- HEADLINES: Chicago falls as the EU attempts to route Ukraine grain through their ports; GFS weather forecast drier at midday with cooler temperatures beyond August 3.
- Chicago grain futures are sharply lower at midday with soybeans gaining on both grains. Wheat futures have declined sharply as Russia did not attack Ukraine Grain infrastructure for the second day in a row and traders ponder whether ALL Ukraine grain can be effectively transported through the EU. The EU has offered Ukraine $1.5 billion to rebuild infrastructure that has been damaged (including grains) which started the break. Showers across Chicago added to the selling while support is offered by the searing heat that will impact the Plains and W Midwest today, and the entire Midwest for the remainder of the week. The wide ranges and extreme market volatility has every producer, trader and end user cutting their risk to derivative positions.
- It is hoped that a path can be carved through the EU to allow Ukraine grain exports from Romania, Bulgaria, and even Baltic ports. Although the EU Government argues that ports can export as much as 4.0 million mt of Ukraine grain monthly, European exporters are far less certain, and there is real worry that it will displace normal EU grain trade. The EU Government is said to have legislation pending to pay for the extra logistical cost for Ukraine grain. However, EU exporters are also voicing that the community needs to pay their rising cost of elevation/transit due to the additional Ukraine grain.
- The EU land movement of Ukraine grain is complex and costly. Moving Ukraine corn/wheat through Constanza, Varna or other nearby ports will produce considerable strain on trucks/bridges/rail lines. Ukraine truck drivers will unload their grain at the border with either an EU truck, rail or barge then taking the grain to a marine export terminal. The logistical costs are sizeable, and the EU is not set up to export such large/consistent tonnages.
- And Russian President Putin can bombard Western Ukraine roadways/rail that would further restrict Ukraine grain flow (into Europe) if it was the intent of Russia to halt Ukraine ag flows. Moving grain through the EU is the last (and a costly) alternative. Otherwise, Ukraine agriculture will be facing worsening bankruptcies of farmers, processors, and exporters. Ukraine farmers will not be able to make it through to another growing season.
- Weekly US ethanol production was hefty at 322 million gallons, up 7% from last year and the largest weekly corn grind for any week since October 2021. The US needs to grind 311 million bu of corn per week to reach the WASDE annual target. A few additional weeks like this would cause WASDE to raise their 2022/23 corn ethanol grind by 20-25 million bu. US ethanol stocks rose by just 3 million gallons to 973 million suggesting record large use. US gasoline demand was 8.94 million gallons, down 3% from last year.
- The USDA announced the sale of 272,000 mt of US soybeans to an unknown buyer for 2023/24 and 229,000 mt of soybeans received and to be sold to an unknown buyer. The buyer is assumed to be China as they start their October/November purchase program.
- The midday GFS weather forecast is drier that was offered overnight. The system that currently sits over Lake Michigan will push east today producing scattered showers across MI, IN and OH with rain totals of 0.1-1.00” on coverage of 40%. The period from Thursday into Monday is dry with searing heat in the 90’s/lower 100’s. There may be a few instability afternoon thunder storms on Tuesday, but rain total will be less than 0.25”. The Canadian Prairies are also drier/hot under the GFS forecast with limited rain for key canola, oat, and spring wheat areas for at least another week.
- A secondary surge of Midwest heat develops mid next week with a high-pressure ridge holding across the South-Central US. High temperatures range from the upper 80’s to the lower 100’s. A ridge riding storm is forecast for Aug 3 with 0.1-0.6” of rain favouring the E Midwest. The W Midwest/N Plains is dry into August 6 with considerably cooler temperatures in the 80s/low 90s.
- The EU hopes that Ukraine grain can flow through its ports in the coming months. We suspect the EU flow will be far smaller than was pushed through the Black Sea. The midday GFS forecast is considerably drier with cooler temperatures after August 3 for the Midwest. The amount of US crop in drought will be expanding. US soy crush and corn grind margins are profitable. The chase is on for remaining old crop beans.