecast is much drier and like the EU model overnight solution. The GFS model has been highly erratic and confidence in the midday solution is low. We see no reason to sell today’s Chicago break.

23 June 2023

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  • HEADLINES: GFS weather forecast drier at midday with rain being pushed further north into N IA/MN/WI, Midwest heat builds in the extended range.
  • Chicago grain futures are sharply lower on wetter Central US weather forecasts with the exception being soyoil futures that are rising on the cancellation of deliverable receipts and rising cash basis bids. The oil share spread has been historically volatile this week. Soyoil is the one commodity in Chicago that has a demand story due to on the onboarding of new renewable biodiesel plants and the shunning of used cooking oil as a feedstock due to the mixing of tropical oils that are not sustainable or eligible for California low carbon credits. We maintain that soyoil will gain on soymeal in the months ahead.
  • We note that option volatility has been crushed this morning due to the prospect of Midwest rain on Sunday and again late next week. Corn/soy futures have whipsawed wildly this week amid Wednesday’s sharp fall in US crop condition ratings and then the overnight addition of Midwest rain. The volatile markets caused traders to cut position size ahead of next Monday’s US corn/soybean crop condition report and the USDA Stocks/Seeding Report on Friday. If you think that this week’s price action has been extreme, wait until next week. Producers/traders need seat belts to navigate the sizeable daily price changes.
  • Chicago brokers estimate that funds have sold 4,200 contracts of wheat, 17,500 contracts of corn and 12,300 contracts of soybeans. In the products, funds have sold 9,400 contracts of soymeal and bought 6,700 contracts of soyoil. Funds were massive sellers of corn on the opening pushing out some 9,000 contracts in the first 10 minutes of the day.
  • US export sales for the week ending June 15 were 4.0 million bu of wheat, 1.4 million bu of old crop and 1.9 million bu of new crop US corn, and 16.8 million bu of old crop soybeans and 6.2 million bu of new crop. The US sales pace of corn, soybeans and wheat are restricted by the lack of Gulf/PNW competitive prices with Russian wheat and Brazilian corn/soybeans being offered far cheaper. The world is feasting on Russian wheat and Brazilian summer row crops well into October. This will maintain a slow US sales pace until their supplies are drawn down.
  • For their respective crop years to date, the US has sold 1,915 million bu of soybeans (down 297 million or 13% from last year), 1,521 million bu of corn (down 854 million or 36% from last year), and 149 million bu of wheat (down 44 million or 23%). The US sales pace argues that WASDE needs to cut their 2022/23 corn export estimate by another 50 million bu and soybeans by 10-15 million bu in the July WASDE report.
  • The Argentine Grain Exchange reduced its corn crop estimate to 34 million mt from 36 million with many expecting a further cut to 31-32 million mt by the final count. Argentine rainfall has been in short supply as their drought hangs on.
  • The midday GFS weather forecast is drier than the overnight run for the Midwest with shower chances being pushed further north and south than was indicated overnight. The GFS forecast has been highly erratic in its placement of rain, and its reliability should be questioned. That said, the Hi Res NAM model has also moved the rains northward into the northern half of IA, MN and WI and largely out of IL. The next ridge riding system is due late next week with rain of 0.2-0.7”, which was also curtailed at midday. A weak northern branch of the jet stream is shifting into Canada which will maintain a slow eastward pattern progression. Heat will be building across the Central US in July that will acutely stress crops without a soaking rainfall. To sum it up; there will be several chances of Midwest showers, but outside of the Dakotas, rain totals from both ridge riding systems will range from 0.1-0.8” (each), far less than is required to recharge soil moisture. Midwest weather stays a concern.
  • We look for a 2-3% fall in US corn/soybean crop conditions on Monday. Thereafter it is all about how much rain falls next week. The market onus has shifted to the bears with abundant rain now needed to keep Chicago in decline. We see no reason to sell today’s Chicago break with the drought worsening across the Midwest. Heat will build northward into the Midwest during July.
To download our weekly update as a PDF file please click on the link below:

