- Looking out of the window and judging crops is a long-established and popular pastime, particularly amongst grain traders and consumers. This year’s US corn crop has been monitored particularly closely and the conclusion from pretty much all corners it that it is a highly variable crop that demands an extended growing season. Prior to 2012, this window crop estimating exercise generally produced the right gauge for Chicago and world corn prices. Yet all of that has changed in the past decade with Argentina, Brazil and Ukraine (ABU countries) now accounting for a combined 60-65% of world corn trade. In other words, the US corn crop has lost measurable importance in the world marketplace. The big production expanse by non-US corn producers helps explain why this year’s US spring weather problems have not produced a bigger rally effort.
- Chart related selling and slow weekly/monthly exports had Chicago soybeans under pressure to end the week. The soybean export pace is slipping further behind what is needed to reach the USDA’s annual forecast, which will further add to the US old crop stockpile. The weekly export sales report picked up last week’s sales announcement to China, which put weekly sales at the largest since late March. However, it is the large outstanding old crop sales and slow new crop sales that are discouraging. Outstanding sales are record large at just under 11 million mt, with 5.8 million to China and 2.2 million to unknown destinations. New crop sales of 2.5 million mt are the slowest in 14 years. Our view stays bearish on any strong Chicago rallies. China’s demand still appears in retreat, and much of their needs are being filled with S American supply. At the same time, the US old crop stockpile looks to be increasing as the US export rate falls short of what is needed to reach the USDA forecast.
- Chicago corn futures were narrowly unchanged in noticeably low volume. Neither the bulls nor the bears wanted to press their case ahead of the weekend. It seems that rallies will struggle amid favourable Central US weather and ahead of next week’s potentially bearish WASDE report. Using NASS acreage data, new crop US corn end stocks will be raised to 1.85-1.90 billion bu. The Commitment of Traders report is delayed until Monday because of the US holiday this week. Old crop export sales continue to disappoint. Sales through the week ending June 27 totalled 7 million bu. A pace of 29 million per week is needed to meet the USDA’s target. World demand is being sent to S America amid discounted fob offers there. Note also that the Brazilian safrinha harvest is 36% complete, vs. 20% on average. Strong resistance is pegged at $4.40, basis spot, and we doubt that corn can trade at a premium to KC wheat for any length of time. KC wheat’s task is to find better export demand. Abundant world wheat supplies are a negative as it is a cheap alternative for corn
- US wheat futures ended unchanged amid a lack of fresh input. However, it should be noted that Black Sea cash prices fell $2/mt this week as the market looks for summer demand. The world market is beginning to debate the true health of world wheat demand. Recall that world trade declined in 2017 and 2018. The USDA is calling for a 9 million mt increase in 2019/20. The pace of world trade in the next two months will therefore be watched closely. Major importer currencies remain weak, which is an obstacle. Mostly dry weather across the Central US this weekend will allow for substantial harvest progress. Harvesting will also accelerate across Europe and S Russia over the next 10 days. Interior HRW cash basis is beginning to weaken. Rallies in wheat still struggle during harvest and as major exporter production rebounds. Even conditions in Australia are far better than a year ago.