- HEADLINES: Wheat, soyoil lead midday rally; GFS weather forecast trends drier next 10 days; Brazilian corn market at new record high.
- Chicago futures are higher at midday, led by wheat and soyoil. This week’s tour of North Dakota’s spring wheat crop has validated the USDA’s decision in early July to peg national US spring wheat yield roughly 40% below trend, and the trade is well aware that near-identical weather has plagued much of the Canadian Prairies since late spring. EU and Canadian rapeseed/canola futures are today’s laggard amid talk that China is selling reserve rapeseed oil into its domestic market, but there is little doubt that higher spring wheat/canola future lie in the offing as supply rationing begins this autumn.
- The overnight rally in Chicago markets has been extended despite another round of weak weekly export sales. Through the week ending July 22, exporters recorded net cancellations of old crop corn worth 4 million bushels and net old crop soybean cancellations of 3 million bushels. Importers response to lofty prices has been to seek cheaper feed wheat/Argentine corn, while Brazil continues to ship modest tonnages of soybeans.
- Yet, the forward US export outlook is brightening as feed wheat prices continue to rally as exporter milling wheat supplies tighten, and as Sep-Oct Brazilian soybean fob basis reaches new seasonal highs.
- We note that Black Sea wheat futures are up $8 per ton today. Feed wheat follows milling wheat values higher into late 2021 and are projected to reach parity with US Gulf corn offers by late August/early September. The cost of Argentine corn is rising as vessel loads are restricted by historically low river levels and as Brazil reaches for Argentine supply to bridge current supply gaps. Safrinha corn in Parana is only 7% harvested, which is an abnormally low figure. Many questions remain as to final safrinha production in Southern Brazil has been impacted by widespread damaging frost. Like a broken record, Brazil’s interior corn price index is again higher at $8.48 per bushel, a new all-time high despite the ongoing safrinha harvest.
- New crop US corn sales totalled 21 million bushels, a 9-week high. New crop soybean sales were 12 million bushels, a 4-week high. Exporters this morning sold two cargoes of new crop beans to unknown destinations, likely Europe. US wheat sales through the week ending July 22 were an impressive 19 million bushels, vs. 18 million the previous week and included two cargoes sold to China. The USDA’s all-wheat export forecast of 875 million bushels is easily obtainable, despite lofty US premiums to other origins.
- Extreme heat and a lack of precipitation returns to major corn producing regions of Southern and Central Russia over the next 10 days. Ukraine avoids the worst of this heat, but modest net draws in soil moisture persist there. This is important as the world needs record Black Sea corn output following historic yield loss in Brazil.
- The midday GFS weather forecast is drier across the Northern Plains and Great Lakes Region than the overnight release and allows extreme heat to return to the Dakotas, Minnesota and Iowa beginning early next week. Temperatures cool in all areas briefly Aug 1-3, but expansive high pressure ridging resumes its influence on the N American climate thereafter. High temperatures in the 90s/low 100s returns to the N Plains/N Midwest next Tues-Sat. Concern is also growing with respect to widespread lack of meaningful rainfall projected over the next 10 days. Notice that rainfall in excess of 1″ will be rigidly confined to a small region encompassing southern Iowa and Missouri. Concern over soil moisture in August stays elevated.
- Exporter wheat surpluses are in fast retreat, while two-week US forecasts bode poorly for maximising yield potential. A massive N American pattern change is needed no later than mid-August to prevent an acceleration in the addition of weather premium. Continue to use breaks to add to supply coverage.