Monthly Archives: July 2024

31 July 2024

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  • Chicago wheat bounces while corn tests long term trendline at $3.81; China flooding getting talk in export circles; US ethanol use at record level.
  • Push until the market pushes back!
  • In the world of Algo/AI trading, market momentum is a powerful feature in daily commodity pricing. Trends are important to programmers/traders and these systems will keep pushing until the market pushes back to tell the buyers/sellers that they are wrong. To date, there has been no push back from Chicago grain prices to tell “the machines” that they should stop directionally selling Chicago grains. Corn/soybean futures have pushed to new lows with December corn slipping below $4.00 while November soybeans fell to $10.15. Wheat has been able to hold Monday’s low, but the pressure from the summer row crops has wheat back against longer term support at $5.155 September Chicago futures.
  • The bearish push to new lows makes today’s Chicago close important at the end of the month. The market needs to push back to tell the bears that they are wrong and that 4-year low prices offer value. Watch closely as key support for spot corn futures looms at $4.77-4.81 on the weekly corn crop. This price is trendline support and a mean price average of value extends back to 2018-2020, the height of the pandemic and a trade war with China. Maybe there is “cents” of additional downside potential, but by any economic measure, corn prices are at demand building levels. Monitor the market closely for push back as traders prepare for private crop estimates of US corn/soybean yields.

  • The USDA announced a daily sale of 104,572 mt of corn to an unknown destination for the 2024/25 crop year.
  • Chinese weather during the 2024 growing season has been anything but kind. Record heat and regional drought delayed summer row crop during May/early June which has been followed by extreme rainfall during July with several tropical storms (Prapiroon/Gaemi) that has produced massive flooding across key Chinese corn/soy crop areas. 43% of China’s primary corn/soybean area has endured July rainfall of 9-24”. Record flooding is underway across Central and Northern China. This morning the Chinese government pledged 2 billion Yuan ($277 million) in disaster assistance to farmers. Although the Chinese government will never admit to anything but a record large harvest, Asian contacts offer that sizeable soy/corn losses are occurring. The flooding and potential grain imports by China is something to closely follow.
  • US weekly ethanol production set a record last week at 326 million gallons. This is up 4% from last year with US ethanol stocks rising to 1,006 million gallons. WASDE is 25-40 million bu too low on their 2023/24 US corn ethanol grind of 5,450 million bu. Strong US gasoline consumption and favourable plant economics is expected to maintain strong corn ethanol grinds into September.   Corn price is doing its job to stimulate demand.
  • The Central US GFS midday weather forecast is drier than the overnight run in regards for rainfall for the Plains, W Midwest, and the Canadian Prairies. Extreme heat develops ahead of a tropical storm that rakes Western Florida (Sarasota) and then heads west/northwest along the Panhandle before pushing inland into Alabama/Mississippi where its forward progress slows. The storm never makes it northward into the Midwest or the Plains.  This leaves most of the Plains and SW Midwest in an arid flow with seasonal temperatures returning beyond August 7.
  • End users are stepping forward and making purchases with futures reaching 4-year lows and the USDA August crop report due in 7 trading sessions. US ethanol demand is record large and WASDE needs to raise both export and ethanol demand in the old crop year. China’s row crop production has been damaged by drought/ flooding and import demand for US soybeans is expected. And with US corn cheaper than Brazilian offers, could China take US corn with an import margin of over $1.80/bu. Volatile and interesting markets are ahead.

