Monthly Archives: July 2024

17 July 2024

Posted on July 17, 2024 by simon

• Chicago mixed at midday as traders sell early Chicago rally on cool temperature forecast: US weekly ethanol grind third best on record; Midday GFS weather forecast little changed.

• It is a battle of US supply vs rising US and world cash premiums in Chicago.

• The bears talk about record large US corn, sorghum, and soy yield potential, and that the coming cool Central US temperatures with widely scattered showers will further boost potential. WASDE pegs the US corn yield at a record 181 bushels/acre, but the marketplace is trading/discussing a corn yield of 182-184 bushels/acre and a soy yield of 53-53.5 bushels/acre. WASDE has the US soybean trend yield at 52 bushels/acre.

• Corn is a crop of July, and the weather has been favourable. How high is high in the 2024 US corn yield, which will hinge on the filling stage and foliar disease pressures. Last year’s US corn crop witnessed limited foliar disease amid low humidity and the residual smoke from Canadian wildfires that produced a record large US ear weight. It was record 2023 ear weight that surprised the farmer.

• The bulls point to surging US cash market basis and that (low) price is doing its job of stimulating use. The morning Chicago corn/soybean rally was sold on nearby non-threatening weather forecasts. The Western Canadian Prairies, the Northern US Plains and the NW Midwest can endure another 7-10 days of dry weather without undue crop stress. These are areas to monitor into August.

• Plainly stated, if Chicago is to score new lows it will be based on the US corn yield rising above 184 bushels/acre or soy above 53.5 bushels/acre. Such big yields are possible amid improved July weather, but there are a key 6-7 weeks of Central US weather remaining. How big is big is the question for US corn/soy yields. However, one eye must be kept on corn foliar diseases and their early arrival.

• The bulls point to rising cash markets and improving demand. Interior US cash corn/soybean basis keep on strong soybean crush/ethanol production margins. And refilling the US soymeal pipeline has been a lot more difficult than expected, especially with 3 new Midwest crush plants taking an extra 375,000 bu/day of US soybeans each day by October. The point is that world corn and soy product values are historically strong with Brazilian corn $1.00 over the Gulf and Brazilian soyoil +1 cent over Chicago August futures. And even Argentine cash soymeal has stayed stout with Sept at $15/mt over. Black Sea wheat values are steady/higher with Russian/Ukraine farmers not selling to replace yesterday’s GASC purchase. US Gulf corn is offered at $0.77-0.80 over.  The point is that world/US cash basis bids are strong on demand.

• The US ethanol grind was the third largest weekly total on record at 325 million bu. This big corn grind was a bullish surprise. Yet, hefty US ethanol production was not a surprise with margins exploding to the upside. And weekly US ethanol stocks fell 19 million to 972 million gallons. We maintain that WASDE is too low by 15-25 million bu on the 2023/24 corn grind.

• The GFS weather forecast is slightly cooler for the next 10 days, but little changed in the outlay of precipitation. The only forecast change is slightly drier for the S Plains, with limited rain for the Northern Plains and the NW Midwest. Heavy rain totals are forecast for the Gulf States and the SE US. The Western US and the Canadian Prairies hold in an arid forecast trend. Our future crop risk concern is the N Plains and the NW Midwest. High temperatures hold in the 70’s/80’s with high humidity levels.

• Chicago is cheaply priced relative to the future supply risks ahead amid surging Brazilian and Black corn and oilseed basis bids. And look for Russian wheat fob values to score a bottom in the next few weeks. Unfortunately, Black Sea crop losses will worsen with an ongoing arid trend. If you are bearish, it is a bet on record large US corn/soybean yields. The market has already priced large US stocks and yields,  can they grow even larger is the difficult question.

16 July 2024

Posted on July 16, 2024 by simon

• Chicago recovers on rising cash basis bids; Egypt receives wheat offers with Russia the lowest offer at $226/mt; GFS weather forecast unchanged at midday.

• Chicago grain futures are mixed at midday with wheat futures sagging to new lows on additional speculative selling while corn/soybean values are stabilising following Monday’s lashing. Like August of 2020, the damage from strong windstorms across Eastern Iowa and NW Illinois can only be known by satellite maps that help define areas of flattened corn. The market is aware of some toppling of corn during pollination, but the degree is unknown. A cautious approach to crop damage is being taken.

