• Chicago sharply lower on sizeable managed money selling on momentum; Midday GFS weather forecast drier and much warmer than overnight run; Extreme heat ahead for the Plains.

• Chicago futures are sharply lower at midday trade with soybeans, corn and wheat futures in the red. September Chicago wheat futures are back to testing prior contract lows at $5.25 while corn/soybeans are giving back Thursday’s gain. The midday volume has subsided as long liquidation has as prices fell. Chicago has been myopic in following each new daily forecast and today’s GFS forecast solution was cooler beyond August 8. Expect Chicago values to be back and forth on each new weather forecast which is difficult for fund managers. The early week buyers on the unwind of the Trump Trade and the warmer/drier Central US weather forecast are this morning’s sellers.

• The grains have the best fundamentals and cash market strength to withstand Chicago selling pressure. Paris wheat futures are down despite falling crop production and crop quality concern. We have been highlighting the lack of quality milling wheat across France since late last week. The discount of FOB US Gulf wheat to French offers has reached $24/mt at midday. The French/German wheat markets must assure that their hi pro milling wheat stays within country. This is why the spread between French/US gulf and French/ Russian offers are widening. French fob wheat at $245/mt is $24-25/mt above spot Russian fob offers, future EU wheat sales will be modest.

• Chicago brokers report that managed money sold 4,100 contracts of wheat, 8,200 contracts of corn, and 8,900 contracts of soybeans. In the product’s, managed money has sold 4,200 contracts of soyoil and 3,900 contracts of soymeal.

• The US did not announce any daily sale of corn, soybeans, wheat, or soy products.

• EIA will update its Monthly Biofuel Capacity and Feedstocks report on Wednesday. The report is expected to show increased usage of soyoil due to cash prices competitive with other vegoils and even imported used cooking oil. Recent EIA monthly data has sparked rallies in Chicago soyoil values in the days following the report’s release.

• The US Central Bank’s measure of inflation rose modestly during June at0 .2%. On a 3-month annualised basis, core inflation cooled to 2.3%. This inflation rate offers the US Central Bank runway to start cutting its lending rate in September as the US labour market has become balanced. The US dollar dipped on the news as treasury yields declined. A weakening of the US dollar is forecast with the key ag currency, the Brazilian Real, trading at 5.65:1 USD at midday.

• Chicago values have taken out a considerable amount of weather premium on today’s sharp price fall. The risk heading into the weekend is that the forecast holds onto a hot/dry pattern and that the Atlantic tropical storm activity has just made the forecast beyond the next 10 days less reliable. Should the Midwest forecast turn cooler/wetter beyond August 6, Chicago will be slightly lower on Sunday. However, if the forecast stays hot/dry, the calls will be sharply higher. Please be aware of the opening week trade risk.

• The Central US GFS Weather Forecast at midday is drier/warmer vs the overnight forecast. Limited rain is forecast to fall across the US Plains, Canadian Prairies, and most of the W Midwest into August 6. Any heavier rainfall totals greater than 1.50” has been shifted east to E IN/S OH.  An amplified high-pressure ridge builds across the southern half of the US and retrogrades west and north to the Intermountain West and the W US Plains. This creates a NW upper flow through the Lake States where seasonal 80’s will prevail. However, the Plains, Delta, and the W Midwest hold in a warm to hot pattern with highs ranging from the upper 80’s to the lower 100’s. Kansas will be the hottest with readings in the 100’s.

• Today’s Chicago break seems overdone and a bounce into the close, amid the weekend weather uncertainty, is expected. The market risk is to the upside as traders argue that the weakest shorts have covered. Cash soymeal premiums are rising while Ukraine corn offers are scant. China is back asking for US soybean offers for October. The Central US weather forecast is key, and the warmer/drier midday run is like the EU model. The Chicago break sees extreme vs Central US weather.

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