30 July 2024

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  • Corn/soybeans score fresh lows on large US crop fear; French wheat farmers seek help on catastrophic harvest; GFS weather forecast warmer for the Midwest in the extended range.
  • Chicago grain futures are lower at midday on slowing volume as the soybean market scores fresh contract lows. Soybean prices have been searching for improved export demand (China) while soy product prices are helping to keep crush margins strong. We calculate board crush margins at a highly profitable $1.80/bu with the oil share contribution to margin sliding back to just under 39%. EIA will be out on Thursday with their May feedstock production estimate which is always closely followed by the industry. Soyoil should gain relative to soymeal heading into the weekend as cash soyoil values are trading at 2-4 cent/pound discount relative to imported Gulf UCO. Soyoil has priced itself into feedstock blends that will be important heading into the end of the year. Soybean futures are technically oversold, but there is no indication of a bottom on the charts amid fresh contract lows.
  • September corn futures scored new contract lows at $3.8925, while Chicago September wheat held Monday’s new contract low at $5.1425. The grains are holding better than the complex with wheat trading inside of Monday’s price range. Wheat values hold a developing bullish story once the charts turn higher and seasonal EU harvest price pressure abates.
  • The USDA did not announce any daily sales of corn, soybeans, wheat, or soy products. As the US export season arrives, traders are watching to gauge future US export purchases.
  • Chicago brokers estimate that the managed money has sold 6,900 contracts of wheat, 6,700 contracts of soybeans and 1,900 contracts of wheat. In the soy complex, the managed money has sold 3,900 contracts of soyoil and 1,800 contracts of soymeal.
  • Bloomberg is reporting what we have reported for most of the past 10 days, a catastrophic French wheat harvest with crop quantity and quality in sharp decline. French farmers are calling on the government to provide financial aid with yields down 15-28% and a crop as low as 26 million mt. But the real worry is related to low test weight wheat that does not meet French milling standards. How much wheat France has for export in the months ahead will be closely followed with exporters able to meet export milling standards from a blend of old and new crop supplies. Paris wheat futures are well above contract lows due to the French/German wheat crop uncertainties.
  • Tunisia purchased 125,000 mt of optional origin soft milling wheat and 50,000 mt of durum wheat in a concluded tender for August-October. The purchase price was $243.99-245.77/mt basis CIF. The wheat is expected to be sourced from the Black Sea on cost. We calculate fob values for August at $225-227/mt which is close to current valuations.
  • Monday’s Chicago soyoil volume was one of the largest on record at 364,427 contracts, the biggest daily volume in 8 years. Soyoil spread trade was massive and there is leftover selling that is bleeding into today’s marketplace on fresh selling from managed money.
  • The Central US GFS midday weather forecast is like the overnight solution. The forecast shows big heat for the Central US which includes the W and S Midwest with high temperatures to reach the 90’s to lower 100’s. Scattered showers will dot the E Midwest for the next few days before a hot/dry pattern emerges on Friday and lingers into August 8. Severe weather with Derecho winds is forecast this afternoon across portions of E IA, MO, and into W IL. The extended range 11-15-day forecast holds a strong ridge of high pressure across most of the Central cornbelt with extreme heat over the Eastern US.
  • It is the end of the month and August deliveries will be out overnight. Private crop estimates will be released in coming days ahead of the USDA August 12 report. Wheat has a developing trade story on EU/Russian quantity/quality losses, while soyoil funds support faltering UCO and tallow imports and domestic usage. China is expected to step forward in August with a sizeable US soy purchase program. A first notice day bounce expected on Wednesday.

29 July 2024

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  • Chicago grains bounce into the green; US export inspections well above pace needed to reach WASDE; GFS weather forecast warmer/drier after August 2.
  • Midday grain futures are mixed following sharply lower trade in soybeans and soy product prices on the morning reopening. The liquidation of August futures was featured with soybeans, soyoil and wheat futures dragged to new contract lows. Wheat and back end soyoil futures bounced and are trading in the green at midday. End user pricing in the back end of soyoil and rising Russian wheat fob prices provided the support. We would note that corn did not post a new contract low when soybeans were down over 40 cents. The strength in corn was surprising. The midday volume of trade is contracting as August soy liquidation slows. August soybean futures volume of 26,430 contacts suggests that the Friday/early Monday liquidation phase is nearing an end. A Tuesday turnaround is forecast following the market lashing of the past two sessions.
  • Chicago brokers estimate that the managed money sold a net 2,600 contracts of corn and 8,900 contracts of soybeans, while buying a net 4,200 contracts of wheat. In the soy products, funds have sold 3,200 contracts of soymeal and 2,100 contracts of soyoil. Managed money is estimated to have returned to holding a record net short corn/soybean position that will be vulnerable with any bullish fundamental spark.
  • The US did not announce any daily sales of corn, soybeans, wheat, or soy products. The lack of US soybean sales to China or an unknown buyer has placed futures in a bearish demand position.
  • However, we understand that China purchased 3-4 cargoes of Argentine soybeans for September and is asking for US offers for October/November out of the Gulf. Argentina dropped its export tax on meats on the weekend and rumours have the Government looking to drop the tax by 10% in soybeans/soy products to appease farmers by mid-August. The 10% tax break would be for a short period of time to push farmers to sell stored soybeans.
  • Russian/Ukraine fob wheat prices are rising on the concern for spring wheat production amid a weather forecast that calls for another two weeks of cool/wet weather. And winter wheat in the Volga Valley is said to be sprouting in the head due to the cool/wet weather. Spring wheat comprises 30-35% of the Russian wheat crop in 2024 and strong yields are needed of hi protein wheat. Pay close attention to Central Russian weather prior to harvest in the next 2-3 weeks.
  • The French wheat harvest is stalled by cool/wet weather that started Friday. Yields are below producer expectations with test weights not reaching milling wheat thresholds. Remember that France needs 3.5 million mt and other EU members need 10 million mt for domestic milling needs which would take the French out of the world wheat export market in 2024/25. France exported 10 million mt of milling wheat last year. The key question is which world exporters will replace the French.
  • The Central US GFS midday weather forecast is drier/warmer vs the overnight forecast. The forecast shows big heat for the Central US which includes the Midwest. High temperatures are forecast to reach the 90’s to lower 100’s. Scattered showers will dot the E Midwest for the next few days before a hot/dry pattern starts on Friday and lasts into August 8. The extended range 11-15 forecast drags the jet stream southward allowing cooler Central US temperatures and widely scattered showers. Our confidence in any extended range forecast is low due to tropical waves that may or may not develop across the Gulf of Mexico. Our current forecast lean is that August will be a warm/dry month for the Plains and the W Midwest.
  • Grain futures are trying to bounce. NASS has confirmed that it will update wheat, corn and soybean planted acre estimates in their August report based on the FSA Farm program participation data that was submitted in mid-July. US census exports for corn are 220 million bu with soybeans 72 million bu above Monday’s FGIS totals. This places 2023/24 US corn exports at 2,057 million bu with soybeans at 1,643 million bu. WASDE annual 2023/24 US corn/soybean export targets appear to be too low with seven weeks remaining in the crop year. Low prices are curing low prices!

