- Chicago grains bounce into the green; US export inspections well above pace needed to reach WASDE; GFS weather forecast warmer/drier after August 2.
- Midday grain futures are mixed following sharply lower trade in soybeans and soy product prices on the morning reopening. The liquidation of August futures was featured with soybeans, soyoil and wheat futures dragged to new contract lows. Wheat and back end soyoil futures bounced and are trading in the green at midday. End user pricing in the back end of soyoil and rising Russian wheat fob prices provided the support. We would note that corn did not post a new contract low when soybeans were down over 40 cents. The strength in corn was surprising. The midday volume of trade is contracting as August soy liquidation slows. August soybean futures volume of 26,430 contacts suggests that the Friday/early Monday liquidation phase is nearing an end. A Tuesday turnaround is forecast following the market lashing of the past two sessions.
- Chicago brokers estimate that the managed money sold a net 2,600 contracts of corn and 8,900 contracts of soybeans, while buying a net 4,200 contracts of wheat. In the soy products, funds have sold 3,200 contracts of soymeal and 2,100 contracts of soyoil. Managed money is estimated to have returned to holding a record net short corn/soybean position that will be vulnerable with any bullish fundamental spark.
- The US did not announce any daily sales of corn, soybeans, wheat, or soy products. The lack of US soybean sales to China or an unknown buyer has placed futures in a bearish demand position.
- However, we understand that China purchased 3-4 cargoes of Argentine soybeans for September and is asking for US offers for October/November out of the Gulf. Argentina dropped its export tax on meats on the weekend and rumours have the Government looking to drop the tax by 10% in soybeans/soy products to appease farmers by mid-August. The 10% tax break would be for a short period of time to push farmers to sell stored soybeans.
- Russian/Ukraine fob wheat prices are rising on the concern for spring wheat production amid a weather forecast that calls for another two weeks of cool/wet weather. And winter wheat in the Volga Valley is said to be sprouting in the head due to the cool/wet weather. Spring wheat comprises 30-35% of the Russian wheat crop in 2024 and strong yields are needed of hi protein wheat. Pay close attention to Central Russian weather prior to harvest in the next 2-3 weeks.
- The French wheat harvest is stalled by cool/wet weather that started Friday. Yields are below producer expectations with test weights not reaching milling wheat thresholds. Remember that France needs 3.5 million mt and other EU members need 10 million mt for domestic milling needs which would take the French out of the world wheat export market in 2024/25. France exported 10 million mt of milling wheat last year. The key question is which world exporters will replace the French.
- The Central US GFS midday weather forecast is drier/warmer vs the overnight forecast. The forecast shows big heat for the Central US which includes the Midwest. High temperatures are forecast to reach the 90’s to lower 100’s. Scattered showers will dot the E Midwest for the next few days before a hot/dry pattern starts on Friday and lasts into August 8. The extended range 11-15 forecast drags the jet stream southward allowing cooler Central US temperatures and widely scattered showers. Our confidence in any extended range forecast is low due to tropical waves that may or may not develop across the Gulf of Mexico. Our current forecast lean is that August will be a warm/dry month for the Plains and the W Midwest.
- Grain futures are trying to bounce. NASS has confirmed that it will update wheat, corn and soybean planted acre estimates in their August report based on the FSA Farm program participation data that was submitted in mid-July. US census exports for corn are 220 million bu with soybeans 72 million bu above Monday’s FGIS totals. This places 2023/24 US corn exports at 2,057 million bu with soybeans at 1,643 million bu. WASDE annual 2023/24 US corn/soybean export targets appear to be too low with seven weeks remaining in the crop year. Low prices are curing low prices!