- The US$ resumed its rally against the Brazilian Real three weeks ago, and broke to a two year high on Tuesday. It’s been a mix of a healthy and growing US economy versus the usual political uncertainty in Brazil. Brazilian farmers have already benefitted from record basis (thanks to China), and are now reaping rewards from the strong US$. The Brazilian planting season is now just weeks away, but already it’s been expected that Brazilian farmers will increase their new crop soybean area by another 3-5%.
- Soybeans were traded lower overnight as Day one of the Pro Farmer crop tour confirmed large soybean counts in the states of OH and SD. November struggled to get back over unchanged early in the day session, and had slipped back below the 50-day moving average by the close. Funds were estimated sellers of 3,000 soybean contracts. Ahead of the morning open, the USDA’s FAS agency reported a new crop soymeal export sale that was worth 250,000 mt. Meal announcements are rare, but the loss of Argentine supplies continues to drive world trade to the US. Apr-Jun Argentine meal exports were the slowest since 2008, and ship lineup data shows that a historically slow pace has continued in July and August. July exports are estimated at just over 1.5 million mt and August is expected to be just under 2. It’s been a disappointing start to the week and follow through liquidation is expected to weigh on soybean prices at midweek. All eyes are on the crop tour yield figures on Thursday night, as well as trade negotiations with China.
- Corn futures fell 2 cents. December ended exactly at its 50-day moving average, and a close below this foreshadows a test of $3.65-3.70. Pro Farmer’s tour has so far reported yields in two states (SD, OH) and results there are rather close to NASS’s initial forecasts last week. Final US yield will likely be big. Otherwise the market still lacks major corn-specific news. There remains weakness in Brazil’s ethanol market, where seasonal weakness has been extended a few weeks beyond the last two years. Sugar is testing multi-year lows. US ethanol exports will be lacklustre into early Sep, and so US ethanol stocks will remain lofty. Note also that Brazil’s Real today fell to a new 17-month low. Safrinha corn area will expand. But in the near term it remains that elevated world grain demand will be funneled to the US. We maintain that intermediate lows will be scored between $3.65-3.70 basis Dec, and in the next two weeks. Brazilian and Black Sea corn is a full $.30-.50/bu above US Gulf corn. Funds are short an estimated 40,000 contracts.
- US and world wheat ended sharply lower again following statements from Russia’s Ag Minister indicating no curb in exports would occur in the near term. Reports from Russia remain uncertain, spring wheat harvest is ongoing, and so there’s no real supply tightness in the N Hemisphere as of now. We expect the market to reorganize the world trade matrix, rather than policy. Russia also aims to release 2 million mt of intervention wheat, but this will be done in more rural areas and this wheat is unlikely to be sold unless domestic prices rally further. Russia’s prices have surged since early summer, but note that on average, like many ag markets, lasting rallies begin after harvest. Our point is that Russia’s exportable capacity is still far from certain. Russian offers this evening rest at $229/mt for spot, vs. $232 Monday and $235 last week. World markets this week have moved together, and so US wheat exports will remain limited to traditional buyers. However, on the margin, major exporter stocks will be lowered again in the USDA’s Sep release. Coming Aussie rainfall looks to be just a short term event.