• Monday’s Chicago open interest data reflect that managed money was not big sellers of corn but added to their net short positions in wheat/soybeans. Open interest fell 1,419 contracts in corn, while rising 3,868 contracts in soybeans and 4,786 contracts in Chicago wheat. Monday’s big gain was in soyoil with open interest up a strong 12,745 contracts. Soyoil is attracting end user pricing on breaks which has to be closely followed.

• Egypt’s GASC received wheat offers for September wheat with the lowest offer being $226/mt for Russian origin. The most recent sale of wheat to GASC was completed at $227/mt, so the current offer is down $1.00/mt for a more forward sale period. The world wheat market is holding much better than Chicago where speculative selling is ongoing based on bearish charts. Russian fob wheat is said to be bid at $215/mt and offered at $219/mt, little changed in recent weeks. It appears from harvest data, that Russian wheat crop estimates are again starting to slide, and SW Russian corn yield are being adversely impacted by the heat/dryness that persists.

• Ukraine’s corn yield could fall by 30-35% according due to extreme heat/ dryness according to the Ukraine Agrarian Council in a forecast that was made today. Such a yield decline would drop Ukraine’s 2024 corn production to 18-19.4 million mt. Such production would drop their exportable corn supplies to 15.5-16.5 million mt vs USDA’s current forecast of 24.50 million. The loss of 8-9.0 million mt of Ukraine corn trade is important to the world balance sheet and further makes the coming US corn export program look to be too modest. Ukraine fob corn offers keep rising as farmer’s there hold back on sales. Note that Eastern Europe is also enduring the same heat/dryness with Ukraine corn imports becoming more feasible. Non-US corn exportable corn supplies are in decline which should push demand to Brazil, Argentina, and the US.

• China is showing up in the Brazilian vessel line up as being a buyer of more than 900,000 mt of corn. China again appears to be targeting Brazilian corn. The import margin of US corn into China is at one of the highest levels in years at over $1.50/bu. Traders expect that China will take Brazilian corn but remember that US corn is not out of the question for importers that desire to use their TRQ allocations.

• The midday GFS weather forecast is similar to the overnight forecast with rain across the Gulf States, Delta and the Southern Midwest. The NW Midwest and the Northern Plains hold in a drier pattern. A warmer/drier pattern unfolds following July 25 which persists into early August. The only real concern is the lack of rain across the NW Midwest and the N Plains.

• Chicago is paying more attention to cash markets today with corn/soy basis levels firming as end users try to stimulate movement. US and Black Sea farmers are tight holders of grain. The premium of the cash market is unusual heading into late summer with US farmers holding 1,877 million bu of corn and 345 million bu of soybeans. Ukraine and Brazilian fob corn basis continues to firm in the background. The US is in position to be a near record exporter of corn in 2024/25.

15 July 2024

Posted on July 15, 2024 by simon

• Chicago stays under intense pressure on weather and Trump China worry; Wheat tests trendline support at $5.30.

• Chicago grain futures continue at sharply lower levels at midday. Non-threatening Central US weather and ongoing speculative selling pushed November soybeans to downside price target at $10.40 while September wheat futures test a monthly uptrend line at $5.30, and corn tests last week’s low. End users are scale down buyers as debate rages on 2025 US corn/soybean yield potential. The market has a bearish feel at midday.

• Chicago is trading a 182-184 bushels/acre corn yield and a 53-53.5 bushels/acre soybean yield. It appears that either a threat to this yield must occur or these big yields need to be ratified by USDA before crop losses in the EU/Black Sea becomes a market topic. Chicago momentum is down which has algos/AI trading systems wanting to sell rallies. Yet, the rubber band is very stretched when considering the money managed short in terms of a percentage of open interest.

• Scale down end user pricing is noted, but so far, the needed interest by China to turn the market’s tide is not being seen. Chinese buyers believe that the weekend assassination attempt of Trump helped his re-election chances. Chinese buyers are worried about rising US tariffs in his second Administration. However, the new tariffs will not become active until February at the earliest, which allows a window of purchase opportunity for China.

