- Markets are mixed at midday, with corn and beans steady and with KC wheat posting new lows for the move. Harvest will continue to roll along smoothly into the middle part of July. Quality is excellent, offering relief to millers following a string of sub-par quality crops in recent years. Egypt bought two cargoes of wheat from Russia for mid-August arrival. This was expected. Egypt paid $202/mt, basis fob, which is more or less in line with cash offers quoted Monday evening. This still seems cheap relative to Black Sea dryness, and also as Russian wheat holds a $12-30/mt discount to all other origins, there just doesn’t seem to be a need for such aggressive offers. Sources suggest that Russian wheat will be priced to move at/just after harvest (no surprise there), but Russia’s grain balance sheet continues to tighten. Either the market rallies in mid/late summer, or Russia’s exportable wheat surplus will be exhausted by late year. Very early harvest wheat harvest results in Russia feature low test weights, not a surprise. Better yield info will be available in the next ten days or so. Note that Russia’s primary Ag Belt will stay arid over the next two weeks.
- Macro markets are in full Turnaround Tuesday mode following trade czar Navarro’s comments this morning regarding Chinese investment in US companies. The DOW is up 70 points. Crude has screamed to gains of $2.20/barrel, with spot WTI again slightly above $70. RBOB gasoline and ethanol have followed. Questions remain as to the full extent of OPEC’s production hike, and whether spare production capacity will be adequate moving forward. Wednesday’s EIA report is expected to feature another draw in US crude stocks. South Korea and Canada have resolved a dispute over potential GMO wheat found in a cargo of recently purchased supply. A temporary ban placed on Canadian origin wheat last week has been lifted. The Australian weather forecast is a bit drier than previous runs. Some soil moisture improvement still lies ahead for the driest areas of New South Wales and Queensland, but now this looks to be just an interruption in an otherwise long term dry trend. El Niño is forecast to arrive by Aug/Sep. This historically bodes poorly for rainfall in Australia during wheat’s critical growth stages. Of course, the arrival of El Niño will substantially lower the odds of another Argentine drought in the following months. Other news is lacking. Above-trend yield potential is being digested, while we mention at least temporary heat and dryness lies in the offing.
- The central US midday GFS weather forecast is mixed, and confidence beyond 7-10 days remains low. Scattered showers will dot the Midwest into the weekend. Potentially heavy totals are offered to central IA. MN and WI. The GFS is more intense with high pressure ridging next week, with upper level high pressure to dominate the whole of the Central US throughout the 6-11 day period. High temperatures in the low 100s will be a bit more widespread across the Plains. The heart of the Corn Belt will be largely spared from oppressive heat. The GFS forecast then quickly moves high pressure south and west, allowing for normal conditions to return beyond July 11. If realised, this is positive for yields. This afternoon’s EU model is awaited for confirmation.
- It is tough to find any major issue with US weather, should next week’s heat eases by mid-July. We do note that domestic margins (crush, ethanol, biodiesel) have surged on this break. We maintain that there is solid potential for US exports in 2018/19 if trade barriers can be prevented.