- HEADLINES: Chicago steady/higher at midday; New crop demand surfaces; GFS weather forecast drier in Eastern Midwest.
- Chicago futures are stronger today, led by row crop markets, as macro trends have reversed and new crop US corn and soy export demand begins to appear. Spot WTI crude at midday is up $0.85 at $69 per barrel. Gasoline futures have followed. The DOW is up 200 points and for now concern over potential Covid-based demand weakness has eased.
- Old crop US export sales were virtually non-existent in corn and beans and near expectations in wheat Through the week ending July 29, exporters sold a net 2.7 million bushels of corn and just 0.4 million bushels of soybeans for 2020/21 delivery. US wheat sales totalled 11 million bushels, right at the pace needed to hit the USDA’s annual target.
- New crop corn sales were a much improved 33 million bushels, vs. 21 million the previous week. New crop US soy sales totalled 16 million bushels, vs. 11 million the previous week. FAS this morning announced a sale of 300,000 tons of US soy to unknown destinations, which is rumoured to be China. Today’s sale to China follows ongoing active meal trade there and foreshadows a more regular pace of Chinese buying into late autumn.
- Ignoring old crop outstanding sales, exporters to date have sold a record 688 million bushels of corn abroad. This compares to 452 million last year and implies that weekly new crop corn sales of just 32 million bushels are needed to achieve the USDA’s 2,450 million bushel forecast, which is easily 300-500 million too low. New crop US soy export commitments sit at 390 million bushels, down from 660 million a year ago in early August. Recall massive US soy sales made to China throughout July-August 2020. China’s return is inevitable but their absence in recent weeks has allow profit taking to occur unabated. Today, Brazilian beans for Oct delivery are quoted $20 per ton above US Gulf beans. US PNW soy is even more attractive into Asia.
- We also highlight US Gulf corn’s increasingly competitive position in the world marketplace. Brazilian interior prices remain perched at $7.90-8.20 per bushel for Sep-Nov arrival, and there is strong talk that Brazil is seeking modest tonnages from the US for near-term shipment. That the second largest corn exporter needs imports to bridge its current supply gap is noteworthy, and this also suggests Argentine corn is not as competitive into neighbouring Brazil. Argentine logistics issues will only worsen in the weeks ahead amid labour strife and as river levels continue to shrink until seasonal rains return in early autumn.
- The Argentine forecast into Aug 15 keeps rainfall confined to areas of eastern Buenos Aires, which will not aid river transportation. Eventually Argentine weather will also be monitored for changes to wheat yield potential there.
- There is even some optimism surrounding winter/spring US wheat export demand as export production estimates slide further. Combined Russian, Canadian and Kazakh wheat exports in 2021/22 will be no larger than 63 million tons, vs. 74 million last year. Additionally, there remains massive concern over milling wheat availability in Western Europe as quality reports have been disappointing. Spot Paris milling wheatis up €1/tonne ($0.03/bushel).
- The midday GFS weather forecast is drier in western Iowa and across the eastern Midwest into Aug 15. Otherwise, soaking rainfall of 0.75-2.00″ is still offered to eastern IA, WI, IL, IN and Ml Sun-Wed, while little/no precipitation occurs across the Plains. The GFS forecast also remains adamant that extreme heat returns to the Plains and Canada beginning Aug 14. The mid/late Aug temperature forecast must be watched closely.
- Wheat’s upside vigour has paused as markets worldwide correct from overbought levels. Wheat breaks will simply be corrective in nature. We maintain that weakness in corn/soy is a buy as record yields are unlikely and the trade moving forward must contend with the return of US export demand.