- Mixed in a reversal of Tuesday’s price action are Chicago values at midday. Soy/wheat values are weaker while corn bounces on better than excepted US weekly ethanol production. Trade volume is modest as traders do not want to expand their market risk heading into the weekend and next week’s USDA June Stocks/Seeding Crop Report. And firm old crop corn basis bids are underpinning July corn futures. Farmers report that they want another rain before they start parting with stored old corn/soybean stocks. The US farmer has been a slow seller of old crop grain not liking the price amid a spate of June dryness. Should Mother Nature produce another few good rains, US farmers will start the process of sweeping out their bins for the new crop. The calendar is against storing old crop grain beyond the July 4 weekend.
- We doubt that corn, soybeans or wheat can sustain much of a rally amid favourable Central US weather. The long-range Midwest forecast is less certain, but the recent rains and mild temperatures this week will improve growing and crop conditions. A mixed Chicago close is expected with US wheat futures trying to forge seasonal lows while corn confirms seasonal highs.
- Black Sea July/August wheat/barley prices are struggling to decline as shorts are trying to cover or roll forward their July sales. July/August Russian wheat is bid at $205/mt and offered at $207/mt. The Ukraine/Russian winter wheat harvest is just starting, but with the domestic market well above export offers, exporters short wheat for July shipment are going to have to raise bids to secure new crop supply. Russia/Ukraine and Romania are starting the new crop year with exceptionally low carry-in wheat stocks, which will make the transition to new crop difficult. Advice would be don’t be short Russian July wheat!
- The daily Kansas Wheat Harvest report for day 7 indicated a disappointing yield trend for W Kansas. The yield trend is declining as the harvest works north and west. We would trim our Kansas wheat yield by 1-2 bushels/acre accordingly.
- The EIA’s weekly ethanol report was positive which rallied Chicago corn futures following its release. The ethanol data confirmed weekly production of 263 million gallons, which is still below the USDA’s forecast of 295 million gallons needed to reach the WASDE forecast of 4,900 million bu. Research argues that WASDE will reduce its 2019/20 ethanol production forecast by another 50-100 million bu in July. A US 2019/20 ethanol grind of 4,750-4,815 million bu appears right.
- A progressive weather pattern will be maintained across North America. Systems in a strong westerly flowing jet stream will produce showers/storms every 3-4 days. Rain totals from each system are forecast in a range of 0.35-1.25″. The next rain chance occurs from Friday into the weekend with a second chance mid next week and third during the July 4 weekend. The 11-15 day forecast calls a tropical storm system to make landfall around Panama City, FL and push northward into the Ohio Valley. This system would produce heavy rains of 1.50-5.50″ from the FL Panhandle north to northeast into Tennessee/Kentucky and Indiana/Ohio. Our confidence in this Tropical system is low but would grow if its forecast is consistent.
- Central US weather remains the key fundamental impacting corn, soy and wheat prices. The forecast is favourable and US crop sizes are growing. The US looks to harvest a corn crop that will be 2 billion bu more than last year, likely a record. It is the huge size of the US corn crop which will cap rallies in soy/wheat. China is not showing today as a large buyer of US ag goods today which leaves Chicago values in liquidation into the close.