• HEADLINES: Chicago recovers, DOW up 600 points, GFS weather forecast trends much warmer in early July.

• Chicago ag markets are steady to higher at midday, with row crops leading the recovery as US climate outlooks turn more threatening. A welcomed cooler temperature profile lies in the offing this weekend/next week, but net soil moisture loss will be ongoing in all but the Upper Midwest. The return of widespread heat is probable beginning in early July and crop stress will be mounting if current 30-day outlooks verify. The addition premium in July does not require devastating weather, but rather yield loss of just 3-4% relative to trend pulls US corn and soy stocks in 2022/23 to pipeline minimum levels. It is the combination of tight old crop stocks and less than ideal conditions.

• Weekly US export data leans positive. Through the week ending June 16, exporters sold a net 26 million bu of corn, vs. 6 million the previous week, 18 million bu of wheat, vs. 9 million the previous week, and 1 million bu of soybeans, vs. 12 million the previous week. We note that corn export sales must average only 4 million bu/week through the balance of summer to meet the USDA’s 2,450 million bu annual target. Wheat sales must average only 12 million bu. US soy demand last week was weak, but already cumulative soy export commitments of 2,213 million bu support a 25-30 million bu revision to USDA’s old crop forecast.

• Exporters also sold another 10 million bu of soybeans for new crop delivery, with total 2022/23 soy export commitments a record large 491 million bu, vs. 277 million a year ago in mid-June. New crop soy sales already account for a sizeable 22% of the USDA’s forecast. We reiterate that the entirety of global soybean import demand in the Oct-Jan period will be funnelled to the US as supplies become exhausted in S America.

• Macro markets are firm as the Dow rallies 600 points and spot WTI crude rises $2.30/barrel. Energy markets have shed risk premium along with grains, but crude has held major chart-based support, and it is just difficult to be bearish of global energy markets. The US’s planned gasoline tax hiatus will work to increase petroleum consumption at a time when stocks are drawn down rapidly seasonally. In turn, it is tough to be bearish of corn and vegoil markets without a lasting collapse in energy prices. EIA data is delayed due to technical issues, but we fully expect a further tightening of US crude and motor gasoline stocks.

• Extreme heat will be anchored across Central and Eastern Europe, including Western Ukraine, into July 5. On the margin, this will trim EU corn yield potential further as Hungary, Serbia, and Romania account for 30% of total European corn output. Overall, weather patterns are far less than ideal in the US, Europe and Argentina in a year that record crop production is needed to ease food inflation.

• The midday GFS weather forecast is much warmer in the 10–15-day period, which aligns with recently released long-range climate outlooks. Max temperatures in the 90s/low 100s will again be spread across the Plains, Delta, and Southern Midwest. Another few model releases are needed to boost confidence in the arrival of this hot pattern, but we note that there is broad consistency among the models that heat/dryness will be featured in early and mid-July.

• Otherwise, regional/scattered showers will impact the ND/MN/WI this weekend. Light showers are possible in the E Midwest in the 6-10 day period, though accumulation will be capped at 0.10-0.25”. Rapid soil moisture loss will be ongoing.

• Markets recently have been a function of uncertainty in the Black Sea, recessionary fears, and weather. Volatility stays elevated indefinitely, but most important in the long run is whether US/N Hemisphere production is allowed to match global demand needs. Once again Sunday night weather will be critical. Our weather concerns remain high. Cash sales are on hold until there is clarity over mid/late July growing conditions.

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