- HEADLINES: China secures 5 cargoes of French wheat; September futures lead the rally on cash strength; GFS weather forecast wetter at noon.
- Chicago grains are higher on talk that China booked 5 cargoes of French wheat while soybeans rally on US soymeal demand amid thinning Argentine fob offers. The hefty premiums paid for US old crop soybeans/corn is underpinning valuations. If corn end users (livestock/ethanol) can make money at $7/bu cash corn on a spot basis today, they will all do very well with new crop bids down $0.80-1.20/bu in several weeks as the harvest starts. The ability of Chicago to hold with sharply lower crude oil/equity prices speaks to the potential that harvest lows have been formed. The question going forward, is can they be retested during the harvest.
- Chicago brokers estimate that funds have bought 5,400 contracts of wheat, 6,400 contracts of soybeans, and 5,500 contracts of corn. In the products, managed money has purchased 3,200 contracts of soymeal and 1,900 contracts of soyoil.
- China is said to have booked at least 5 cargoes of French wheat for November/December delivery, with inquiries out for Australia, Canadian and even US SRW off the PNW Coast. The news has caught funds short and rallied wheat futures to sharp gains. Under a 2001 WTO obligation, China is expected to secure 9 million mt of world wheat in a calendar year. China has not asked for offers of Russian/Ukraine wheat, which reflects the worry of execution in war torn areas. The Chinese demand has sparked a new round of short covering with KC December to target $9/bu once again.
- Wet weather forecasts for the Gulf States will slow early harvest operations and cause a tightening availability of nearby corn/soy stocks. Crushers and ethanol producers are seeking remaining corn/soybeans to bridge the supply gap to the Midwest new crop harvest in mid-September. And US soybean exports stay active which is adding to the stocks battle. The September/November soybean spread pushed out to 96 cent premium with September/December corn pushing out to a 4 cent premium. Heading into first notice day, strong hands could be seeking deliverable September corn and soybean receipts.
- Ukraine’s Independence Day Celebration is Wednesday. Russia may be planning a robust rocket attack to disrupt any glee and for a payback for the bomb that killed a Russian leader’s daughter on the weekend. Grain markets should be alert to the potential of heightened war activities from Russian midweek.
- US grain export inspections for the week ending August 18t were 29.1 million bu of corn, 25.2 million bu of soybeans, and 21.8 million bu of wheat. For their respective crop years to date, the US has shipped out 165 million bu of wheat (down 46 million or 22%), 2,118 million bu of corn (down 459 million bu or 18%), and 2,057 million bu of soybeans (down 111 million bu or 5%). US old crop soybean exports were stronger than expected with China a noticeable shipper.
- A broad ridge/trough pattern holds across the US for another 2 weeks. The Central US weather forecast is dry this week with the next chance of rain being on Sunday/Monday in the NC Midwest. A ridge riding storm system pushes south producing 0.5-1.50” of rain across MN/IA and N MO. The showers then push NE across WI/MI and N IN with rain totals of 0.25-1.25”. The rest of the Midwest is dry. High temperatures range from the 70’s to the lower 90’s with any heat located across the S Plains. The forecast remains generally favourable except for NE/KS where the drought is set to worsen.
- Chicago values have rallied into the noon hour with China seeking world wheat. And tightness in old crop summer row crop supplies is placing delivery equivalents well above current prices. Look for additional Sept spread tightening into first notice day next week Wednesday. Flat prices should top out early this week and soften into the weekend amid the coming harvest. As the S Midwest harvest starts, premium cash basis bids collapse. But remember that margin for crushers, ethanol grinders and livestock feeders only improve on the futures break. US farmers hold 2022 revenue insurance at $5.89 in December corn and $14.32 basis November soybeans, they will not be big sellers on weakness. This is no place to chase a rally.