• Chicago brokers estimate that the managed money has sold a net 5,500 contracts of wheat, 4,400 corn, and 6,700 of soybeans. In the products, speculators have sold 4,100 contracts of soymeal and 2,100 contracts of soymeal.

• US weekly grain exports were 42.5 million bu of corn, 19.6 million bu of wheat, and 6.2 million bu of soybeans. For their respective crop years to date, the US has shipped 1,755 million bu of corn (up 439 million or 33%), 83.3 million bu of wheat (up 18 million or 28%), and 1,543 million bu of soybeans (down 290 million or 19%). The US is on track to reach USDA’s revised corn/wheat annual export estimates, although we could argue that WASDE is too high with its soybean export estimate by 15-20 million bu.

• NOPA members reported a record June Crush rate of 175.6 million bu, a record and up 6.4% year on year. US soyoil stocks fell to 1,622 million pounds, which was below the average trade estimate of 1,686 million pounds. The August/December soyoil spread has pushed out to a $1.40 premium as cash US soyoil supplies tighten. The next upside price target is a test of the 2023 highs just above $2.00. The strength of cash soyoil and spreads offers limited downside potential for soyoil values.

• We look for US good/excellent ratings on corn/soybeans and spring wheat to rise 1-2%  later this today. Rating gains are unseasonal in mid-July as the crop enters the reproductive stage. However, corn disease pressures are mounting with Grey Leaf Spot, Tar Spot and Northern Corn Blight worsening.

• The midday GFS weather forecast is drier for the W Midwest and the Northern Plains and more in line with the EU overnight run. Following a storm later today across IA/N IL, the forecast  becomes more arid across the NW Midwest and the Northern Plains. Heavy rain will fall across the Gulf States and the SE US with totals of 2.50-4.50”.The midday forecast is warmer with heat returning to the Central US after July 20 as the western high pressure ridge in the west pushes eastward. A ridge in this position would spur the return of heat and 90’s/100s.

• The bears are in control amid favourable Central US weather and the fear of a trade war with China as President Trump prepares to address republicans in Milwaukee this week. The bears expect that Trump will continue his strong rhetoric against China and promise even larger tariffs in 2025. Wheat, corn and soybeans are at major chart support amid strengthening cash basis bids. And humidity levels are high with scouts concerned about corn foliar diseases. The bearish cast is set for today and maybe early Tuesday, it is a hard place to make sales with speculators so short.

11 July 2024

Posted on July 11, 2024 by simon

• Chicago mixed at midday as volume thins ahead of Friday’s July WASDE Report; Midday GFS weather forecast drier with heat across the N Plains; US Dollar declines on slowing inflation.

• Short covering has featured ahead of Friday’s USDA July Crop Report. Wheat has witnessed the heaviest covering, while more modest totals are being tossed about in corn/soybeans. Also, active corn spreading has been featured with the September/December spread pushing into 7 cents and then moving back out to 11 cents. And the rally in soyoil has jumped crush margins back higher with spot board crush at back over $1.52/bu with oil share pushing out to 41%. There is a bullish undertone in wheat/corn, while the soy complex languishes awaiting additional Chinese demand.

• Chicago brokers estimate that managed money has secured 6,200 contracts of wheat, 3,500 contracts of corn, and 1,200 contracts of soybeans. In the products, managed money has sold 3,100 contracts of soymeal and 4,200 contracts of oil.

• US weekly export sales were disappointing in the US holiday week. The US sold 8.8  million bu of wheat, 25.8 million bu of corn (21.2 old and 4.6 new crop) and 14.6 million bu of soybeans (7.6 old and 7.0 new). For their respective crop years to date, the US has sold 262 million bu of US wheat (up 78 million or 43%), 2,136 million bu of corn (up 582 million or 37%), and 1,653 million bu of soybeans (down 276 million or 14%).

