- HEADLINES: Paris wheat pushes to strong gain; UN head to Turkey; GFS drier at midday.
- Chicago markets are mixed at midday with the summer row crops of corn/soybeans lower while the wheat market holds in the green. Improved Central US weather and lacklustre export demand has pressured Chicago corn/soy futures to key chart support. World wheat prices trend higher on improving import demand and the slowing US winter wheat harvest.
- We look for a mixed Chicago close as the European Central Bank raised its bank lending rate by 0.5%, its first hike in 11 years. The US$ weakened following the EU rate increase with WTI crude oil values falling $4.00/barrel to $95.00.
- The US Central Bank will raise its rates next week which has sparked worry about a coming US recession. Thereafter, the next US Central Bank rate increase won’t occur until September, so raw material asset prices could catch a bullish tailwind late next week. Our research argues that Chicago grain futures are mispriced relative to their fundamentals. However, a sustained recovery must be led by the cash grain market and tightening future supplies.
- Chicago brokers estimate that managed money has sold 2,500 contracts of corn, 3,600 contracts of soybeans, 2,900 contracts of soyoil, and 1,100 contracts of meal. Funds have bought 4,500 contracts of wheat.
- FGIS reported that for the week ending July 14 that the US sold 18.8 million bu of wheat, 1.3 million bu of old crop and 22.4 million bu of new crop corn, and 7.5 million bu of old and 9.4 million bu of new crop soybeans. This was the first week of the past 3 that USDA did not report net soybean cancellations.
- For their respective crop years to date, the US has sold 279 million bu of wheat (the same rate as last year), 2.380 million bu of corn (down 367 million or 13%), and 2,190 million bu of soybeans (down 88 million or 4%). China did secure a cargo of US corn last week.
- The Russian wheat harvest is sizeable, and maybe record large at 87.5-89.5 million mt. However, wheat quality is being questioned amid low protein levels. The low protein levels could push world hard wheat buyers to Northern Europe or Argentina. The US may also find increased HRW demand on quality.
- UN Secretary General Gutterres will be heading to Turkey this afternoon for the hopeful signing of the Black Sea Grain Intervention pact in the coming days. There are details that have yet to be worked out but hope for a signed deal can happen on any day. However, we remain sceptical about the logistics to export sizeable quantities of Ukraine grain in a war zone.
- Paris wheat futures closed sharply higher with gains of €10.75/mt or some $0.295/bu if related back to Chicago in $/bushels. EU wheat crop estimates are being cut by another 1.4-2.1 million mt due to hot/dry weather conditions across N Europe. More important is that EU corn crop estimates are in a freefall from those that surveyed fields to 55-56 million mt, a 17% yield fall from trend.
- The midday GFS weather forecast is drier for the Plains and the W Midwest compared to recent forecasts. The midday GFS forecast has cut back rain prospects by 40-50% and reduced coverage to 45-55% of the area. This leaves some significant areas of the W Midwest and Plains needing rain. S Minnesota and portions of Iowa must be closely watched. The latest forecast reflects a high pressure ridge forming across the SE US and retrograding west into the Central Midwest. A period of heat/dryness looms which makes the coming rains important.
- It is a macro day in a host of markets with the volume of trade in decline. Chicago has not traded its own fundamentals for some weeks. EU crop losses are sizeable and important to world trade flows of grain. Chicago values have become too cheap!