4 August 2023

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  • HEADLINES: Chicago corn futures declined for 8 consecutive days; GFS weather forecast at midday wetter on the weekend, drier in the 6–10-day period; US crop condition ratings to ease 1% on Monday.
  • Chicago futures are higher at midday, but the overnight gains have been cut in half with soyoil/soybeans being the day’s bullish stalwarts. Wheat has retreated as Russian exporters tell their import customers that they will be able to manage future marine drone attacks from Ukraine. The Russian’s claim that no damage was done to Novo export infrastructure and that loading has quickly resumed. However, insurance brokers are more fearful, but ahead of a weekend, no one wants to push the green panic button until there is clarity on whether the war is expanding into the shipping lanes of the Black Sea in a more meaningful way. Those headlines will be closely followed next week.
  • If the expired Black Sea corridor export pact is not renewed, neither Ukraine or Russia will want the other side to export and capitalise on the shortfall. It’s a classic case of, “If I can’t export then neither will you!”  Otherwise, traders will be counting weekend Midwest raindrops and where they fall and in what amounts for the key dry zones of Minnesota, W and N Iowa, and Central Illinois. Rain has been forecast for the drier Midwest areas since the start of the week. Rainfall totals this week were disappointing, but the models are still promising rain this weekend, so hope persists that a crop saving rain will develop. The midday GFS forecast is slightly wetter this weekend.
  • Spot Chicago corn futures have declined for 8 consecutive days coming into today’s trading session with the September/December corn trading at a discount of 13 cents. The last time that spot corn futures has fallen 8 consecutive trading was back in 2016, 7 years ago. Our point is that for corn to drop 9 days in a row would take a further step back in history. The shorts are willing to bank profits ahead of a key USDA crop report a week from today. Headlines have been the biggest feature of Chicago this summer and who knows if Russia will retaliate for the Novo attack on the weekend.
  • Chicago brokers estimate that funds have bought 3,500 contracts of wheat, 4,700 contracts of corn, and 4,100 contracts of soybeans. Funds have bought 2,200 contracts of soymeal along with 3,500 contracts of soyoil.
  • We look for a stable or 1% decline in corn, soybean, and spring wheat good/excellent crop ratings on Monday. Seasonally, US corn/soy crop ratings erode into mid-September before stabilising ahead of the harvest. The impact of weather on US corn fades in the middle of August while its impact on soybeans is sizeable.
  • S American soymeal export premiums slipped this morning on the need to uncover business. The cash slippage pressured Chicago soymeal spreads. However, the US cash soymeal market stays tight amid strong domestic demand and slowing US crush due to plant maintenance. August soymeal futures are priced at a $46/ton premium to December with September soymeal trading at $24/ton premium. August Illinois rail soymeal is offered at $34 over September soymeal futures.
  • The midday GFS weather forecast is slightly wetter on the weekend with needed rain across SW MN and the northern third of Illinois. Rainfall totals are estimated in a range of 0.2-1.50”. The rains then cover a larger share of the E Midwest in the first half of next week. Short changed will be the Delta and the S and C Plains where limited rain looks to fall for the next week. The forecast models have backed off on heavy rains across the SE US as the Bermuda high pressure ridge is located further east. There is no extreme heat noted as a high-pressure ridge retrogrades to the SW US. A more zonal weather pattern is forecast for mid-August with near to above normal temperatures and near normal rainfall in the 11–15-day period.
  • The week produced 2 larger than expected private US corn yield estimates of 176-177 bushels/acre, a bearish surprise. We see the US corn yield at 173 bushels/acre or under as producers report considerable ear tipping and shallow kernel depth. US corn supplies and end stocks are the bearish anvil on Chicago. US 2023/24 wheat/soybean end stocks will be smaller than last year, and we doubt that Brazil will be able to produce back-to-back record corn/soy crops amid El Niño. We are looking for longer term bottoms are in by mid-September.
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