- Chicago traders watch hot/dry Central US weather forecast amid record fund short: Brazilian FOB soybean offers lacking.
- Chicago grain futures are mixed at midday with corn/soybean futures higher on threatening Central US weather and a record large net managed money short position, while wheat prices sag on profit taking in European wheat futures following several days of gains. It may seem to be too simple, but the ownership structure of Chicago is in the hands of commercials, while managed money is holding a record short corn/soybean position combined. As long as the Central US forecast is threatening, the Chicago price risk is to the upside.
- The French wheat harvest is reaching 40% and low test weight wheat is being reported. Unlike the US, EU co-ops collect the wheat but delay docking producers on quality until there is a clearer picture of all deliveries. To date, French/German wheat is struggling to meet milling grade, but the hope persists that the later maturing wheat may see its quality improve. We look for Paris wheat futures to dip mid-week on profit taking, and rally into the weekend as French crop condition ratings partially reflect wheat quality woes on Friday. We note that France needs at least 10 million mt of milling quality wheat to meet the domestic production of flour and wheat exports to other community members. Unless test weights change on the French crop, this leaves limited French wheat supply for export in 2024/25.
- Chicago brokers estimate that the managed money has purchased 2,900 contracts of soybeans and 4,800 contracts of corn, while selling 1,900 contracts of wheat. In soy products, funds have bought a net 1,600 contracts of soymeal and 2,100 contracts of soyoil.
- The USDA announced the sale of 200,000 mt of US 2024/25 corn to unknown destinations. US corn is uncovering demand amid smaller S American and Black Sea crop harvests. Rumours have the buyer being Mexico or Japan.
- It is becoming difficult to uncover Brazilian fob soybean offers after the middle of September. The lack of cargo availability is due to record Brazilian soybean exports with the primary buyer being China since February. Paranagua soybeans are offered at $1.25 over for FH of September, well above US Gulf offers of $0.95 for the entire month of September. The point being is that the tail of Brazilian soybean exports is being cut short by the smaller 2024 crop. The US Gulf is back in position to attract world soybean demand from mid-September onward. We look for China to become a larger buyer/importer of US soybeans in August/September. The cash market premium argues that final size of the 2024 Brazilian soybean crop is 148-152 million mt.
- World ocean freight rates declined to a 1 month low on rising availability of vessels to carry dry goods. The fall in grain values and freight costs is allowing end users the opportunity to book forward at the lowest landed values in years. World demand will be focused on the US in the months ahead.
- The Central US GFS weather forecast at midday is slightly cooler in the 8-11 day period across the W Midwest, but a below normal rainfall trend is forecast for the Plains, Canadian Prairies and the most of the Midwest into August 4. Heat will begin on the weekend with highs ranging from the mid 80’s to the mid 90’s throughout most of the Plains, Delta and the Midwest. Precipitation for the next 9 days will be focused on the Gulf States and SE US with a few isolated afternoon thunderstorms over the N Midwest. The GFS forecast projects amplified high pressure ridging in the 10–15-day period with high temperatures in the 90s/100s across the entirety of the Plains and in AR, MO, and IA. Confidence in extended range details is growing on run-to-run consistency. The coming heat and dryness will be a stress on Central US crops.
- The midday GFS forecast is threatening with extreme heat/dryness to invade the Central US from late July into August 7. Whether the GFS is overdoing the extreme heat in the 11-15-day period is unknown. But the forecast models are consistent in the heat threat with limited rain. Finishes have proven to be poor in recent US crop years, and we expect the same again in 2024. This makes the record large fund short “vulnerable” heading into the August USDA crop report.