- Chicago futures are mixed at midday with wheat firmer while corn/soybean futures trade either side of unchanged amid the ongoing debate over Central US weather. As has been the trend for weeks, the EU weather model has less rain than either the GFS, Canadian or the Ensemble models of the US or Canadian output. The EU model used to be the most accurate on rainfall, but since there have been updates, the model appears to be too dry as it misses convective shower activity, which is a large part of Central US rainfall during summer. On the other hand, the GFS forecast has returned wet for the Central US with any high pressure ridging to hold across the SW US for most of the next 70 days. The 11-15 day outlook remains difficult with any forecast being low confidence.
- FAS did not announce any new sales this morning to China or others. What has been absent so far this summer is sales to nations other than China. Covid-19 appears to have a negative impact on world grain trade. USDA is likely to cut its 2019/20 world corn export outlook by at least 6 million mt with the new crop wheat export campaign starting out slowly. Black Sea wheat vessels loading are well down from July last year amid the sharp fall in tourism and foodservice demand. The old crop corn export forecast will likely curtail 2020/21 world corn trade. The US market lacks a demand driver to push grain/soy upwards.
- Chicago brokers estimate that funds have bought 3,500 contracts of corn, 4,400 contracts of soybeans, and 4,200 contracts of Chicago wheat. In the products, funds have bought 1,200 contracts of soymeal and 2,700 contracts of soyoil. Funds were net buyers of the break awaiting the midday weather update.
- Private Russian wheat production estimates are retreating with most now seeing the 2020 crop in a range of 76-78 million mt based on early harvest data. Such a crop is above last year which would allow Russia to export 34-36 million mt of wheat. WASDE did not raise their 2020 wheat crop estimate in June and its forecast of 77 million mt now appears close to correct. We would reiterate that Russian exporters will try to push out as much wheat as possible until an export quota system is put in place during October.
- The world’s major ag currencies are generally weak vs the US$ with limited rally potential nearby. The Russian Ruble is priced at 71:1 US$, the Argentine Peso at 70.8:1, the Ukraine Hryvnia at 27:1 and the Brazilian Real at 5.32:1. The weakness of non-US ag currencies limits US export opportunities longer term amid overseas production expansion. Argentina is offering fob corn for August/September at $0.46/bu below the US Gulf while US wheat is $0.49-0.59/bu above Black Sea offers. US soybeans are competitive until late January when Brazilian offers are $0.55/bu cheaper. Like last summer, the US export opportunities are in decline in a supply driven US weather market.
- GASC tender results are awaited with it likely to be filled by Russian wheat. We await an announcement.
- The midday GFS weather forecast is like the overnight run and less threatening. The GFS retrogrades the high-pressure ridge west and south to a position over the SW US late week. The ridge in this position allows ridge-riding Midwest rain chances through Monday. None of the rains are heavy, but cumulative totals look to add up to 0.35-1.50″ over the next 6 days. Temperatures cool from the mid-90′s to more normal 80′s to lower 90′s.
- A new storm system is noted for next Tuesday which pulls through the N Plains and the W Midwest. This system produces additional showers/storms of 0.2-0.9″.
- The high-pressure ridge holds across the SW US through July 15 before elongating across the South Central US under humid weather conditions. Rains will ride the northern end of the ridge in crop areas from IA into OH.
- Option volatility is being extracted today, but Friday’s WASDE report and Central US weather will combine for considerable market risk. This is not a classic weather pattern set up for a dire Central US drought. Midwest rains will occur regularly with near to above normal temperatures. The jet stream is migrating back southward to a more normal position. Any acute/lasting dryness will be across the S Plains. Crops will be well watered across most of the Midwest/Delta into July 20.