• There were early day rumours that China was seeking US corn. We cannot confirm any US corn interest, but China does appear to be willing to ask for offers on Brazilian corn for September/October shipment. Export sources argue that China has purchased modest amounts of Brazilian corn for September. Last year, Brazil had a monster China purchase program. This year, China has been far more patient with corn/soybean purchases for autumn delivery. US new crop soybean futures are in decline seeking an increase in China interest. Normally, China is a price sensitive buyer, but the political rhetoric this year has importers not wanting to get caught with additional tax beyond the installation of the next US President on January 20.

• The value of the US dollar fell sharply following the confirmation of negative price growth in the US economy.  The CPI, a broad measure of the cost of US goods fell 0.1% in June with a decline in gasoline prices helping to offset modest gains in foods. The year on year CPI rose 3%, down 0.3% from May. The decline in the US inflation rate should spur the US Central Bank to initially start cutting interest rates in September. The June CPI was the first time since May of 2020 that the monthly inflation rate showed a decline. We are now raising the risk that the US Central Bank will cut their lending rate in September and again in Q4. The US economy is slowing now that the US labour market is balanced. A falling US dollar will be bullish to commodities.

• Russian fob wheat offers stand at $218/mt, steady with last Friday. Black Sea dryness and extreme heat is causing farmers to slow any new cash sales.

• The jet stream is migrating northward which will leave most of the Plains, Delta and the Midwest with limited rainfall for the next 10 days. One short wave pulls through the lower Midwest in the last half of next week producing rainfall of 0.15-1.00”. Heat will be returning to the Plains, Delta and the W Midwest with highs routinely in the 90’s and a few lower 100’s. More seasonal upper 70’s to mid-80’s will prevail across the remainder of the Midwest. The warmer/drier forecast will draw down Central US soil moisture. However, any extreme heat will hold across the Northern Intermountain West with record lower 100’s possible. The Northern Plains will see the warmest/driest weather into early August which is the crop area at the biggest risk.

• The USDA reports on Friday are widely expected to bearish with growing new crop US corn and wheat stocks. US 2024/25 soybean stocks could fall on reduced seeded acres, depending on how the USDA sees future China demand. China has a flotilla of Brazilian soybeans heading in their direction. China is asking for offers on US October/November soybeans and Brazilian corn. No new sales can be confirmed. Crop weather for the rest of the US 2024 growing season holds the key for prices.

10 July 2024

Posted on July 10, 2024 by simon

• Chicago corn tries to stabilise on strong US cash bids; US crush margins solid into October; US finally sells new crop beans to China.

• It has been another active morning of Chicago speculative selling with corn and soybean futures pushing to new lows, while Chicago wheat test the prior contract lows. New selling emerged on the morning reopening with volume cited as “active”. Bearish charts and the rains from the tropical remains of Beryl have been the catalysts for this week’s decline with traders openly discussing record US yield potential and future weekly gains for US crop conditions. The bearish mentality of the market was thick.

• However, there are still 6-7 weeks of important growing weather ahead and key crop areas like KY, TN, NC, OH need rain, while NW Midwest crops are trying to grow out the spring excess of water. The are holes in the 2024 crop that will be noteworthy.

• The US corn market is pricing a 182-184 bushels/acre US corn yield with December corn futures at $4.00. Yet, June temperatures were 2.7 degrees above average and that heat looks to be returning to the Midwest in the last half of July. Years in which temperatures have been 2 degrees above the historical average have not produced trendline corn yield. We maintain a US 2024 corn yield estimate of 178-179 bushels/acre, which is 2-3 bushels below the WASDE 181 bushels/acre trend.

• USDA announced that finally China has booked its first US new crop soybeans on a known basis. FAS announced that China booked 132,000 mt of US soybeans for 2024/25. We understand that China continues to bid for new crop US soybeans, with Brazilian exporters saying that China has started checking corn offers from September forward. China is always a price or margin buyer, and both are attractive following the recent decline in Chicago grain valuations. Nonetheless, let’s be clear that China is dramatically behind recent years in securing forward soybean coverage from the US.