26 July 2024

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  • Chicago sharply lower on sizeable managed money selling on momentum; Midday GFS weather forecast drier and much warmer than overnight run; Extreme heat ahead for the Plains.
  • Chicago futures are sharply lower at midday trade with soybeans, corn and wheat futures in the red. September Chicago wheat futures are back to testing prior contract lows at $5.25 while corn/soybeans are giving back Thursday’s gain. The midday volume has subsided as long liquidation has as prices fell. Chicago has been myopic in following each new daily forecast and today’s GFS forecast solution was cooler beyond August 8. Expect Chicago values to be back and forth on each new weather forecast which is difficult for fund managers. The early week buyers on the unwind of the Trump Trade and the warmer/drier Central US weather forecast are this morning’s sellers.
  • The grains have the best fundamentals and cash market strength to withstand Chicago selling pressure. Paris wheat futures are down despite falling crop production and crop quality concern. We have been highlighting the lack of quality milling wheat across France since late last week. The discount of FOB US Gulf wheat to French offers has reached $24/mt at midday. The French/German wheat markets must assure that their hi pro milling wheat stays within country. This is why the spread between French/US gulf and French/ Russian offers are widening. French fob wheat at $245/mt is $24-25/mt above spot Russian fob offers, future EU wheat sales will be modest.
  • Chicago brokers report that managed money sold 4,100 contracts of wheat, 8,200 contracts of corn, and 8,900 contracts of soybeans. In the product’s, managed money has sold 4,200 contracts of soyoil and 3,900 contracts of soymeal.
  • The US did not announce any daily sale of corn, soybeans, wheat, or soy products.
  • EIA will update its Monthly Biofuel Capacity and Feedstocks report on Wednesday. The report is expected to show increased usage of soyoil due to cash prices competitive with other vegoils and even imported used cooking oil. Recent EIA monthly data has sparked rallies in Chicago soyoil values in the days following the report’s release.
  • The US Central Bank’s measure of inflation rose modestly during June at0 .2%. On a 3-month annualised basis, core inflation cooled to 2.3%. This inflation rate offers the US Central Bank runway to start cutting its lending rate in September as the US labour market has become balanced. The US dollar dipped on the news as treasury yields declined. A weakening of the US dollar is forecast with the key ag currency, the Brazilian Real, trading at 5.65:1 USD at midday.
  • Chicago values have taken out a considerable amount of weather premium on today’s sharp price fall. The risk heading into the weekend is that the forecast holds onto a hot/dry pattern and that the Atlantic tropical storm activity has just made the forecast beyond the next 10 days less reliable. Should the Midwest forecast turn cooler/wetter beyond August 6, Chicago will be slightly lower on Sunday. However, if the forecast stays hot/dry, the calls will be sharply higher. Please be aware of the opening week trade risk.
  • The Central US GFS Weather Forecast at midday is drier/warmer vs the overnight forecast. Limited rain is forecast to fall across the US Plains, Canadian Prairies, and most of the W Midwest into August 6. Any heavier rainfall totals greater than 1.50” has been shifted east to E IN/S OH.  An amplified high-pressure ridge builds across the southern half of the US and retrogrades west and north to the Intermountain West and the W US Plains. This creates a NW upper flow through the Lake States where seasonal 80’s will prevail. However, the Plains, Delta, and the W Midwest hold in a warm to hot pattern with highs ranging from the upper 80’s to the lower 100’s. Kansas will be the hottest with readings in the 100’s.
  • Today’s Chicago break seems overdone and a bounce into the close, amid the weekend weather uncertainty, is expected. The market risk is to the upside as traders argue that the weakest shorts have covered. Cash soymeal premiums are rising while Ukraine corn offers are scant. China is back asking for US soybean offers for October. The Central US weather forecast is key, and the warmer/drier midday run is like the EU model. The Chicago break sees extreme vs Central US weather.
To download our weekly update as a PDF file please click on the link below:

