- HEADLINES: No US wheat offered to GASC; Midday GFS weather forecast slightly wetter across the W Midwest; US gasoline demand stays strong.
- Chicago futures are mixed at midday with soybean futures higher, corn lower while wheat trades either side of unchanged. The surprise has been the strength of July futures relative to the remainder of the board.
- We have commented previously about strong US cash markets and the impact on spot Chicago futures. The July/December corn spread has pushed out to a $1.15 premium as cash corn holds firm above $8.00 while cash soybeans hold near $17.00 with the July/November spread pushing out to $2.05 premium.
- The heady July spreads are informing the US grain industry on how tight old crop stocks really are or suggesting that the minimum supplies of US corn/ soybeans that are needed are larger than what was discussed a few years ago. Rising transportation costs and logistical snarls suggests that US corn end stocks of 1,300-1,400 million bu produces $8.00 cash corn during the crop year. And record low world exporter stock/use ratios adds to the bull thesis. The above will have a significant impact on new crop prices and how futures drop at harvest. We doubt that Dec corn can fall too far below $6.00/bu, even with favourable weather during July. November beans should hold $13.50.
- Chicago brokers estimate that funds have bought 4,100 contracts of soybeans while selling 7,500 contracts of corn and 3,100 contracts of wheat. The products have featured buying of 1,900 contracts of soyoil and 2,900 contracts of soymeal. July soymeal futures are back to within $17.00 of their contract highs that were set back in March. Cash meal in the E Midwest stays strong on demand. Feeding demand for soymeal is incredibly good.
- US wheat was not offered to Egypt’s GASC for what some suggest as a difficulty in meeting a protein spec at 11% for SRW or as others hint at, a desire of US wheat exporters to hold their stores and hedge them in forward futures to lock down a return on storage. Sometimes using the board to lock down margin beats selling wheat that you will never get back. On paper it worked for the US to sell wheat to Egypt, but it takes willing sellers for 11% SRW new crop wheat.
- GASC did receive offers for 15 exporters for shipment from mid-August into late October. The cheapest offer on a landed (CIF) basis was for Romanian wheat at $430/mt while there were Russian export offers from Cargill, Aston, GTCS, and Viterra. The Russian offers were for nearby August or September with few wanting to go forward into October. The trade awaits the decision of GASC and tonnages that they will commit to. A large purchase remains possible.
- EIA reported that for the week ending June 24 the US produced 309 million gallons of ethanol, down 1 million from the week prior, but above the 307 million gallons to achieve the annual 2022/23 USDA forecast. US ethanol stocks fell to their lowest level of 2022, while US consumers bumped up their use of gasoline. There is no indication that US consumers are cutting gasoline use too hard relative to record high gasoline prices.
- The midday GFS weather forecast has added rain to the Central and Western Midwest. Rainfall totals of 0.25-1.50” will aid crops in the Northern Plains and the Upper Midwest, while the SE US and Delta enjoys some rain from fast moving storm systems. The Bermuda High Pressure Ridge builds across the Eastern US and holds across the E Midwest/Delta by mid-July. A much warmer and drier weather pattern is likely beyond July 7, which will cause the corn market to add price risk for pollination.
- The NASS Crop Report looms tomorrow. Traders are betting that US corn acres will rise 1 million with soybean acres falling 1.5 million. We look for combined US corn/soybean acres to fall at least 2 million acres. Wheat is forming a seasonal low while Midwest July weather looks to be threatening.. We doubt that December corn can sustain much a decline below $6.00 at harvest. The past 2 years have shown that cash corn prices rise above $8.00 with US corn end stocks at 1.350-1,450 million bu. 2022/23 end stocks are forecast by WASDE at 1,400 million bu assuming US corn yields are record large at 177 bushels/acre.