- Chicago futures are mixed at midday with wheat lower while the summer row crops add weather premium to price. The morning rally has been on diminished volume as neither the bulls or bears are willing to push their case too hard with cooler temperatures and some rain across the Midwest from Wednesday through the weekend. A front pushes through the Midwest/Delta late week cooling things off and also producing widely scattered showers. Traders understand that the models have difficulty getting locations and amounts right with convective shower activity. No trader wants to caught buying the bulge ahead of green blobs on the radar screen. We look for a mixed close with soybeans the upside leader. The forecasts are not wet enough for the bears or hot enough for the bulls.
- Chicago brokers estimate that funds have bought; 5,100 contracts of corn, 3,600 contracts of soybeans while being flat in wheat. Funds have secured 4,400 contracts of soyoil and 2,100 contracts of soymeal.
- China was confirmed to have bought 264,000 mt of old crop soybeans and 202,000 mt of US new crop corn. We hear that 2-3 cargoes of US soybeans have sold off the PNW for September/October this morning.
- A host of Executive Orders and Congressional Bills sit on US President Trump’s desk to sign against China’s aggression via Hong Kong. Traders worry that China could somehow retaliate against the US’s meddling which would further raise US/Chinese political tensions. 40 US trade groups in a letter to Sec of Treasury Mnuchin pushing him to get China to secure more energy and ag goods in coming weeks. US exporters report that China is securing US ag goods, but not at a pace that will allow them to reach their Phase One Commitment.
- The US FAS Weekly Export Inspection report has been delayed for technical difficulties and will be released later this afternoon.
- Brazilian farmers have completed 25% of their winter corn harvest with yield trends holding well above expectations. The high yields have traders discussing a total Brazilian corn crop of 104-108 million mt. Most expect that CONAB and USDA will be raising their Brazilian corn crop estimates in the months ahead. Brazil is likely to export record tonnages of corn of 38-40 million mt.
- Russian interior wheat/flour prices are in sharp decline as the 2020 winter wheat crop harvest gains speed. So far, yields have been below producer expectations which has renewed talk of a Russian 2020 all wheat harvest of 75-78 million mt. Russian exporters can now secure wheat in the interior at prices below fob export values. However, the ship line-up for export remains dismal with just 2 boats loading this week. Russian wheat prices will not seasonally bottom until there is a noticeable rise in export sales/loadings.
- The midday GFS weather forecast is slightly wetter and less threatening with a high-pressure ridge during the 10-15 day period. Midwest storm activity will be featured daily into next Tuesday. The best rain chance is late week with a frontal pass across the Midwest. A rich source of gulf moisture along with afternoon heating will produce showers/storms including “Ridge Riding” rains. None of the rains are projected to be heavy, but daily amounts could add up to 0.35-1.25″.
- The mean position of the ridge has shifted west, a trend that we think will be furthered in coming runs. The best nearby rain chances will be across the N Plains and the W/N Midwest, with reduced totals in the SW Midwest/Plains. The 10-15 day period has a less amplified ridge that is further west compared to the overnight run. A ridge west/trough east pattern favours Midwest rain.
- It is a game of weather musical chairs in Chicago. The outlook for US grain demand is dismal with export sales in retreat amid cheaper fob offers from others. US corn ethanol producers are back to break even margins, while US livestock farmers struggle with negative feed margins. The point is that the Chicago rally is supply driven via adverse weather. If the US weather pattern improves, there won’t be enough chairs for the bulls to sit down on.