25 July 2024

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  • Chicago summer row crops rally as Central US heat builds; Unknown destination buys US soybeans; World wheat trade down 1 million mt via Turkey.
  • Summer row crop futures are higher with wheat values sagging on intra market spreading at midday. Hot/Dry Plains and W Midwest weather and fresh Chinese demand has rallied soybeans back to early week highs. A close above $10.87 November soybean futures argue for a recovery back to $11.25-11.50 on the charts as soymeal futures rise on tight domestic supplies in the US and slowing sales from Argentina amid rumours of a crush industry strike next week.
  • Soyoil has fallen back to its recent low, but export and biofuel demand is expected to underpin December soyoil futures below $0.43/pound. Minor oilseed values have a developing bullish story on tightening supplies of European and Black Sea rape/sunseed crops and as a flash drought that is adversely impacting Canadian canola. The loss of overseas crop production mandates larger US corn and soybean harvest. August weather will be critical for soy/corn/sorghum crops and run to run changes in the forecast are having a meaningful price impact on Chicago grain values. It is the duration of West Central US heat/dryness that is important heading into the last third of the summer growing season. It is all about August weather for Chicago values.
  • Chicago brokers estimate that managed money has bought 4,000 contracts of soybeans and 6,500 contracts of corn, while selling 6,100 contracts of wheat.
  • The USDA announced the sale of 264,000 mt of US soybeans to an unknown buyer, which is rumoured to be China. The sale was for the 2024/25 crop year.
  • FAS/USDA export sales for the week ending July 18 were 11.4 million bu of wheat, 13.0 million bu of old crop and 29.3 million bu of new crop corn, and 3.3 million bu of old crop and 30.5 million bu of new crop soybeans. For their respective crop years to date, the US has sold 295 million bu of wheat (up 96 million or 48%), 2,166 million bu of corn (up 589 million or 37%), and 1,665 million bu of soybeans (down 271 million or 14%). Remember that through May, US soybean census soybean exports were up 72 million bu from Monday FGIS inspections with corn exports up 220 million bu. We see no reason to argue with the WASDE 1,700 million bu of soybean exports but could increase US corn exports by 25-50 million bu if the current pace is sustained for the next 7 weeks left in the crop year.
  • Initial crop year world wheat trade via vessel counts is down 1.0 MMTs from the prior year at 8.4 million mt. The decline is largely due to Turkey and its use of domestic wheat stocks vs imports from the Black Sea. World wheat trade to other destinations is on par with the prior year and not showing a decline. Now it is early in the 2024/25 world wheat crop year with this being only the third week, but the decline from Turkey is likely to persist and slow Russian trade. Remember that Russia is expected to export 46 million mt in 2024/25 vs last year’s 53 million mt, so the early shortfall seems right. The disappointing aspect is that Turkey through policy made the demand adjustment, not the marketplace. It is hoped that Turkey returns to resume world wheat imports in October.
  • The Central US GFS weather forecast at midday is slightly drier and warmer vs overnight forecast. Limited rain is forecast to fall across the US Plains, Canadian Prairies, and most of the W Midwest into August 4. Heat returns to the Central US on the weekend with highs ranging from the mid 80’s to the mid 90’s. Precipitation for the next 9 days will be focused on the Gulf States and SE US with widely scattered showers for the E Midwest on ridge riding storm systems. The GFS forecast projects amplified high pressure ridging across the Western third of the US in the 10–15-day period with high temperatures in the 90s/100s. There are clear signs of increased tropical storm activity in the Gulf of Mexico which is causing some forecast “fits” in the model.
  • US ag analysts are dropping their 2024/25 US corn end stock forecasts below 2,000 million bu on expanding demand, both in exports and ethanol. Such stocks do not argue for December corn futures to fall below $4.00 for harvest lows. We see 2024/25 corn stocks at 1,750 million bu, which should rally December corn to $4.35-4.50, assuming a 180 bushels/acre US corn yield. And China is becoming active in US soybean purchases. Upside targets of $11-11.50 November are valid. US wheat values trade a range of $5.30-5.80 during August as the spring wheat crop is harvested.

