- HEADLINES: Chicago bounces on rain shift south and west on midday GFS forecast and talk of interest from China for Jan-March soybeans; US crop conditions decline?
- Chicago futures are mixed at midday with consumer demand noted on the early break which has steadied values heading into the noon hour. China’s big meal trade overnight (600,000 mt) and their resulting purchase of US soybean futures (January/March) along with cash talk that China has new interest in US corn on weakness has underpinned Chicago.
- Traders also understand that it is only late July and there is an entire month of important US weather ahead with ENSO readings indicating that La Niña is coming on fast. Last year, La Niña slowed the early soy seeding campaign in Brazil which resulted in their winter corn supply woes. Brazilian interior corn prices rose to record highs this morning at 100+ Reals/bag which is occurring even with massive imports. Brazil will be lucky if it exports more than 20 million mt of corn in their local crop year, substantially below the USDA estimate.
- The Central US weather risk and the arrival of demand is enough to produce a sideways Chicago as US corn/soybean yields are assessed. Traders correctly assume that big US crops are being made in the E Midwest, the unknown is the W Midwest/Plains yields and how far off trend could be they be. For now, it is a balancing act, but we anticipate that demand led bull markets are ahead as world grain demand is pushed to the US.
- Chicago brokers estimate that funds have been buyers of a net 1,500 contracts of corn and 2,500-3,200 contracts of soybeans, while selling 1,800-2,500 contracts of wheat. Funds have sellers of 2-2,500 contracts of meal while buying 2,400 contracts of soyoil. The volume on the break and the rally has been nothing to write home about. The summer doldrums are underway unless there is a big shift in the Central US weather pattern to lasting heat/dryness.
- US export inspections for the week ending July 22 were 40.8 million bu of corn, 8.9 million bu of soybeans, and 17.6 million bu of wheat. All were close to expectations, but the corn total came in below weekly vessel counts. This likely will produce an upward revision next Monday. Last week’s US corn exports were revised up 3 million to 42.4 million bu. China was the biggest destination for US corn of 489,000 million mt which is keeping up with their weekly averages.
- We understand that Brazil’s strong demand for Argentine corn in taking at least 1 million mt last week. Argentina is down to where its remaining unsold corn is just 2.0 million mt with additional Brazilian demand noted this morning. We estimate that Brazil will import 3.0 million mt of world corn in 2021/22 with potentially 500,000 mt coming from the US. Exportable corn commitments are getting whittled down in Argentina which should soon shift demand back to the US. Canada due to its acute drought is also seeking US corn for October/November. World feed demand heading into 2022 will be strong.
- The midday weather model is substantially drier across Iowa/Illinois/Indiana and Ohio than what was offered overnight. The midday GFS forecast has pushed any heavier rain south and west into Kansas. The model has extracted 1-2.50″ of rain for the heart of the Midwest which along with the coming 5-6 days of heat will drop soil moisture.
- Highs in the 90s to low 100′s will be commonplace this week with moderation on the weekend and next week. The E Midwest never gets into the extreme heat with highs in the 80′s to the lower 90′s. The extended range 10–15-day period offers a high-pressure ridge across the South-Central US with heat returning to the N Plains and the E Midwest. US crop condition ratings should decline for the next few weeks.
- The market is hearing some fresh interest on the demand side which has caused a pause in the weather-related selling of recent days. We look for more of a two-sided trade into early August unless the forecast maintains dryness across the N Plains, Minnesota, and Iowa. Longer term, we see the return of a demand led bull market much like last year amid the crop losses in Brazil, Canada, and the EU. Don’t chase rallies or sell sharp breaks would be our best advice.