- Chicago markets have extended overnight losses in weak volume on better than expected rainfall in southern IL and IN and as midday GFS weather forecasts maintain scattered showers this week across the E Midwest and cooler than normal temperatures. The US corn crop this week will reach 35-40% silking. The lack of excessive heat is timely.
- There are more questions than answers with respect to China demand for US ag good in the near term. Chinese crushers are enquiring about US imports and looking to obtain tariff waivers. However, private companies in China indicate that future purchases will still largely hinge upon US and S American price relationships (no real surprise there!). Without tariff waivers, S American origin soybeans make economic sense. The question longer term is just how much will China buy without the elimination of some US tariffs. New face-to-face meetings are desired to boost market confidence in US-China trade progress.
- Weekly US export inspections through July 18 were neutral soy and wheat but bearish corn. Weekly corn inspections totalled just 17 million bu, vs. 27 million the prior week. A pace of just over 36 million bu/week is needed to meet the USDA’s old crop corn export forecast. USDA is expected to lower its 2018/19 US corn export forecast another 50-75 million bu in its August WASDE. Weekly wheat export inspections totalled 16 million bu, vs. 13 million the prior week. Bean inspections totalled 21 million bu, vs. 31 million the prior week. China loaded 12 million bu of US beans last week, mostly from the PNW. For their respective crop years to date, the US has shipped 1,717 million bu of corn, down 13% from last year, 1,443 million bu of soybeans, down 24%, and 125 million bu of wheat, up 28% on this week in 2018.
- Otherwise, the market is just more of the same. The demand bears continue to hold more leverage following recent rainfall and cooler temperatures into the opening days of August. There is talk that ethanol production will slow moving forward as margins sink. We calculate that plants across the W Midwest are barely meeting variable costs given current cash corn and ethanol values. Whether the recent slowing of demand has come too early will be determined by August weather and NASS’s August and September yield forecasts.
- Note that in addition to NASS’s re-survey of seedings, NASS in August will use satellite-based data as well as some FSA acreage certification data when updating acreage.
- The midday Central US GFS weather forecast is broadly wetter across the Plains and Midwest in the next 12 days. Coolish, dry weather lies ahead into the coming weekend. Thereafter the GFS forecast projects a more zonally flowing jet stream, with more regular rain chances due July 29-Aug 3. Neither the EU nor the GFS forecast has been overly precise with long term details, but the GFS features widespread rainfall of 0.50-2.00” across a bulk of the Corn Belt next Tuesday to the following Saturday. Temperatures warm slightly next week but excessive heat is absent. Supply-driven bull markets tend to peak in mid-summer, with a long tail to follow. So far, this is occurring. New highs require somewhat bullish August acreage figures amid regional boosts in US soil moisture and adequate supplies in non-US exporting countries.