24 July 2024

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  • Chicago mixed at midday with corn/wheat firmer amid hot/dry weather for the Plains/NW Midwest; Soybeans sag awaiting China demand; Ethanol grind strong.
  • Chicago grain futures are mixed at midday with corn/wheat being the upside leaders while soybeans trade either side of unchanged. Soybeans have rallied over $0.50/bu off the lows on a partial unwind of the Trump Trade as President Biden dropped out of the 2024 race, and the election seems less clear on the November victor. As the Trump trade unwind faded, traders looked to Central US weather and its potential impact on US summer row crop yield. Chicago will add or subtract premium to price depending on the weather forecast. This week Chicago has been adding premium due to a forecast of excessive heat and dryness for the Plains and the W Midwest.
  • It is the duration of Central US heat/dryness that will be the most important feature for price on a day-to-day basis. US corn and soybean yield potential is record or near record today, but it all depends on the August Central US weather pattern. July featured the remains of hurricane Beryl that soaked MO, IL and IN that has caused each state’s crop condition ratings to rise. We are focused on the Dakotas and the Plains amid the dry weather trends of recent weeks, and an arid forecast for this region. We note that the overnight models have been the driest while the midday GFS forecast adds rain and is cooler.
  • Chicago brokers estimate that the managed money has purchased 3,400 contracts of wheat, 5,400 contracts of corn, and 4,200 contracts of soybeans. Managed money has purchased 5,700 contracts of soymeal while selling 4,200 contracts of soyoil.
  • The USDA did not announce any new sales of US corn, soybeans, or wheat today. There are rumours that China is back asking for offers of US late September and October soybeans out of the Gulf. We cannot confirm a trade, but we suspect that if Chicago prices pull back, some new Chinese demand for US soybeans could be filled. We look for China to become a much more active US soybean buyer during late July and August.
  • The US consumed 322 million bu of corn last week in the production of ethanol. The total was down 3 million bu from the prior week, but well above of the weekly average needed to achieve the USDA annual forecast of 5,450 million bu. We would argue that WASDE will raise its US corn 2023/24 ethanol grind forecast by 25 million bu by the final count. US grind margins are positive and the seasonal decline in ethanol production should be less than prior years.
  • The Central US GFS weather forecast at midday is slightly cooler and wetter than the overnight forecast across the W Midwest. Limited rain is forecast to fall across the US Plains, Canadian Prairies, and most of the W Midwest into August 5. Heat will begin on the weekend with highs ranging from the mid 80’s to the mid 90’s throughout most of the Plains, Delta, and the Midwest. Precipitation for the next 9 days will be focused on the Gulf States and SE US with widely scattered showers for the E Midwest. The GFS forecast projects amplified high pressure ridging across the Western third of the US in the 10–15-day period with high temperatures in the 90s/100s. The GFS midday forecast is further west in the mean position of the ridge compared to the EU or Canadian models. Our forecast lean is to the EU model based on its consistency.
  • Maybe it is too simple, but Chicago ownership features a record managed money corn/soybean short with a Central US weather forecast calling for heat/dryness across the Plains/W Midwest next week. And the August USDA crop report is dead ahead which includes an FSA update on program and prevent plant acres. The shorts are nervous about Central US weather with Chicago grain values at 3-year lows. Only a little spark is needed to ignite a rally. The price risks are to the upside on Central US weather.

