- Markets opened as expected, and have done little since, save for a modest extension in wheat’s recovery. At midday, corn is up 1, Nov beans are down 4, and wheat futures are up 13-20. EU milling wheat futures have held on to their overnight rally, and concern persists regarding the size of EU/Black Sea wheat crops. Just this morning there has been talk that Germany’s crop will be downgraded 2-4 million mt, which follows France’s 4 million mt -downgrade last week. Otherwise, the market awaits news or implementation of the first round of US tariffs placed on Chinese goods. There has been ongoing radio silence from the US Trade Team so far this morning. Tariffs are set to take effect shortly after midnight tonight. China has stated it won’t implement tariffs until/unless the US does. Exporters reported two cargoes of optional origin corn sold to S Korea for new crop delivery. US and Argentina share the title as the world’s low cost exporter. Crude oil has fallen slightly from overnight highs amid a very modest build in weekly stocks.
- As of last Friday, US crude stocks (less reserves) totaled 418 million barrels, up 1 million on the week but still 17% below late June of 2017. Exports have offset record production in 2018. US crude stocks will remain tight into late year, and downside risk below $67-68 is limited. RBOB and ethanol are firm. US ethanol production last week totaled 314 million gallons, vs. 315 million the previous week and up 16 million gallons on last year. This is more evidence to support a 25 million bu hike in industrial corn use in the USDA’s July WASDE. Production and blend margins remain sizeable.
- The EU/Black Sea forecast at midday maintains warmth and dryness over the next 7-8 days. Better rain chances are offered to Ukraine and Poland thereafter. Of note, maximum high temperature across Russia’s Corn Belt into next week will reach into the upper 90s and low 100s. Much better rain is needed across the European continent to stave off corn yield loss.
- Estimates show that managed funds as of Tuesday were net short 74,000 contracts of corn (up 14,000 on the week), were net short 1,000 contracts of Chicago wheat (down 11,000), and were net short 60,000 contracts of beans (up 16,000). The combined corn/wheat/bean position is a net short 135,000 contracts, up 36,000 on this week a year ago.
- The central US midday GFS weather forecast is slightly wetter in the 12-15 day period, but is warmer/drier in the meantime. The models in recent runs have struggled with the details of high pressure aloft. The midday GFS allows ridging to persist in some fashion aloft the Midwest into July 18 before shifting it westwards. Temperatures won’t be excessively hot outside of the Southern Plains, but highs in the mid/upper 80s will be commonplace across IA/IL over the next 10-12 days. Rainfall will be scattered/modest in nature. Meaningful totals over the next 10 days will favor WI, as well as the Delta/Southeast. Sharp declines in Midwest soil moisture lie in the offing. Just how well corn can buffer coming dryness will be watched closely.
- There are only hours to go before the US-Chinese trade battle becomes tangible. All indications point to the first round of tariffs being implemented, which has no doubt been digested by the market. It is the retaliation, and whether progress can be made thereafter that is most important. Grain futures will maintain support amid falling crop sizes in Europe and Russia.