- It has been a mixed morning in Chicago with the grains weaker while soybeans are firm. Fund selling has slowed, but December corn fell below last week’s low at $3.68. Spot Chicago wheat appears to be targeting the top of a chart gap at $4.50 while the world wheat market struggles to find a bottom.
- World wheat traders fear that WASDE is once again overstating world wheat trade amid the cheapness of world corn and lack of feed wheat throughout the Black Sea. The Pro Farmer Tour is being watched, but the corn yield data from OH/IN did not show the disaster that some supply bulls have argued for.
- US crop maturity is a big deal, but traders are unwilling to place any bullish frost bets until there is a cold weather threat on the forecast maps.
- We look for a mixed close, but the downside potential in corn is becoming limited. Wheat values may still have 5-10 cents of downside price risk, but this no place to be turning bearish of Chicago grain or oilseed. Cold weather risks will escalate during beyond mid-September as the race to the end of the growing season begins in trying to better understand US production.
- Chicago brokers estimate that funds are net sellers of 1,300 contracts of wheat and 3,900 contracts of corn, while buying 2,500 contracts of soybeans. Funds have bought 1,800 contracts of soyoil while being flat in meal.
- US ethanol production reached 301 million gallons last week vs 307 million in the week prior. US ethanol stocks fell to 981 million gallons, unchanged from last year. US crude oil stocks were 438 million barrels, up 7% on the year. The weekly energy/ biofuel data is seen as neutral to slightly bearish. The sharp drop in US corn prices has not stimulated US ethanol production. The big problem facing US ethanol is oversupply in capacity which pressures margin.
- The Pro Farmer Crop Tour has pushed into IL and IA with the yield results awaited. Today’s additional rainfall across IL/MO/NE is aiding the yield outlook with some rains to leak into IL. The PF Tour is expected to release their US corn yield estimate on Thursday evening or Friday morning. The Tour has really helped define the degree that immaturity could become a yield issue should the 2019 Midwest growing season prematurely end.
- China has been active this morning booking 10-12 cargoes of Brazilian soybeans for October. FOB prices are rising and the Brazilian premium vs the US Gulf has reached close to $1.00 /bu. China is 50-60% booked on Oct crush.
- The midday GFS weather forecast is farther north with Midwest rain next week as a series of storm systems next week are projected to include a larger share of IL, MO and IN. The midday model has 1-2.00″ of rain across much of MO, the southern 2/3′s of IL and southern half of IN. Rains of 0.25-1.00″ are projected for the Upper Midwest and N Plains. The forecast has enough rain to limit any dry weather concern, but cool temperatures in the last week of August will slow crop maturity. The primary weather concern going forward is no longer rain, its crop maturity and the finish of the 2019 growing season.
- The downside price risk is limited in corn with values near last year’s Aug 22 price level. Different this year is the uncertainty surrounding US corn/soy production relative to maturity. Dec corn bottomed following the Sept crop report at $3.45. Prior to the report the low was $3.59. The point is that corn has a few cents of downside risk with Mother Nature in control of the upside. Soy pod counts are well down from last year, but will the plant be placing on more blooms/pods heading into September. And Chicago wheat is likely within 6-8 cents of a low. Our best guess is that there will be better days to make new sales as a Chicago bottom forms in late August.