22 June 2023

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  • HEADLINES: Midday GFS weather forecast drier with extreme heat across South Central US; 64% of the US corn and 57% of the US soy crop in drought.
  • Chicago futures are sharply mixed at midday with wheat futures higher while corn/ soybeans sag on profit taking ahead of the weekend. The volatility of Chicago is acute with traders now expecting dramatically higher or lower prices daily. The 2023 US weather market has reached a new stage of volatility.  Chicago margins have expanded 50% due to yesterday’s limit up close in soymeal and limit down close in soyoil. Heading into next week’s NASS Crop Progress/Condition and Stocks/Seeding reports, traders will need seat belts to manage their positions. Positioning in Chicago options is the preferred method of managing the US weather market. Days of 10-25 cent gains or losses in corn and 30-50 cent losses in soybeans will be commonplace into early August.
  • Wednesday’s final Chicago open interest showed a 16,361 contract gain in corn, while wheat and soybean oil fell 6,632 contracts and 2,555 contracts, respectively. We note that Chicago soymeal futures were up 7,774 contracts on the limit gains with soyoil open interest down 4,926 contracts with its limit losses. Today’s Chinese holiday is limiting their Chicago pricing which is contributing to the Chicago weakness. China grain traders will be back in full force on Monday. The volume on the morning break has been slow.
  • Chicago brokers estimate that funds have bought 3,200 contracts of wheat while selling 9,500 contracts of corn and 15,900 contracts of soybeans. Funds sold 13,000 contracts of soybeans in the first 10 minutes of the Chicago reopening. In the products, funds have sold 5,300 contracts of soymeal and 5,100 contracts of soyoil. Much of the soyoil selling was due to liquidation following Wednesday’s limit down close.
  • FAS/USDA will release their weekly export sales report on Friday due to Monday’s holiday. The sales are expected to be seasonally slow with limited demand for US corn/soybeans due to the Brazilian fob cheapness.
  • Thailand purchased feed wheat in recent days with as many as 3 cargoes trading according to cash sources. The feed wheat was sold cheaply at $277 CIF which makes Aussie or Russian wheat unlikely to fill the demand. The sale of cheap optional feed wheat has cash connected traders discussing that the seller may have been China. It has been a long time since China has sold feedgrains, but it is something that is being rumoured in the Asian cash grain circles.
  • Russia remains aggressive in offering fob wheat at $230/mt spot with a $2/mt carry per month into December. Why Russia is selling wheat so cheaply is unknown. Basis the rally in Chicago/Matif futures, Russian sellers can raise their fob offers by $12-16/mt and still be the cheapest hard wheat in the world. Our message to Russian wheat end users, is that the cheapness of Russian wheat offers a long-term purchase opportunity into yearend.
  • The Drought Mitigation Centre forecast that 64% of the US corn and 57% of the US soybean crop is in drought regions. In 2012, 37% of the US corn and 43% of the US soybean crop was in drought on the same date. We note that in the July 2012 WASDE report, USDA forecast a July corn yield of 146 bushels/acre, down 20 bushels/acre from their June forecast. It appears likely that WASDE will cut their June corn yield in July, it is just a question of degree.
  • US weekly ethanol production produced 309 million gallons, 2 million gallons more than was required to match the USDA annual forecast. US ethanol stocks rose 25 million gallons to 958 million gallons, which is equal to last year.
  • The midday GFS weather forecast is drier than the overnight run with 2 ridge riding storm systems passing across the N Plains and the NW Midwest over the next 10 days. These ridge riding storms do not produce much rain over IA, IL, MO, MI, or IN as the systems are too far north. A strong ridge of high pressure holds from Texas into Mississippi with high temperatures in the mid 90’s to the lower 100’s. A few days of record-breaking heat is possible across Texas/Louisiana. However, each of the ridge riding systems could produce 0.1-0.6” of rain across 30% of the Midwest. Such rain won’t be enough to dramatically change soil moisture levels. A trough builds across the upper Lake States which will produce seasonal temperatures, but limited rain.
  • As has been the case since April, we see the GFS weather forecast as too wet and maintains an arid Midwest forecast via the EU model. Canadian dryness is also worrisome!
  • The weather forecasts do not have enough rain to prevent US corn/soy crop conditions from declining another 2-3% on Monday. Showers will drop across the Midwest, but the amounts are way below crop needs heading into pollination on corn. US cash soyoil basis stays strong and is rising which is testament to EPA’s RVO decision not impacting coming renewable biodiesel demand. Our message at midday; “Do not sell Chicago hard breaks!”

