- Chicago soybean markets were lower overnight and liquidation continued through the day. Fundamental news flow leaned supportive on fresh export demand, though the markets followed the rest of the financial markets lower. Market focus next week will be on the USDA reports, with initial support noted at the 50-day moving average, near $10.60. US old crop soybean demand remains solid.
- Corn fell, as expected, following Britain’s vote to exit the EU. Some buying was noted towards the close, but US weather and falling non-US grain prices still lean bearish. Unlike a week ago, US forecasts into the first week of July look rather cool/wet, and though crop conditions are likely to fall modestly on Monday, improvement is expected thereafter. Above trend potential remains intact. Recall that weather in July is vastly more important than conditions in June, and the market will continue to ebb and flow on daily weather model releases. Yield models will maintain elevated potential (168-170) through the weeks ahead, should the forecast verify, but the point is that, despite the recent break, volatility will continue over the next 2-3 weeks. Temperatures will be key. Longer term research continues to centre on demand. Even at $3.85/bu, basis spot, US corn is still expensive relative to global feed/milling wheat, as well as Argentine corn, which should continue to fall as harvest expands in July. Gulf corn is one of the more expensive grains in the world currently and weather based rallies will only further ration export demand. Additional downside risk exists without adverse weather.
- Britain’s surprise decision to exit the Euro Zone rallied the US$ (and weighed on other currencies), but also the market continues to struggle in the face of expanding harvest and rising world production estimates. There are lots of unknowns surrounding the consequences of Brexit, but key is that US$ will likely remain supported. At current prices, Russian exporter revenue is up 11% on last year; US exporter revenue is down 10%. The US can not compete nor is there any incentive for US exporters to become more aggressive. Russian domestic prices also fell sharply this week as harvest in S Russia begins. Test weights have been lower than desired, but yields have been impressive, much like across the US Plains. Quantity remains bearish, but how major milling wheat importers work out quality is less certain, although we would remind that the N Hemisphere harvest is still in its early stages. The market is nearing initial downside targets Rallies will likely to continue to struggle amid favourable Canadian weather, projected weakness in EU/Black Sea currencies, and as exporters become more aggressive when major importer demand finally surfaces.
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