- HEADLINES: Midday GFS weather forecast drier in 6–10-day period for E Midwest; Spain buys US soybeans to send the oil back to US on renewable diesel.
- Chicago grains are mixed at midday with July soyoil holding above the 20-day moving average at $0.4875 and rising to $0.5074 (highest price since May 12) while corn/wheat futures have traded in a wide range on fundamental battles between improving Central US weather forecasts and heightened war concern between Russia/Ukraine. Nearby, crop stress is ongoing for Midwest/Delta corn and soybean crops with the weather forecasts promising a few showers early next week. Research maintains that the showers are an interlude in an overall dry weather pattern. The midday GFS weather model has lost notable rain for the E Midwest in the extended range. The lack of run-to-run consistency is reducing confidence of traders in the prospect for meaningful Midwest rain.
- Each new model run has added or subtracted rain and is pushing back any meaningful rain in time. Amid rapidly falling subsoil moisture, regular and meaningful rain will have to fall across the Midwest during the growing season. 2023 crops must be made with surface, rather than ground water this summer. This means that a sustained price break will likely have to wait until favourable weather is offered for Midwest corn pollination in mid-July. We look for a mixed Chicago close today with all eyes on future Midwest weather forecasts as the market adds or subtracts weather premium in price.
- USDA reported that 165,000 mt of US 2022/23 soybeans was sold to Spain. We understand that the sales are for August when the price spread between US and Brazilian soybean offers narrow. US exporters report that US soybeans were bought since the meal will stay in the EU, while the oil will be shipped back to the US where it will be needed in biodiesel or renewable diesel.
- Cash talk is noted/growing that several renewable biodiesel producers are seeking audits/clarification on imported waste oil from China. The renewable fuel producers want to make sure that the waste oil is not made from palmoil or other tropical oils that are not eligible for renewable diesel carbon credits. The exclusion of imported waste oil from renewable diesel feedstocks would shift demand to refined soyoil by default. This is important to follow.
- A newswire is claiming that the EPA has abandoned a proposal to include the electric vehicle in its 2023-2026 biofuel program which would withdraw billions of dollars of tradable RIN production in the coming years. These RINs would harm production profitability of other congressional approved biofuel blenders that are also granted RINS.
- Midwest soil moisture has been in a freefall since April and subsoil totals are nearing decade lows. Amid this week’s dry weather, crops must rely on rain (surface moisture) heading into reproduction. This means that regular/meaningful rain is needed to preserve yield potential, anything less is bullish. US corn, soybean and spring wheat ratings are likely to fall again next Monday amid this week’s warm/dry weather amid a lack of soil moisture. Illinois corn and soybean crops are showing acute crop stress today.
- The midday GFS weather forecast is drier for the E Midwest with widely scattered showers being heavier and more important for the W Midwest on the weekend. Rain could even make it into Central IL on Sunday. However, the 6–10-day period pulled out much of the heavier rain for the E Midwest. Rains are now positioned across the Delta and the SE US. Please note that the midday GFS forecast also builds an impressive 594 millibar high pressure ridge across the Delta and SW Midwest on June 20. This is the second day in a row that the models have offered a strong high-pressure ridge. This is why we believe that the coming rains are an interlude, not a lasting pattern change. This is where low subsoil moisture would become extremely important to US crop yields.
- Chicago is back to adding weather premium to price amid a midday run that offers less E Midwest rain. The risk in Chicago values is to the upside with falling soil moisture and crop conditions if the coming rains prove to be disappointing. It is premature to be overly bearish until 2023 Midwest crop yields are made/better known.