- It has been a mixed and slow morning in Chicago, with beans up 10-11 and corn and wheat little changed. Positioning ahead of potential weekend trade news, as well as this afternoon’s CFTC report, is noted. Limited activity is expected into the close. US exporters sold 218,000 mt of new crop corn to Panama and Mexico, and 30,000 of old crop to Mexico. Gulf corn is the world’s cheapest for summer delivery following rallies in S American basis over the last week. We note that Brazilian weather has failed to improve in June outside of pockets of Parana in the South. Additional cuts to Brazil’s exportable surplus are likely forthcoming.
- OPEC confirmed a hike in production worth 1 million barrels/day. The actual total will be closer to 700-800,000 barrels, however, as certain countries will fail to meet proposed quotas. Crude is up sharply at midday ($3/bbl, basis spot) amid a lack of clarity on how global stocks will be impacted. Potential tariffs on US crude will allow stocks to build. But amid the US’s new-found position as a crude exporter, foreign market will be left with shortages.
- Ethanol production margins have recovered from the lows of early May. The spot futures-based blend margin has again exceed $.06/gallon. Additional draws in US ethanol stocks lie ahead. There is also talk that the EPA will raise the total RFS mandated volume to 19.9 billion gallons, up 3% from its prior target. This proposal is not expected to include reallocation of biofuel volumes under its waiver program.
- The midday GFS weather forecast is drier in Ukraine over the next two weeks. Temperatures will be variable, but net declines in soil moisture will persist into the early part of July. Southern Russia will stay rather hot, with high temperatures this weekend pegged in the mid/upper 90s. Much above normal precipitation will be needed in the Black Sea and Eastern Europe to maximise corn and oilseed yield potential. Old crop corn offers out of Ukraine have evaporated. The midday forecast does offer better rain chances to parts of New South Wales in Australia, which is desperately needed. 1-2” is projected across Southeast Australia in the next 10 days. The remainder of the country will stay dry. Aussie producers in NSW hope the rain will materialise as projected. Other ag-specific news is lacking. It seems clear traders are reluctant to take new positions following the emotional decline, and amid silence regarding next steps in US-China trade relations.
- The central US midday GFS weather forecast is cooler next week across the bulk of the Midwest. Key moving forward will be the amplitude and duration of high pressure aloft. The GFS allows a weak front to keep the ridge a bit farther south than previously indicated, and this will allow temperatures to moderate July 1-5. It remains that meaningful rainfall beyond early next week will be confined to Northern and far Eastern growing areas. The midday forecast leans slightly market negative based on the lack of sustained excessive heat. The afternoon EU model release will be watched closely for confirmation of this.
- Next week’s Stocks and Seedings report should not hold many surprises, but rather it is the July 6 deadline for US tariff implementation that will weigh on rallies in the near term. It is tough to be bearish corn/wheat amid adverse Black Sea weather, and as heat/dryness expand into Europe. Any news over US-China negotiations is desired.