• US crush margins exploded last week with the sharp rally in soyoil to cash values over $2.00/bu. Even with the recent decline in soyoil values, the cash margin is calculated at $1.70/bu. Such margins are strong, and we see no economic evidence that crushers will cut back their runs. And with Cargill’s re-stopping of Chicago soyoil receipts from ADM, the stage is set for soyoil stocks to be cleared. There is a supply bull story developing in world minor oilseeds amid the Black Sea drought knifing sunflower yields, while European rapeseed production was adversely impacted by frosts, cool temperatures and excessive rainfall. And now the Canadian canola crop is being hit with hot/dry weather. The point is that vegoil values will be to be supportive to the US soy crush. Soyoil is developing a story not only from expanding US renewable diesel demand, but also from diminished production of minor oilseeds.

• Russian fob wheat values are bid at $216/mt and offered at $220/mt, with the mid point being down $1/mt at $217/mt.  The Russian wheat market is seeking a price that sparks improved wheat export demand following their recent tender misses. Russian private crop size estimates vary from 79-84 million mt. Due to July’s heat/dryness, the impact on the spring wheat crop will likely tug the final total wheat harvest downwards.

• The jet stream is migrating northward which will leave most of the Plains, Delta and southern half of the Midwest with limited rainfall for the next 10 days. One short wave looks to pull through the Upper Midwest in the last half of next week producing rainfall of 0.25-1.25”. Heat will be returning to the Plains, Delta and the W Midwest with highs routinely in the 90’s to the lower 100’s. A Central US high pressure ridge is maintained well into late July. The GFS weather forecast is cooler than the EU model- a trend that persisted at midday.

• The corn market is showing independent strength due to strong cash basis bids. Wheat has rechecked its contract lows while soybeans fall to new lows on technical selling and the fear of new tariffs for China in 2025 via the Republican political agenda. CONAB’s Brazilian crop estimates are out Thursday and USDA due on Friday. The size of the corn short will be important in Friday’s CFTC CoT update. US weekly wheat export sales are expected to be robust on Thursday and add to an already strong start of the new marketing year.

8 July 2024

Posted on July 8, 2024 by simon

• Chicago new crop corn/soybeans fall to fresh contract lows; Rains from the remains of Beryl to aid E Midwest; French wheat yields disappointing.

• Chicago futures are sharply lower at midday with new crop corn and soybean futures scoring new contract lows. December corn fell to $4.08 while November soybeans declined to $10.9425 amid improving Eastern Midwest weather tied to the remains of hurricane Beryl. Moreover, the Monday following the July 4 holiday week always produces big price moves, and today’s drop falls into that category, in a big bearish way.  Wheat futures have been a follower of the summer row crop decline and are back testing the lows following the June Stocks/Seeding Report. Managed money has been sizeable sellers this morning as they add to already large net short positions. We look for Chicago to form a low early this week with a recovery into Thursday’s Brazilian CONAB and Friday’s USDA July Crop report. The momentum in the market is down and the algo systems are trading accordingly on the short side of the marketplace.

• Chicago brokers estimate that the managed money has sold 12,400 contracts of corn, 8,700 contracts of soybeans, and 5,900 contracts of wheat. In the products, the funds have sold 5,100 contracts of soyoil and 6,500 contracts of soymeal.  The fund selling slowed at midday but may return prior to the close. The market has an exceptionally bearish feel all morning long.

• The USDA reported the sale of 135,636 mt of US corn for delivery to an unknown destination. Of the total, 50,800 mt were for delivery during the 2023/24 marketing year and 84,836 mt for 2024/25.

• US weekly export inspections for the week ending July 4 were; 40.3 million bu of corn, 10.0 million bu of soybeans, and 12.5 million bu of wheat. For their respective crop years, the US has shipped out 1,713 million bu of corn (up 393 million or 30%), 63.6 million bu of wheat (up 7.7 million or 14%), and 1,536 million bu of soybeans (down 291 million or 19%). The US is on track to export 2,150 million bu of corn and 1,675 million bu of soybeans.

