- HEADLINES: Central US weather warmer/drier into August 8; China buys Brazilian Aug/Sept soybeans; Chicago close is key today.
- Chicago higher on threatening Central US/European weather; Market stalls as it worries about Wednesday’s Central US bank rate hike. Midday GFS weather forecast hotter/drier
- Chicago values are sharply higher at midday following a push above $6.00 in December corn futures and $8.00 in September wheat. Soybean futures followed with August soymeal gaining another $12/ton on the cash premiums paid. Indiana and Ohio crushers are offering spot soymeal at +$60-70.00 over while the Volga Valley crush plant in South Dakota is +$20 over. Even the Iowa rail is offering meal at $45-50 over August which makes August soymeal futures and August soybeans appear to be cheap. August soybean futures have pushed back above $15.00 with first notice day on Friday. The August/December soymeal spread is trading at a strong premium of $54.00.
- Profit taking was noted on the early Chicago rally with traders betting that open chart gaps could be filled in coming days. The fall in US crop condition ratings sparked a gap opening overnight which makes today’s close important. A close in the upper end of the price range would prove bullish, while a lower closer would argue for additional sideways trade. Chicago futures have had a history of higher Monday trade with values then sliding into Friday. A break in this recent price pattern would argue that seasonal lows are being formed.
- Chicago brokers report that funds have bought 5,100 contracts of wheat, 8,900 contracts of corn, and 6,400 contracts of soybeans. In soy products, funds have bought 4,300 contracts of soymeal and 1,100 contracts of soyoil.
- The Ukraine is preparing to allow stranded vessels to start dodging ocean mines in a corridor out of its war zone late this week. It is estimated that some 22-24 vessels are stranded in the 3 ports that will produce the Ukraine export corridor. The quality of the grain on these vessels is said to poor following months of demurrage. It will take at least a week before all these stranded vessels can leave Ukraine waters. Loading grain on incoming vessels will be a challenge. Export facility owners do not want to place their people in harm’s way while vessel owners stay clear of the area for the same rationale. However, ADM’s CEO indicated that he was optimistic on the Ukraine grain export corridor. Time will tell, but the size of the ships will be down with few wanting to make the trek into the Black Sea
- US sorghum yield/supplies will be cut substantially this year amid the Plains drought. The US planted 6.3 million acres of sorghum in 2022 with harvested acres estimated at 5.4 million. This means that each bu of yield loss amounts to 5.4 million bu. Crop scouts estimate the US sorghum yield closer to 56 bushels/acre or a crop cut of 71 million bu. The production loss may not seem like much, but amid the area’s corn shortage, cash basis bids for grain will stay stout.
- China booked 2-3 cargoes of Brazilian soybeans for August-September. China continues to seek Brazilian soybeans when they can. Basis levels for both corn and soybeans are rising in Brazil on strong demand. EU demand for Brazilian corn is active.
- The midday GFS weather forecast offers limited rain for the N Plains and the NW Midwest over the next 12 days. IA, MN, NE, and the Dakotas hold in an arid trend with warming temperatures following the weekend. Highs will return to the 90’s to lower 100’s which will push crop maturity. A high-pressure ridge is forecast to build northward beyond the weekend and set up residence in the E Midwest. This ridge fans dryness and extreme heat for the Plains/W Midwest with highs projected from the mid 90’s to the lower 100’s. The mean ridge position is further east, across the Midwest. The cooler waters off the SW Canadian coastline could maintain this Ridge position. Our concern for Central US corn, soybean and sorghum crops is rising amid the midday run that was warmer/drier.
- Sliding stock/energy markets tugged Chicago values off their early morning highs. However, the Central US weather threat is too great for any widespread selling. August Central US/European weather will direct Chicago valuations. Cash market basis strength tells you that futures have discounted/digested a considerable amount of bearish economic news. Stay bullish, each new weather model run looks more concerning. Iowa/Minnesota/Nebraska weather during August is key.