- Chicago markets are mostly higher in diminished volume. The morning Chicago rally effort has lacked heart, but few want to sell the market ahead of the NASS Weekly Crop Progress/Condition Report due out later today.
- Traders are adjusting their risk profile lower ahead of the political and report shocks that are due later this week (Trump/Xi meeting and USDA Stocks/Seeding Report). The 4th of July holiday is seasonally important for corn pollination, but due to historically slow 2019 US seeding progress, that “importance” will be pushed back by 3-4 weeks. The big weekend for US corn pollination is now late July and early August.
- This is how we see Chicago: Amid Central US weather forecasts that are more favourable, there is no reason for a big rally with crop uncertainty underpinning breaks. The rationing of demand via a smaller crop can either happen as an acute price spike or at a less high price over a long period of time. Our considered opinion is that due to the loss of 2-2.5 billion bu of US corn production in 2019; rationing is a process, not an event.
- Chicago traders estimate that funds have bought 2,400 contracts of wheat, 3,200 contracts of corn, and 2,800 contracts of soybeans. In soy products, funds have bought 1,200 contracts of soymeal while being flat in soyoil.
- US export inspections for the week ending June 20 were; 24.3 million bu of corn, 25.0 million bu of soybeans, and 14.9 million bu of wheat. US corn exports were less than expected, while wheat/soybeans were in line with trade expectations.
- For their respective crop years to date, the US has exported 1,632 million bu of corn (down 109 million or 6.2%) 1,335 million bu of soybeans (down 459 million or 26.5%), and wheat at 45.0 million bu (up 2.5 million or 6%). We look for US 2018/19 US soybean exports to decline by another 25-50 million bu and corn by another 100-150 million bu by the end of August. It is too early to make any comment on US wheat export prospects in 2019/20 depending on world crop production.
- Extreme heat for portions of the EU is causing concern for winter and summer grain crops. Although French and S German wheat is starting to change colour as it pushes to maturity. The heat will increase crop quality, but it could modestly trim production. At this time we doubt that the heat will have a sizeable impact on 2019 EU wheat production with their crop so advanced in maturity.
- SW Russian wheat will finally enjoy cooler temperatures/rain with a pattern change to occur this weekend. Most see the pattern change as keeping Russian all wheat production in a range of 78-80.0 million mt for 2019/20.
- The midday GFS weather forecast is little changed from the overnight run with a more normal summer weather pattern ahead. A ridge of high pressure will push northward later this week which produces near to above normal temperatures and near to below normal rainfall.
- The sunshine/warmer temperatures will be welcomed by crops. The drier forecast will accelerate winter wheat harvest in the Plains and help corn/soybean crops mend from their waterlogged spring. The best weather for Central US crops going forward is abundant sunshine, slightly warmer than normal temperatures and soft regular rains. We would note that the old cold/wet weather pattern does NOT look to return into the middle of July.
- Once the news of the week in terms of US/China trade and NASS Stocks/Seeding is released, it all comes down to Central US weather for the next 4-6 weeks. With the Central US weather looking improved and more normal for mid-summer, it will be difficult to sustain a Chicago rally. How does one become comfortable buying Dec corn at $4.60-4.70 without a new weather fear. Our advice is to pay very close attention to summer Central US weather.