- HEADLINES: Chicago recovers after a morning of heavy fund selling as midday GFS weather forecast takes out rainfall for Plains/W Midwest; US weekly export sales disappoint.
- Chicago futures are sharply lower at midday with funds massive sellers on liquidation. Midday price direction has been basically momentum. The market was unable to gather any rally early this week on threatening Central US weather and the bears sensed a chance to produce liquidation. Fund selling ensued with the wetter 11-15 day extended range European weather model in the background providing fundamental fodder for the algo weather trading systems. It is now about the charts.
- November soybeans have fallen back to support at $13.25-13.50 while December corn uncovered buying below $3.50. So far, December corn has been able to hold Monday’s low, a positive sign. And the big declines in highly charged speculative weather grains like canola and spring wheat futures, has added to the Chicago selling. We doubt that the Chicago break can be sustained, but momentum trade has been a summer theme.
- Chicago brokers estimate that funds have sold 8-9,500 contracts of corn, 12,500-14,000 contracts of soybeans, and 5,400-5,800 contracts of wheat. Funds have sold 5,500-5,800 contracts of soyoil and 4,100-4,600 contracts of soymeal. Funds have been aggressive sellers of soybeans/soyoil on liquidation.
- Weekly US export sales for the week ending July 15 were 17.4 million bu of wheat, 2.3 million bu of old crop and 6.5 million bu of new crop soybeans, and net cancellations of 2.1 million bu of old crop and sales of 6.5 million bu of new crop corn. China cancelled just over 2 cargoes of US old crop corn which fuelled the net corn cancelations for the week.
- For their respective crop years to date, the US has. sold 279 million bu of wheat (down 46 million or 14%), 2,278 million bu of US corn (up 1,026 million or 60%), with US soybean sales at 2,278 million bu (up 574 million or 34%). The wheat sale included 4.2 million bu of US HRS wheat with crop year sales at 84 million bu. Somehow through spreads and price, the US HRS market must see US HRS exports slowed.
- US export demand has been stalled for weeks as Gulf/PNW fob price offers for corn/soybeans have been well above Argentina/ Brazil and the Baltic on wheat. This has slowed US export demand and left the weather algos to run Chicago price direction. However, US corn sales are record large in an old crop position with new crop sales record large for the middle of July at 635 million bu. US new crop soybeans are not record large, but they are sizeable at 362.5 million bu.
- We expect that the Chicago break combined with the sharp rise in Brazilian fob corn/soybean export offer prices should push back world demand to the US on corn and soybeans on the US’s newfound competitiveness. There is talk that China has become interested in securing US soybeans for an October forward timeslot. Monitor the daily sales report for new buying.
- The midday weather model is drier across Minnesota, Iowa, W Illinois, and Wisconsin and more like the overnight EU model forecast. The model has taken out a good 1-2.00″ of rain. The forecast is wetter through the Delta/SE US where rains should be regular. A strong high-pressure ridge holds across the Plains, the Delta, and lntermountain West next week. This is a 594 millibar ridge and capable of producing heat/dryness for an extended period. High temperatures will be in the 90′s to lower 100′s across the Plains/W Midwest starting tomorrow and continuing next week. It is a hot/dry Plains/W Midwest forecast. It has not rained across lowa/Minnesota/S Dakota in over a week. The coming forecast is stressful and crop ratings will decline.
- When November soybeans fell below the 50-day moving average overnight it triggered a slew of sell stops that dropped values a quick 10 cents and sparked the massive fund sales of nearly1 4,000 contracts this morning. Corn/wheat selling followed. The midday GFS weather forecast is dry for the N Plains and the W Midwest, and Canadian Prairies into August 1. US and Canadian crops are not getting larger with temperatures in the 90s/100s. We continue to see the weather as crop threatening.