- HEADLINES: Chicago soy leads recovery amid return of Chinese buying; GFS stays hot in Plains.
- China buying US soybeans for September confirming that US/China Ag trade is unaffected by Pelosi Taiwanese visit. US soybeans are now the cheapest in the world into mid-January which will gather world soybean demand. China’s big cash short is not in soybeans, but grains. Chicago bumps higher on the news.
- Chicago futures are higher at midday with soybeans/soymeal the upside leader on reports of fresh Chinese demand for US soybeans from the US Gulf for September. November soybean futures have recovered to $14.00 while December corn rising back above $6.00. Chicago wheat has held recent lows with a close above $8.50 spot futures confirming a seasonal low.
- There is limited selling above the market. And when a key importer secures US soybeans, Chicago reacts with vigour. We doubt that China is finished securing US September/October soybeans assuming that House Speaker Pelosi does not return to Washington and take a big media victory lap in the face of the Chinese. We see China returning as a more reliable buyer of US soybeans in the weeks ahead. This will help confirm seasonal lows. Much of the bearish news is worked into Chicago values, the risk starting to turn to the upside amid the USDA report and return of fund managers back into long grain positions.
- Chicago brokers estimate that funds have bought 2,200 contracts of wheat, 5,100 contacts of corn, and 4,500 contracts of soybeans. In the products, funds have sold 3,5000 contracts of soymeal while buying 4,900 contracts of soymeal.
- Cash premiums for old crop corn, soybeans and soymeal are record highs and we expect that they will stay strong. We advise against being short of September corn/soy futures which we see as “high risk” on active late summer demand. Delayed crops in the Delta and the S Midwest will not quickly refill the depleted cash pipeline until sometime in October, when the harvest gains speed across the C Midwest. We all need to remember that it will take a considerable amount of time for depleted US cash pipeline to be refilled.
- US Weekly Export sales for the week ending July 28 were 9.2 million bu of wheat, 12.4 million bu of corn (old/new combined), and 14.8 million bu of soybeans (old/new). The US sales pace is unexciting but based on the pace that Brazil is selling corn and with US soybeans now the cheapest from mid-September onward, this will be changing in the weeks just ahead.
- Wheat protein bids are on fire in the EU with the Russian wheat crop being a substantially lower protein level than initial expectations. Cash bids for French wheat are €30 €uro/mt above Paris wheat futures. The EU continues to actively sell wheat which was evident in this week’s Algerian tender. We note that world exporters are having trouble replacing prior wheat sales with EU and Russian farmers slowing their cash sales amid bullish expectations.
- The midday GFS weather forecast provides a brief hiatus from extreme heat across the Plains Sun-Tues, but the model is unwilling to let go of amplified high pressure ridging across the Central Plains and Midwest into the middle of the month. Overall, GFS weather output keeps meaningful rainfall confined to areas east of the MS River, with 10-day totals across the Plains, IA and MN pegged at no more than 0.10-0.50”. High pressure resumes its position aloft OK/KS/NE late next week, which fans additional heat into the region. The GFS forecast remains worrisome, but uncertainty over rainfall/temperatures across IA and the Upper Midwest continues.
- We doubt that the August USDA crop report will hold any major bearish surprises. Don’t forget that FSA data will be updated next Friday also. Chicago has digested a considerable amount of bearish information with cash basis bids helping to underpin new crop futures. Soy crush margins are incredibly profitable, and world corn production will fall short of consumption even assuming sizeable production in S America in early 2023.