• French harvested wheat yield data continues to show a sharp drop in production potential with some traders discussing a crop of 25-26 million mt. The decline is based on the 8% drop in seeding and the season long cool/wet weather that hindered seed development and is starting to produce crop quality issues. A 25-26 million mt French crop will drag total EU wheat production down to 126 million mt or less. And a big unknown is the milling characteristics of the  French harvest amid reports that grains are already germinating. Paris wheat futures have fallen with the Chicago decline in a test of the €220 support area. French wheat values are priced $30/mt above the Russian fob market. Why Russia keeps lowering its wheat price offers is being questioned as Russian farmers will not be in a hurry to sell wheat off the combined at breakeven or lower prices and poor yields, that reflect the ongoing drought. We see the world wheat market as “cheap” relative to prevailing fundamentals.

• The midday GFS weather forecast is like the overnight solution with the remains of Beryl taking a track from far NE Texas into Michigan with rain in the narrow 200-mile pathway equalling 0.75-3.00”. The positioning of the storm is slightly further north. Following the storm, the overall Midwest goes dry for the next 6-10 days. Heat is initially absent, but it returns with vigour beyond July 16. The western ridge of high pressure progresses eastward and sets up across the Central US which will produce above to much above temperatures with highs in the upper 80’s to the upper 90’s and even a few locations that will exceed 100 degrees. The coming hot/dry weather will initially be favoured by the NW Midwest, but the last half of July is forecast to be warmer/drier.

• US corn, soybean and spring wheat crop conditions are forecast to be steady to 1% better in the good/excellent category at 67% for corn/soy and 72% for spring wheat. The US winter wheat harvest is forecast to be 68% completed. The coming Beryl rains will help ease dryness across the E Midwest, but a lasting period of cool/wet weather is not offered. As the jet stream pushes north, an extended period of Central US heat/dryness is forecast during the last half of July.

5 July 2024

Posted on July 6, 2024 by simon

• Chicago rally on warm to hot Central US weather after July 16; Additional wheat receipt cancellation: Midday GFS weather forecast adds rain to the Delta/S Midwest.

• Chicago futures are higher at midday with wheat being the bullish stalwart. The decline in the French wheat crop due to lower than expected harvested yield data and the decline in the value of the US dollar (US employment outlook showing weakness with more than 65% of June’s job gains coming from government) is underpinning commodity valuations heading into the weekend. Corn and soybean futures have been followers of the wheat rally with managed money short covering in soyoil lifting August futures closer to key resistance at $49.80-50.20. Like the wheat market in April, managed money can enter too large a net short which forces a dramatic rally. Longer term upside price targets for August soyoil rest at $0.53-0.54/pound.

• US traders are reluctant to take any large new positions until Monday when crop condition ratings and the CFTC Commitment of Traders report will be released. Trading volume is thin with the July WASDE report due next Friday with NASS stocks/seeding updates being incorporated. WASDE will not alter their corn and soybean yield estimates at 181.0 or 52.0 bushels/acre, respectively. The unknown is whether WASDE will drop their US 2023/24 US corn feed/residual estimate by 50-75 million bu. The only bullish hope for the July WASDE would be world crop cuts.

• The Anderson’s cancelled another 198 wheat deliverable warehouse receipts against Chicago futures today taking total to 561 contracts. The bulk of the wheat is being held in Maumee. The hefty 918 contract drop in Chicago deliverable wheat receipts/supplies is a surprise with the Midwest harvest reaching a frenzied pace. Either the US is seeing fresh export demand or the old crop wheat is needed for blending purposes. The sharp fall in deliverable receipts is helping to confirm seasonal lows.

• Indonesia is claiming that it is not targeting China with import duties against textiles and other consumer goods. However, Indonesia seeks to protect its domestic manufacturing sector from unfair competition. Whether this recently announced government comment, will prevent Indonesia from announcing duties of 100-200% on more than 50 Chinese consumer goods is unknown. Nor is it known if such tariffs are enacted, whether China will retaliate against Indonesia palmoil imports with their own duties. The rally in world vegoil prices was initially ignited by Indonesian rumours of proposed duties on Chinese goods.

• US weekly grain export sales for the week ending June 27 were 29.6 million bu of wheat, 26.4 million bu of corn (14.1 million of old and 12.3 of new crop), and 13.9 million bu of soybeans (8.4 million of old and 5.5 of new crop). For their respective crop years, the US has sold 253.5 million bu of wheat (up 84 million or up 49% from last year), 2,115 million bu of corn (up 579 million or 37%), and 1,646 million bu of soybeans (down 281 million or 14.5%).

