- It has been a mixed morning in Chicago with the grains firmer, while the soy complex continues to sag on expanding trade sanctions. The rally in wheat is due to declining crop prospects in the EU and Black Sea, while soybeans are sagging on the ongoing absence of Chinese demand for US soybeans. Chicago volume is much less than prior days as the industry takes a pause on US trade rhetoric. Trade fears today are a war of words, the question going forward is whether parties can talk and move ahead with negotiations before the tariffs start. Chicago is trying to gauge the timing of the next round of trade negotiations. Right now, such negotiations are not foreseen as neither the US or China appear ready to pick up the phone and chat trade.
- Chicago brokers report that funds have bought 3,400 contracts of wheat and 2,000 contracts of corn, while selling 4,100 contracts of soybeans. In soy products, funds have sold 1,700 contracts of soymeal and 2,600 contracts of soyoil. Funds appear to be willing to dive into larger short in the soy complex, while cash markets start to firm offering pause for new sellers. We look for a mixed close in continued modest volume.
- US weekly export sales for the week ending June 14 were; 17.0 million bu of wheat, 6.5 million bu of old crop corn and 13.4 million bu of new crop, and 11.1 million bu of old crop soybeans and 8.5 million bu of new crop soybeans. The corn sales were less than expected, while wheat and soybeans were in line with trade expectations. China canceled 66,000 mt and there were net unknown switches/cancellations of 204,000 mt of old crop soybeans. China has shown no interest in securing new crop US soybeans since US trade tariffs were announced. China has bought just 1.5 million mt of new crop soybeans so far. There are 1.3 million mt of known old crop purchases with another 2.0 million likely held in an unknown destination classification. There is a risk that all 3.0 million mt of old crop US soybean sales to China/Unknown will be cancelled or pushed forward to new crop. We would note that last week China ended any phytosanitary restrictions on grain products that could be substituted in feed rations for soymeal. Included in the list was wheat bran, imported soymeal, DDGs, rapeseed and cottonseed hulls. The Chinese appear to be positioning for reduced soybean/soymeal imports from the US and are seeking other products for its livestock feeders. We also note that China has a huge store of old crop wheat that can also be fed, which would add to feed protein levels. China holds an abundance of feedgrain stocks.
- The central US midday GFS weather forecast is similar to the overnight run with an abundance of Midwest rain for the next 7-8 days. However, as has been stated, this is a complex pattern and we should be prepared for sizeable day to day changes. A static front is sagging across the Central US with an abundance of upper air humidity that will produce widespread rains of 1-4.00” in the next 7-8 days. Compared to the prior GFS model, the rains are farther north that prior runs as a high pressure ridge forms over the Central and Eastern US. The forecast models continue to reflect a developing ridge of high pressure for the Central US during the closing days of June and early July. This ridge looks to produce new rounds of extreme heat for Central US crops.
- The forecast holds an abundance of rain for the Central US. This rain will keep crops well-watered heading into July. The market has digested the politics surrounding a hardened US trade stance. Hope persists that the US/China can get back to the negotiation table before tariffs start to take effect on July 6. Sideways Chicago trade is expected with the grains to gain on soy on export demand and world weather risks.