- Chicago mixed at midday with corn/wheat firmer amid hot/dry weather for the Plains/NW Midwest; Soybeans sag awaiting China demand; Ethanol grind strong.
- Chicago grain futures are mixed at midday with corn/wheat being the upside leaders while soybeans trade either side of unchanged. Soybeans have rallied over $0.50/bu off the lows on a partial unwind of the Trump Trade as President Biden dropped out of the 2024 race, and the election seems less clear on the November victor. As the Trump trade unwind faded, traders looked to Central US weather and its potential impact on US summer row crop yield. Chicago will add or subtract premium to price depending on the weather forecast. This week Chicago has been adding premium due to a forecast of excessive heat and dryness for the Plains and the W Midwest.
- It is the duration of Central US heat/dryness that will be the most important feature for price on a day-to-day basis. US corn and soybean yield potential is record or near record today, but it all depends on the August Central US weather pattern. July featured the remains of hurricane Beryl that soaked MO, IL and IN that has caused each state’s crop condition ratings to rise. We are focused on the Dakotas and the Plains amid the dry weather trends of recent weeks, and an arid forecast for this region. We note that the overnight models have been the driest while the midday GFS forecast adds rain and is cooler.
- Chicago brokers estimate that the managed money has purchased 3,400 contracts of wheat, 5,400 contracts of corn, and 4,200 contracts of soybeans. Managed money has purchased 5,700 contracts of soymeal while selling 4,200 contracts of soyoil.
- The USDA did not announce any new sales of US corn, soybeans, or wheat today. There are rumours that China is back asking for offers of US late September and October soybeans out of the Gulf. We cannot confirm a trade, but we suspect that if Chicago prices pull back, some new Chinese demand for US soybeans could be filled. We look for China to become a much more active US soybean buyer during late July and August.
- The US consumed 322 million bu of corn last week in the production of ethanol. The total was down 3 million bu from the prior week, but well above of the weekly average needed to achieve the USDA annual forecast of 5,450 million bu. We would argue that WASDE will raise its US corn 2023/24 ethanol grind forecast by 25 million bu by the final count. US grind margins are positive and the seasonal decline in ethanol production should be less than prior years.
- The Central US GFS weather forecast at midday is slightly cooler and wetter than the overnight forecast across the W Midwest. Limited rain is forecast to fall across the US Plains, Canadian Prairies, and most of the W Midwest into August 5. 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 widely scattered showers for the E Midwest. The GFS forecast projects amplified high pressure ridging across the Western third of the US in the 10–15-day period with high temperatures in the 90s/100s. The GFS midday forecast is further west in the mean position of the ridge compared to the EU or Canadian models. Our forecast lean is to the EU model based on its consistency.
- Maybe it is too simple, but Chicago ownership features a record managed money corn/soybean short with a Central US weather forecast calling for heat/dryness across the Plains/W Midwest next week. And the August USDA crop report is dead ahead which includes an FSA update on program and prevent plant acres. The shorts are nervous about Central US weather with Chicago grain values at 3-year lows. Only a little spark is needed to ignite a rally. The price risks are to the upside on Central US weather.