23 July 2024

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  • Chicago traders watch hot/dry Central US weather forecast amid record fund short: Brazilian FOB soybean offers lacking.
  • Chicago grain futures are mixed at midday with corn/soybean futures higher on threatening Central US weather and a record large net managed money short position, while wheat prices sag on profit taking in European wheat futures following several days of gains. It may seem to be too simple, but the ownership structure of Chicago is in the hands of commercials, while managed money is holding a record short corn/soybean position combined. As long as the Central US forecast is threatening, the Chicago price risk is to the upside.
  • The French wheat harvest is reaching 40% and low test weight wheat is being reported. Unlike the US, EU co-ops collect the wheat but delay docking producers on quality until there is a clearer picture of all deliveries. To date, French/German wheat is struggling to meet milling grade, but the hope persists that the later maturing wheat may see its quality improve. We look for Paris wheat futures to dip mid-week on profit taking, and rally into the weekend as French crop condition ratings partially reflect wheat quality woes on Friday. We note that France needs at least 10 million mt of milling quality wheat to meet the domestic production of flour and wheat exports to other community members. Unless test weights change on the French crop, this leaves limited French wheat supply for export in 2024/25.
  • Chicago brokers estimate that the managed money has purchased 2,900 contracts of soybeans and 4,800 contracts of corn, while selling 1,900 contracts of wheat. In soy products, funds have bought a net 1,600 contracts of soymeal and 2,100 contracts of soyoil.
  • The USDA announced the sale of 200,000 mt of US 2024/25 corn to unknown destinations. US corn is uncovering demand amid smaller S American and Black Sea crop harvests. Rumours have the buyer being Mexico or Japan.
  • It is becoming difficult to uncover Brazilian fob soybean offers after the middle of September. The lack of cargo availability is due to record Brazilian soybean exports with the primary buyer being China since February. Paranagua soybeans are offered at $1.25 over for FH of September, well above US Gulf offers of $0.95 for the entire month of September. The point being is that the tail of Brazilian soybean exports is being cut short by the smaller 2024 crop. The US Gulf is back in position to attract world soybean demand from mid-September onward. We look for China to become a larger buyer/importer of US soybeans in August/September. The cash market premium argues that final size of the 2024 Brazilian soybean crop is 148-152 million mt.
  • World ocean freight rates declined to a 1 month low on rising availability of vessels to carry dry goods. The fall in grain values and freight costs is allowing end users the opportunity to book forward at the lowest landed values in years. World demand will be focused on the US in the months ahead.
  • The Central US GFS weather forecast at midday is slightly cooler in the 8-11 day period across the W Midwest, but a below normal rainfall trend is forecast for the Plains, Canadian Prairies and the most of the Midwest into August 4. Heat will begin on the weekend with highs ranging from the mid 80’s to the mid 90’s throughout most of the Plains, Delta and the Midwest. Precipitation for the next 9 days will be focused on the Gulf States and SE US with a few isolated afternoon thunderstorms over the N Midwest. The GFS forecast projects amplified high pressure ridging in the 10–15-day period with high temperatures in the 90s/100s across the entirety of the Plains and in AR, MO, and IA. Confidence in extended range details is growing on run-to-run consistency. The coming heat and dryness will be a stress on Central US crops.
  • The midday GFS forecast is threatening with extreme heat/dryness to invade the Central US from late July into August 7.  Whether the GFS is overdoing the extreme heat in the 11-15-day period is unknown. But the forecast models are consistent in the heat threat with limited rain. Finishes have proven to be poor in recent US crop years, and we expect the same again in 2024. This makes the record large fund short “vulnerable” heading into the August USDA crop report.

22 July 2024

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  • Chicago expands overnight rally; GFS weather forecast features possible incredibly strong ridge in early August; Mexico buys US corn.
  • Chicago grain futures are higher at midday amid the unwind of the “Trump Trade” which is pushing soybeans to strong gains of $0.30+/bushel. Corn and wheat futures have followed with farmers unwilling to sell the bounce. Traders are aware of the record net fund short position and the basis strength of the cash market as end users search for nearby supply. Chicago rallies may push higher than expected as managed money is forced out of their large net short position prior to the USDA August crop report. This report has traders on edge with NASS already alerting the industry that it will incorporate FSA Farm Program Participation data into August 2024 US seeding and harvested acre estimates.
  • We have adjusted our 2024 US corn seeding estimate downwards by 900,000 acres and soybeans by 1 million acres to account for latent seeding and the flooding across the NC Midwest. Wisconsin, Minnesota, E South Dakota, and N Iowa crops look tough amid the wet spring. Illinois by itself carried US corn/soybean crop ratings last week. It is unlikely that Illinois can repeat the heavy lifting task in the weeks ahead. We look for a higher Chicago close today.
  • Chicago brokers estimate that the managed money has purchased 8,600 contracts of soybeans, 5,900 contracts of corn, and 2,600 contracts of wheat. In the soy products, managed money purchased 5,400 soymeal and 4,300 contracts of soyoil.
  • The USDA reported 133,000 mt of US corn sold to Mexico in the 2024/25 crop year. Mexico is expected to be sizeable importer of 820-860 million bu of corn in the new crop year.
  • US export inspections in the week ending July 18 included 38 million bu of corn, vs. 43 million the previous week, 12 million bu of soybeans, vs. 6 million the previous week, and 9 million bu of wheat, vs. 23 million the previous week. For their respective crop years to date, the US has inspected for export 1,794 million bu of corn, up 33% year on year, 1,556 million bu of soybeans, down 16%, and 95 million bu of wheat, up 20% from the same week a year ago. Pace analysis suggests WASDE will keep its old crop annual forecasts unchanged amid the relatively solid performance of late season US soy sales and shipments. Corn export demand remains abnormally for mid-summer.
  • Minor oilseed markets have found new life as drought worsens in E Europe, Ukraine and S Russia and dryness expands in S Canada, which follows damaging frost/freeze in spring. Spot Nov Canadian canola’s chart is below. The breach of the contract’s 200-day moving average this morning is noteworthy.