• The midday GFS weather forecast is wetter across the South-Central US with soaking rain for the Delta and Gulf States from the remains of hurricane Beryl. Rainfall totals are estimated in a range of 1.50-6.00” and locally heaver. This area has been dry, and the rain will assist crop yields. A high-pressure ridge holds across the Intermountain West in the 10-15 day period which will produce extreme heat across the Plains and the western section of the Midwest. A dip in the jet stream allows for rain across the E Midwest from July 15-18. The forecast is warm with limited rainfall across the Northern Plains and the North Central Midwest into July 20. The yield risk is based on the developing heat.

• China has not yet booked new crop US soybeans as of late June. Unknown sales of US soybeans could be to China, but the lack of visible China demand is a concern. Heat is coming to the Plains and the far Western Midwest which will cause rapid drops in soil moisture. US corn/soy crop ratings on Monday are expected to be steady to 2% higher amid cool temperatures and rain this week.

3 July 2024

Posted on July 4, 2024 by simon

• China books Brazilian soybeans; Chicago deliverable wheat receipts being cancelled: Central US heat returns after July 12.

• Chicago futures are mixed at midday as traders adjust market risk ahead of the US July 4th holiday on Thursday.China has been active securing Brazilian soybeans for August/September and next April with tonnages said to be nearing 750,000 mt. The Brazilian farmer has been willing to push remaining old crop soy supply into the market amid the recent surge of the Brazilian Real. This has helped keep the Brazilian soy pipeline ample for both crushers/exporters. This has provided a lift to Chicago soybean futures on China pricing. Traders wonder if China will soon turn to the US for new crop soybean supplies as Brazilian supplies are quickly being absorbed.

• Corn and wheat futures are mixed to lower with favourable Central US weather.  Excessive rainfall has produced some flooding issues across the NC Midwest, but the rain is seen helping more than hurting yield potential. US corn and soybean crop condition ratings are being discussed as steady to 1% higher amid this week’s improved Central US weather.

• World vegoil prices continue their bullish push amid sliding new crop production and the short structure of the market. EU rapeseed production has been knifed by cold/wet weather while Canadian canola needs sunshine/warmth, and Black Sea sunseed production is curtailed by hot/dry weather.

• There is more to the world vegoil rally than a potential trade spat between Indonesia and China. This trade spat could push China to Malaysia for supply, but in the background, adverse weather and the fall of rape, canola and sunseed production has the long-term attention of importers and green fuel producers.

• The Andersons have cancelled 720 deliverable Chicago wheat receipts in recent days. On July 1, Chicago deliverable SRW wheat receipts were 1,479 contracts which has fallen by 720 contracts (nearly half) to 759 contracts. Of the deliverable total, 649 contracts are in Maumee, 39 in Kulman, and 71 in Edwin, OH. Questions abound on why the Andersons would be cancelling wheat receipts in the gut slot of the Midwest SRW wheat harvest. Is the old crop wheat needed for blending purposes or has new export demand arrived.

• Chicago brokers report that funds have sold 4,100 contracts of corn and 1,100 contracts of wheat, while buying 4,300 contracts of soybeans. Fund managers have bought 5,700 contracts of soyoil while being flat in soymeal. Soyoil futures open interest has fallen more than 20,000 contracts in recent days with Tuesday’s decline being 14,897 contracts.

• US ethanol production was 313 million gallons, up 6 million gallons on the week, and equal to last year. US ethanol stocks rose slightly to 991 million gallons vs 984 last week, which was up 6% on last year. The US is on track to meet the US 2023/24 corn grind forecast of 5,450 million bu.

• The midday GFS weather forecast is like the overnight forecast with mild temperatures and 3 storm systems passing through the Central US over the next 10 days. Rainfall and highs in the 70’s/80’s favours Central US crop production. Much warmer/drier weather conditions evolve following July 12 as the Western US ridge progresses east to the Intermountain West/Western US Plains. The jet stream lifts northward providing a broad warm/dry pattern with ridge riding rain forecast for the Ohio Valley. Heat will be a growing Central US feature of the last half of July.

