- Chicago soy futures traded on both sides of unchanged on Tuesday and were 2· 3 cents lower at the close. Concern over July rainfall for E Midwest soybeans offered support, while worry for future Chinese demand capped rallies. Soybean basis peaked in mid-July and has fallen sharply in the lost several weeks. Seneca, IL, topped at -$0.19/bu just after the Independence Day holiday and has since dropped to -$0.52. At Davenport, IA, spot bids topped at mid-month and have since dropped to -$0.63. The break this year started a month early due to record large US soy stocks. An average drop in basis would take both Seneca and Davenport to – $0.95 to -$l.05/bu for a harvest low. Only a major change in the 2019 production would change the basis outlook. Chicago soybeans fell on the loss of its largest customer, China. There are still 4.26 million mt of us soybeans to ship to China. We expect that the US will ship out 2.0 million mt in August with 2.2 to be rolled into new crop. This means that China could import just 92 million bu of soybeans in 2019/20 without some thawing in political relations. Supply rallies will be difficult to sustain above $9.00 November.
- Chicago corn futures traded both sides of unchanged, but ultimately ended 1-6 cents weaker. 2020 and 2021 futures paced the decline amid the worry over an extended US/China trade war and larger US corn seeding. Indeed, the corn outlook beyond the next few months is bearish with normal S American weather. Today’s plunge in wheat was also cited. Spot KC wheat has acted as major resistance to corn, even during the throes of market fear in June. The outlook for US and world high protein wheat is a bit negative amid oversupply. US ethanol production potential in 2019/20 is eroding amid falling ethanol export demand. Ethanol rallies have found ample selling interest. However, US corn yield potential is being trimmed as another 7 days of dryness lies ahead for the E Midwest. The market will reset (at least briefly) following the release of Aug 12 NASS report. Current prices are not the place to add to sales in our opinion. Either the annual highs are in place or there will be one more rally attempt in the weeks just ahead. Much depends on E Midwest weather and NASS.
- US wheat futures ended sharply lower. Macro headwinds persist and hope for any measure of Chinese wheat/grain purchases has left. The US$ recovered half of Monday’s loss. Associated weakness in the €uro is keeping EU origin wheat below Gulf quotes. US wheat export demand will stay uneventful. Egypt bought a sizeable 415,000 mt of wheat for early Sep arrival from Russia, Romania and Ukraine. Egypt paid an average fob price of $202.60/mt, up fractionally from its last tender in late July. Egyptian purchase prices are rising seasonally. Amid this year’s sharp increase in available exportable supplies, a major rally is not expected without adverse S Hemisphere weather in September/October. World cash markets haven’t really moved since July. Otherwise, fresh news is lacking. Major chart-based support at $4.77, basis Dec Chicago holds. A bullish US corn supply/demand story is needed in the Aug WASOE to sustain rallies above $5.10. This is no place to turn bearish, as seasonal trends in world markets are supportive. Yet rallies in US futures remain selling opportunities on large stocks and tepid US wheat export demand.