21 June 2023

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  • HEADLINES: Soyoil limit down/soymeal limit up on oil share spreading; GFS weather forecast slightly wetter next Wednesday; Dec corn reaches $6.26.
  • Chicago futures are sharply mixed with corn, soybean, soymeal, and wheat futures sharply higher with soyoil futures down their 4 cent limit. Massive oil share spread unwinding is occurring which sent soyoil futures to limit losses and soymeal to limit gains. The EPA finalised the blending mandates for 2023 at 20.94 billion gallons, 21.54 billion gallons in 2024, and 22.33 billion gallons in 2025. EPA cut their ethanol inclusion from December, but biodiesel use rose 7% annually. The RVO amounts were less than the industry had hoped for and soyoil futures have declined sharply. We see the soyoil break as overdone, as renewable diesel credits in California and other states will sharply increase production. We caution against turning bearish soyoil following the EPA decision, for the next few days it is about the oil share spread. Longer term, it is the lower production of US soybeans (soyoil) which will rally futures.
  • Chicago corn, soybeans and wheat are sharply higher on threatening weather and reduced US corn/soy yield potential. We have adjusted our US corn yield estimate down to 174.5 bushels/acre and soybeans down to 50.4 bushels/acre and trimmed harvested acres due to additional abandonment and extra corn acres needed for silage. The result is US 2023/24 corn end stocks circa 1,600 million bu and soybean end stocks at 225 million bu. And US wheat end stocks are also in fast retreat.
  • Chicago brokers estimate that funds have bought 21,000 contracts of corn, 11,000 contracts of soybeans and 10,600 contracts of Chicago wheat. In the products, funds have sold 4,700 of soyoil while buying 7,100 contracts of soymeal.
  • Soymeal futures have traded limit up while soyoil futures are limit down in a US drought bull market! RIN prices dropped 10-12 cents following the EPA biofuel announcement this morning. With imported used cooking oil now being tested for compliance for not containing tropical oils, the usage outlook for US soyoil is strong. Support should be found under $0.53/pound basis July.
  • India is asking Russia daily for fob wheat export offers. The Indian Government estimates that 2023 Indian will harvest a crop of 112.7 million mt, while private trade groups place the crop at 101-103 million according to a newswire. The private harvest crop estimates would mandate that India become a sizeable net wheat importer or endure domestic price rises that would curtail use. USDA estimates that India will consume 109 million mt of wheat in 2023/24 following demand of 110 million last year. India has been a world wheat exporter for years, but with domestic prices rising sharply in recent weeks, the worry is that India will need to import wheat in 2023/24, it is just a question of when.
  • US double cropped acres from the March Intentions report are being questioned as farmers cutting SRW wheat in the Southern Midwest will avoid taking the financial risks of planting beans into dry seedbeds.  We have trimmed our US 2023 US soybean seeding estimate by 500,000 acres due to the Midwest producers cutting back on double cropped soy acres. The loss of double cropped acres only adds to the woes of reduced yield via drought.
  • The midday GFS weather forecast is slightly wetter than the overnight run in breaking out a ridge riding storm a week from today on June 28 which produces 0.25-1.00” of rain across IA and far Western IL before croaking. Otherwise, the forecast offers limited rain for the drought areas of IL, IN, MI, WI and MO. The Gulf is closed via a dislocated Bermuda high pressure cell. The big fear is whether the South Central US high pressure ridge builds northward into the Midwest in early July. Seasonally, there will be some northward shift in the ridge during mid-summer. Midwest crops are in no position to endure any lasting heat with soil moisture in sharp decline.
  • July soyoil is trading 50-60 points below limit in synthetic options while July soymeal is trading just off its upside $30/ton limit. The bull demand story for soyoil is alive and we doubt that the break is anything but a correction. Otherwise, it is all about US supply/weather into July. A below normal rainfall trend sets up corn/soy for reduced yield potential, it is a question of amount. Don’t sell breaks.