  • Additionally, the major forecasting models are in agreement in keeping Black Sea rainfall confined to Romania/W Ukraine. Key areas of northern Ukraine and southern Russia face an intensification of drought between now and August 1. Heat is forecast to resume there in the 6-10-day period.
  • The Central US GFS weather forecast at midday is consistent with morning output in keeping meaningful Central US precipitation confined to the eastern Midwest/KY in the 8-10-day period. Precipitation this week will be confined to the Delta/Southeast, where drought has become severe but where regional flooding is possible in the Carolinas. Mild temperatures continue for another 3-4 days. Heat expands into the Plains/W Midwest thereafter. The GFS forecast projects widespread and rather amplified high pressure ridging in the 10-15-day period, and forecasts high temperatures in the 90s/100s across the entirety of the Plains and in AR, MO and IA. Confidence in extended range details is low, but this must be monitored.
  • Funds record short position in ags is being tested amid less favourable Central US weather, ongoing Black Sea drought and as US soybeans become competitive for autumn/winter delivery. The duration of Central US dryness is key over the next 2-3 weeks.

19 July 2024

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  • Wheat rallies strongly on European gains; GFS midday weather forecast adds rain to NC Midwest; US 2023/24 soymeal sale to unknown destination.
  • Chicago grain futures are mixed with a strong rally in world wheat values leading the morning advance. Wheat crop quality issues across Western European along with a rumour that there was a nuclear leak at Russian Rostov facility spurred the strong morning Chicago rally. Corn and soybean futures followed. Newsweek and UK tabloids sponsored the Rostov nuclear leak rumour. The Russian’s have denied the leak and Chicago grain prices have relaxed.
  • The opening volume of Chicago trade was active while the midday action has turned slow. Overnight internet/software upgrade issues are being resolved, but European and SE Asian traders are taking off for the weekend. We look for a choppy/mixed trade into the close. The volatility of world financial markets is increasing on speculation on whether President Biden will be ending his Presidential campaign. Traders are taking profits on the “Trump” trade following the successful Republican Milwaukee Convention.
  • Chicago brokers estimate that funds have bought 6,500 contracts of wheat, a net 900 contracts of corn, and 1,200 contracts of soybeans. In the products, funds have sold 2,600 contracts of soymeal and 1,700 contracts of soyoil. The large net short structure of Chicago will be under examination later today.
  • The USDA reported a 105,000 mt soymeal sale to an unknown destination. The sale was for the 2023/24 crop year. This was the second soymeal sale in recent days. There are cash connected rumours that China is securing US Gulf soybeans for Oct/November now that US soybeans are priced below Brazil through yearend.
  • September Paris wheat futures closed with strong gains of €8.75/mt ($0.25/bu) due to growing crop quality concerns. The French/German wheat harvests are showing light test weights with evidence of sprout damage. Protein levels are low, and traders are worried that the new French wheat crop may not reach the deliverable 11% protein that is required by Paris futures.  Notice in the daily wheat chart of Sept Paris wheat that futures closed well above the gap left in early July, with the next upside price target being €235. We note that Europe requires at least 9 million mt of French wheat for its own domestic flour production, which could significantly short the export market. The French cash wheat market must increase its premium to Russian fob wheat to assure its own domestic supply. Russian fob wheat values closed the week at $218, steady with Monday. Russia no longer needs to be as aggressive in pricing its wheat to gain world demand.
  • We caution that just 17-19% of the French and 12-14% of the German wheat harvest is completed, so making blanket assumptions on quality is risky. However, the next few weeks of harvest will determine whether the early harvest light test weights are a forecaster for the remainder of the crop.
  • The  US GFS weather forecast is slightly wetter across the NC Midwest and slightly drier across the Gulf Coast and SE US. The N Plains and the Canadian Prairies hold in a warm to hot weather pattern with limited rainfall. Flooding will become an issue across the Gulf States with the corn harvest there set to begin in 2-3 weeks. No extreme heat is forecast with Midwest high temperatures to hold in the 70’s to the upper 80’s. The extended GFS 10-15 day forecast places a strong ridge of high pressure across the South-Central US with extreme heat returning.
  • A base is being built in Chicago for a rally during late July/August. The milling quality loss of the French/German crop is highly important for future world wheat trade. We look for Russian wheat prices to start an advance on importer reach for protein supplies. Corn and soy futures struggle on rallies on yield ideas. Any surprise in Central US weather is tipped away from future improvement. Long range forecasts are hinting at the return of NW and Southern US heat.
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18 July 2024

