- Chicago futures remain strong but price movement during the morning session has been limited. Neither the bulls nor the bears desire to add to already-held positions amid Central US weather uncertainty during half of August. Chart-based support holds, but the duration of Midwest dryness needs to be extended into mid-August to turn outright bullish at current prices.
- Wheat has led today’s rally as early July frost damage in Southern Brazil is being better assessed. World tender prices are moving slowly higher, with Tunisia offered soft wheat at $213/mt. Tunisia in early July paid $205/mt for soft wheat.
- Newswires report that China has approved tariff waivers on up to 3 million mt of US soybeans. This is seen as a goodwill gesture as talks resume next week in Shanghai. There are also reports that China could extend waivers to another tranche US soybean imports if talks next week and beyond show progress. Any new crop export demand for beans is welcomed but recall new crop US soybean export commitments sit at 103 million bu, the lowest level since 2005. A structural change, via the rebuilding of China’s hog herd or a finalised trade deal, is needed to boost total world soybean consumption.
- Macro markets are providing a modest headwind. WTI crude has failed to react to another sharp drop in US stocks. US crude stocks as of last Friday totalled 445 million barrels, down 11 million on the week and the smallest since late March. The Dow is down 130 points at midday. Concern over global economic growth remains present, with interest rate cuts in the US and Europe likely in the next 1-2 months.
- US ethanol production through last Friday totalled 305 million gallons. This was down 8 million on the prior week and down 3% from the same week in 2018. Margins are being squeezed. And despite the drop in production, US ethanol stock last week were up another 14 million gallons to 995 million. Ethanol stocks have risen a sizeable 89 million gallons since the latter part of June. Current stock levels are by far record large for July.
- US weekly export sales on Thursday will again be lacklustre. Corn sales are estimated in a range of 12-20 million bu, old and new crop combined. Wheat sales are pegged at 10-15 million bu, with bean sales estimated at 15-20 million.
- Searing heat abates in Western Europe abates by late week as high pressure aloft is pushed south into North Africa. The GFS advertises needed soaking rain across France and Western Germany on the weekend.
- EU corn and rapeseed futures have rallied sharply this week, but our view is that seasonal highs are formed there by early August.
- The midday Central US GFS weather forecast is much wetter than the early morning release. The GFS forecast advertises a more prolonged NW upper air flow. The jet stream Sun-Thurs will flow directly across the Central and Eastern Midwest and will bring decent moisture along with it. IA, IL, IN, OH and KY are forecast to see totals next week upward of 0.75-1.50”. Confidence in forecast details is low as all models have performed poorly in July. However, our view is that periods of wet Midwest weather do lie ahead into mid/late August. The EU model’s afternoon release will be watched closely.
- The bulls and bears are looking for fresh input. Weather-wise, the next 2-4 weeks are critical, and we doubt a lasting trend can be sustained. Severe Midwest dryness is present but regional.