20 June 2023

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  • HEADLINES: Chicago trades both sides of unchanged in corrective session; GFS weather forecast at midday drier in the 6–10-day period; Rain needed immediately.
  • Chicago futures are mixed at midday with the bears out in abundance with this being the anniversary of the start of the 2022 summer grain break. A year ago today, Chicago futures fell to sharp losses as the Central US weather pattern improved and world Central Banks became aggressive in raising interest rates to slow inflation. 2022 Chicago grain futures dropped to sharp losses into mid-July as December 2022 corn futures lost more than $2.00/bu while November 2022 soybeans fell nearly $3.00/bu. Seasonally, price tops are set in May/June and traders are on edge due to cheap Brazilian corn/soybean fob offers that the same could occur this year. Amid the big volume of Chicago last Friday and near record volume in grain options trade, the daily/hourly price volatility is rising.
  • Today, the war against inflation is being won by Central Banks, but Mother Nature is holding the upper hand on US corn/soybean yields following months of dryness. June appears that it will end as dry as May with El Niño not having much influence on US or world weather. So far, 2023 weather has been about pattern stagnation produced by the warming of the Arctic (and Antarctic) that has slowed the jet stream and produced amplified weather patterns.
  • Like Argentina from January through March, the prospect of rain was held in the extended range forecast, but it was never pulled forward into the 1-5 day period. This was due to pattern stagnation that is not being handled very well by the forecast models. Remember in the extended range that the models shift back to normality if the pattern is amplified/slow in its progression. With the Bermuda high pressure cell absent, we worry about a like type of forecast development for the Central rain with ghost rain in the extended range that never happen.
  • The USDA/FGIS weekly grain export inspection report has been delayed due to technical difficulties.
  • Midwest farmers are becoming increasingly concerned about their crops and the ongoing lack of soil moisture. Thankfully, temperatures have not been hot like 2012, but questions abound as to US corn/soybean yield potential amid one of the driest mid-May to late June’s on record for the Eastern half of IA, IL, MN, WI, MI, and IN. Corn in these states should be much taller while soybean stands are poor due to poor germination/emergence. The need for rain is immediate and for another 2 weeks, it appears that US yield/production estimates will continue to decline. This raises the importance of July weather to preserve a 177 bushels/acre corn or a 51 bushels/acre soybean yield.
  • Russian fob wheat prices have started to recover as worry over the 2023 crop emerges while some cite Indian interest for Russian wheat as being bullish. Russian wheat traders lament that India has been checking Russian fob wheat prices for nearly a week. Whether India is trying to better understand world wheat values, or they are preparing for a purchase is unknown. It is something to watch close in the days/weeks ahead.
  • The midday GFS weather forecast is like the overnight solution with limited rainfall for IA, IL, MO, S MN, WI, MI, and the northern half of IN. Extreme heat develops at the end of the month with highs returning to the mid 80’s to the lower 100’s. The heat/dryness will combine to add additional stress on US corn/soybean crops. The Northern Plains will benefit from the coming 0.5-2.50” of rain but note that the heaviest rain has been shifted north into N Dakota. This remains a concerning Central US weather pattern with limited rain for the high yielding Midwest.
  • Periodic profit-taking corrections keep volatility in place, but until there are at least hints of a US pattern change with better rain for the Midwest, we doubt bearish trends can be sustained. US corn/soybean crop ratings should drop today and next week based on the forecast. Old crop corn/soybeans are in strong hands with the farmer sold out. Bull spreads and flat price action makes today look much like a needed correction.  Prices ran fast and hard late last week,  Chicago needed a correction, but until there is a strong hint of a North American weather pattern change, we remain bullish on diminished supplies.

16 June 2023

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  • HEADLINES: Midday GFS weather forecast lacks pattern change; crude recovers.
  • The addition of risk premium continues, and while new crop corn and soy contract are off morning highs, soy futures are heavily overbought and corn is nearing overbought technical levels, there is still no indication of a needed Central US weather pattern change into July 1. The market has been somewhat tepid in digesting worst-case scenarios as it is still only mid-June, but we reiterate that US corn and soy yield loss of just 3-4% relative to trend triggers major adjustments to US, exporter and global balance sheets. And no longer can the market place its focus on 16–30-day outlooks given the immediate need for soaking rainfall in all but the Central Plains, and so large up and down moves are anticipated into mid-summer based on latest model guidance. Our concern is one of pattern stagnation, with a measurable portion of the US crop to enter pollination in just 3 weeks. Yield loss of 5%+ mandates supply rationing. Keep in mind this year’s drought-stricken crops in Argentina, while Ukrainian vessel movement in the Black Sea has been effectively halted.
  • French winter wheat crop ratings this morning were lowered 3 points to 85% good/excellent, well above last year’s 65% but down from early season ratings of 92-93% good/excellent.
  • Our  contacts suggests EU wheat yields will be highly variable, but another hike in coming WASDE reports is unlikely. Very poor crop health is noted in far N Europe, including the key Baltic exporting region. Better rain lies ahead for France, but the Baltics and Scandinavia will be left arid.
  • EU corn and wheat markets continue to participate in the global ag markets’ rally, though only modestly given large existing stocks there and as Brazilian corn becomes available to European importers in late summer. But the EU oilseed market has soared, and this underscores the importance of US and European yield performance if Northern Hemisphere stocks tightening is to be prevented. Spot EU rapeseed has pierced through an 8-month downtrend line this week. EU rapeseed oil has also rallied with summer/autumn demand being found.
  • There is an otherwise dearth of fresh news, and the trade is well aware that three full days of potential US forecast changes lies ahead. Like this week, a big move is anticipated Sunday night.
  • This afternoon’s CFTC report is expected to show large managed fund short position in corn and wheat. Managed funds’ length in soybeans as of Tuesday is estimated at 18-20,000 contracts.
  • The midday GFS weather forecast is similar to this morning’s solution. Little/no rain is offered to IA and areas eastward into June 26, and equally important is the arrival of summer heat to the N Plains and Midwest beginning next Tues/Wed. Forecasts have been consistent in calling for a rapid northward shift in the jet stream late this weekend, with blocking high pressure aloft the Plains and Midwest likely to fuel warmth/dryness into the very end of the month. Confidence in details beyond 5-7 days stays low, but a pattern shift prior to July 1 remains unlikely.
  • Periodic profit-taking corrections keep volatility in place, but until there are at least hints of a US weather pattern change we doubt that bearish trends can be sustained. US dryness in the first half of July would be a big deal globally.
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