- It has been a widely mixed Chicago start of the week with wheat running to the upside while soybeans sag under a worsening US/China dialogue. Corn is caught as it cannot seem to decide if it should be following wheat or soybeans. And uncertainty reigns on the importance of May-July 15 heat amid the warmest weekend this summer across the Midwest and how it might be impacting US corn yield. NASS will be weighing in on the US corn yield debate on Friday. Last year’s cool Midwest temperatures was the primary reason why the US corn yield did not fall as much as traders expected in the August report, and rose thereafter. Will this be the year that corn yield does not rise as much as expected due to heat, that starch accumulation is less and kernels don’t have as much depth. Heat’s impact on US corn yield is something that shows up in the September/October reports when ear weights can be measured. The August report offers an initial reference point. Our bet is for a mixed Chicago close, but we would comment that the rhetoric can’t get much worse in terms of the US/China trade war. We would be surprised if there is not an effort put forth on talks prior to the activation of another $265 million of tariffs in early September. It is in the economic and the US’s best political interest to see where middle ground is on trade.
- Strong Russian export pace is now slowing on quality as 12.5% protein wheat is becoming difficult to find or secure from the farmer. Aussie weather is getting more attention as the wheat crop starts to head across Queensland and far NSW next week. Winter wheat never enters dormancy in Australia and warm/dry weather has pushed crop maturity. Aussie wheat heads from mid-August through September with harvest starting in early October. It is weather from mid-August into mid-September that will be the most important to heading wheat with the winter being either the fourth or fifth driest on record. Most see the Aussie wheat crop in a range of 13.0-18.50 million mt depending on rainfall. WASDE is carrying the 2018 Aussie crop at 22 million mt, which is far too high.
- Australia can only import wheat/feedgrain from the UK via phytosanitary standards. In 2003/04, Australia imported 250,000 mt of UK feed wheat. Otherwise, the Aussies may have to import WA wheat into Queensland/NSW to feed cattle/sheep. At an 18 million mt Aussie wheat crop, its exports will be cut from 16 to 12 million mt, assuming no wheat is transshipped from WA to the impacted East.
- The central US GFS weather forecast is wetter across the Central Plains and drier across IA, the southern half of IL, and through the Delta. The forecast is also cooler next week, but confidence in the GFS model is low due to big run-to-run changes. Our bet is that limited rains will fall through the N Plains and the W Midwest over the next 7-8 days with near to above normal temperatures.
- It was a new rally high close for French Dec wheat at €214.75 as EU/Black Sea offers rise. A running measuring chart gap projects Dec French wheat to €235-240/mt if last week’s high is exceeded. We look for a modest 1-2% decline in corn/soy good/excellent ratings this afternoon. The Chicago spot wheat/corn spread is trading above $2.00/bu, with an upside target of $3.40-3.60 premium. Soymeal spreads are starting to firm as Argentine meal supplies tighten.