• Central US weather favours corn but managed money covering in soyoil is lifting soybeans.  Paris wheat futures are sagging on harvest pressure while spring wheat production in Russia is gaining attention amid hot/dry weather. Amid declining world grain production, the Central US weather forecast holds significant market importance in the coming weeks.

2 July 2024

Posted on July 3, 2024 by simon

• Chicago soyoil sees additional managed money short covering; Russian wheat yields are better than expected; Beryl takes a turn to the North into S Texas.

• Chicago futures are mixed at midday as the volume of trade tails off heading into Thursday’s US July 4th holiday. Short covering was the feature early today in a turnaround from the recent selling. Corn and soybeans bounced while wheat sagged on harvest hedge pressure against Paris wheat futures. China has been active pricing Chicago soybeans while 3-year lows in corn prices spur greater interest from S American buyers. The favourable Central US weather forecast caps rallies, but the short structure of the market makes the bears wary of selling breaks. Interior cash corn/wheat markets are well bid with cash buyers suggesting that if all the corn is available that NASS suggests that it is not making its way into local markets. We look for a mixed Chicago close with the spec trade interest in selling rallies on non-threatening Central US weather.

• Chicago brokers report that managed money has sold 3,200 contracts of wheat and 6,700 contracts of soyoil, while selling a net 1,900 contracts of corn, 3,200 contracts of soybeans and 3,400 contracts of soymeal.

• Soyoil is (again) the bullish stalwart of Chicago as prices surged through their 50, 100 and 200 day moving averages with values at their highest levels since mid-May. The $0.47-0.48 area basis August soyoil will act as resistance.

• The brewing trade war between Indonesia and China is the fundamental bullish catalyst for Chicago soyoil. Indonesia is threatening to place duties on imported Chinese consumer goods at 100-200% to help their local manufacturers. The only significant good that Indonesia exports to China in sizeable tonnages is palmoil. Most argue that China would retaliate against Indonesia palmoil with new duties. Chinese duties on Indonesian palmoil could force Chinese importers to secure supply from Malaysia. However, curtailed total palmoil imports would likely mean less UCO that China could ship to the US. Traders will closely follow Chinese UCO valuations should an Indonesian/China trade spat develop. The US has seen record imports of Chinese UCO, which has become important to future US soyoil demand. Canadian canola prices are also sharply higher while European rapeseed prices are rising on tightening new crop supplies. World vegoil supplies are rising on tightening supplies and an outlook for curtailed 2024/25 stocks.

• Early Russian wheat yields have been better than expected. However, NVDI measures have fallen to decade lows and the worry is that the strong yield trends in Kraznodar and Stavopol won’t last as the harvest carries northward. We maintain a Russian wheat crop estimate of 82.5 million mt awaiting harvest information from the frost/freeze areas that were hit in early May. Our bet is that USDA’s 83.0 million mt Russian wheat crop forecast will hold fast until harvest yield data is available across the Black Soils area during late July and August. Russian spring wheat crops are faring ok with the key reproductive period occurring during the last week of July and the first half of August. 

• The midday GFS weather forecast is wetter than the overnight run with warmer temperatures offered in the 11-15 day period for the  Midwest. Hurricane Beryl is forecast to make landfall across the southern tip of Texas and power northward into Dallas. This would add 3-7.00” of rainfall for Texas and potentially boost rainfall totals across the Central Plains and the W Midwest depending on the northward speed as the storm becomes extratropical. The EU model has been further south and west with Beryl, and their midday solution will be important. Beryl is the first category 5 hurricane in the Gulf of Mexico in July. The warm Gulf waters will likely produce additional hurricanes as systems exit off the Eastern African Coast.

• An historically strong high-pressure ridge is forecast to build across the Intermountain West and extend into the Plains following Beryl. Highs in the 100’s would be widespread with 90’s/lower 100’s extending into MO/IL.

• The structure of Chicago is heavily short of corn/soybeans and even wheat. Central US weather is favourable today and the algos are programmed that “rain makes grain”. Chicago values will drip lower into the holiday. However, if there are any threats, sharp short covering rallies will unfold. The Black Sea drought is expanding.