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  • Grains sag while soybean bounces on sale of 510,000 mt to unknown destination; Wheat protein spreads to widen amid low test weight EU wheat crop; GFS weather forecast more like EU Model.
  • The battle is ongoing in rising new crop US supply vs strong US/world cash premiums. Rumours have China back in the US market for soybeans with 510,000 mt reported sold for 2024/25. The sale was to an unknown destination. There was also a sale of 150,000 MTs of US soymeal to an unknown destination for 2024/25. We believe that China is asking for additional soybean offers off the Gulf and PNW for October/November. Chinese and US crush margins are strongly positive, and China is a price buyer with values at 3-year lows. Chicago soybean futures have been able to recover on the news, with soymeal holding strong on record large cash premiums and ongoing new demand as Argentine sales and offers are well below expectations.
  • Corn and wheat futures are mixed to weaker on mild Midwest temperatures which could produce a larger yield. The corn market is falling on the potential for a record US corn yield and how big is big. Current values are pricing in a US corn yield of 182-184 bushels/acre, or some 5-7 bushels/acre above last year’s record. The corn market is searching for a low that deciphers this year’s US corn in the backdrop of rising Brazilian/Ukraine fob offers. Brazilian corn is offered at $0.96-1.05 over for August/September, $0.20-0.24/bu above the US. The weakness in corn has pulled Chicago wheat values back into the red.
  • Chicago brokers estimate that the managed money has sold 5,600 contracts of corn, while buying a net 2,100 contracts of soybeans and 1,200 contracts of wheat. In the products, the managed money has bought 2,200 contracts of soymeal and 1,700 contracts of soyoil.
  • US weekly export sales for the week ending July 11 were 21.3 million bu of wheat, 17.2 million bu of corn, and 13.2 million bu soybeans. For their respective crop years to date, the US has sold 284 million bu of wheat (up 93 million or 49%), 2,154 million bu of corn (up 589 million or 38%), and 1,667 million bu of soybeans (down 264 million or 14%). A US 2023/24 soybean export estimate of 1,675-1,700 million bu is realistic with corn at 2,200-2,250 million bu.
  • China is way behind on its US new crop soybean purchases, something that we have been reporting for  some weeks. There is talk that China is adding to their soybean purchases, but nothing near the volume of the past 36 hours. Traders are questioning whether China steps forward and catches up on its soy purchase pace with US tariff levels known into February. China needs US soybeans since Brazilian offers are limited beyond the next 60 days. If China wants to place itself in a strong trade negotiating position with the US, they will increase their soybean import needs into early 2025. We suspect that China will be a more active buyer following the Milwaukee Republican Convention. Time will tell, but some traders are exiting long corn/short soybean spreads amid the potential for China to be a larger buyer of US Sept-January soybeans. Also, we suspect that 2 cargoes of US old crop sales, are new crop and misclassified.
  • World wheat protein spreads are expected to gain amid the reported poor quality of the French/German wheat crops. And if yield cuts are produced by dry weather across Canada and the Northern US Plains, spring wheat protein supplies will be tightening. 12% Russian, US HRW/HRS and Canadian/Kazakh wheat will be sought. The EU will likely feed more low-quality wheat in 2024/25.
  • The Central US GFS weather forecast is more like the EU model solution and drier across the W Midwest, the N Plains, and the Canadian Prairies than it showed overnight. Limited 10-day rainfall of traces to 0.6” is forecast above the NW Midwest and the N Plains, while heavy totals of 2-6.00” drop across the Gulf States and the SE US. Flooding will become an issue across the Gulf States with the corn harvest set to begin in 2-3 weeks. No extreme heat is forecast with Midwest high temperatures to hold in the 70’s to the upper 80’s.
  • Black Sea weather is the biggest threat to world crop production with corn/sunseed crops in decline and the midday GFS forecast returning drier. The non-threatening Central US weather forecast caps Chicago rallies. Traders will be closely following net short corn, soybean, and wheat positions in Friday’s CoT report. The market is excessively bearish, but a US supply threat is lacking amid uncertain future Chinese demand.