- It has been another mixed day in Chicago, with beans higher and grain markets steady to a bit weaker. Markets have done little after early morning trade, and the highlight today is talk that the White House plans to authorize CCC funds to provide emergency relief to soybean farmers. An announcement is possible after the close, but reportedly the Trump Administration plans to provide $12 billion in aid to soy farmers. No other details are available, and possible strategies have been discussed by the private trade for some time, either direct payments, commodity purchases or export enhancement programs. Many favour the purchase of beans from the market, which may be auctioned off at a later date. Direct payments, while helpful in the near term, won’t change supply and demand and thus actual fair value. Exports to non-Chinese origins already are being enhanced by Gulf bean’s $60/mt discount to Brazilian origin. This is the first sign of action by the Administration, but also indicates that US-Chinese trade issues are expected to linger for some time. The authorisation of this money allows the US to maintain a hard stance on tariffs placed on China.
- We would also mention that soybean export demand should be robust in the weeks and months to come. China will stay absent from the market, but non-Chinese importers are short-bought, and will likely be very active in securing supply moving forward. Current Gulf prices are highly attractive to world crushers. Brazilian corn exports remain sluggish, and the country’s truck freight issues persist. Permanent freight rates were set to be released last week, but now a decision awaits a public comment period. Higher truck freight in Brazil could be maintained into early 2019, which will hinder Brazilian corn’s ability to compete against cheaper US and Argentine origin. This along with falling EU crop estimates will be a boon for US exporters.
- Private wheat crop estimates in Ukraine are now below 25 million mt, vs. the USDA’s 25.5 million. Of note, EU milling wheat futures have shrugged off early losses and look to settle sharply higher, and new highs for the move. EU corn is following. Gulf wheat’s discount to EU origin will widen this evening. Egypt bought a sizable 420,000 mt of wheat for September delivery from Russia, Romania and Ukraine. Crude oil futures have also reversed early weakness, with spot WTI up $1.00/barrel at midday. Uncertainty over Iranian trade will be ongoing, but we maintain that a sizeable boost in crude stocks is needed to turn bearish below $67. Rising gas prices have maintained massive ethanol blend margins.
- The central US GFS weather forecast at midday is wetter in KS into the weekend but otherwise maintains a pattern of dryness and seasonal temperatures across the Central Midwest. A deep low pressure trough drops into the Great Lakes by late week. This will act to restrict heat across the Corn Belt, but the flow of moisture will be shifted south of major producing regions. Heavy cumulative rainfall (2-3”) impacts E CO, KS and NE Fri-Sun. Little to no precipitation is advertised across MO, S IA and IL into early August. High temperatures will continue in the 70s and 80s. Temperatures will aid grain/pod fill. More rain is needed to maintain record potential across the driest areas of the E Plains and SW Midwest.
- Markets have shown strength on breaks, and our bet is that seasonal lows are in. US row crop yields will be very big, but particularly in the case of corn, larger demand will be offsetting. Ocean freight indexes are rising seasonally, and are up 40-75% from late July a year ago. Global economic growth continues. Breaks in corn and wheat are opportunities for end users. Black Sea and European grain markets reflect shrinking surpluses.