- HEADLINES: Chicago lower on better rain forecast for the W and N Midwest; Crop ratings expected to gain on Monday; Bull spreading in soyoil
- Chicago grain futures are mostly lower at midday with traders expecting additional Midwest rain over the weekend with NASS crop condition ratings expected to increase on Monday (2-4% in the good/excellent category). The July 4 holiday on Tuesday has caused traders to slowly return to taking on risk, and traders like being on the sell side of the grain ledger. However, firming cash markets in the US and S America is causing caution. December corn is heading back to test support at $4.80-4.90 while November soybean futures sag to chart support at $13-13.25. Traders want to be bearish of grain and bullish of soyoil/soybeans, but the bulls would rather engage in new length early next week. We look for weak prices to persist into the Chicago close with traders staying focused on cool temperatures and showers across the Midwest this weekend. Central US weather threats are lacking for the next 10 days.
- Chicago brokers estimate that managed money has sold 6,200 contacts of corn and 2,600 contracts of wheat, and 8,800 contracts of soybeans. In soy products, funds have sold 4,900 contracts of soymeal and 2,400 contracts of soyoil. The firmness of the US cash soyoil market has bulled Chicago spreads but has not halted the decline in flat prices.
- The US Labor Dept showed that the jobs market may be losing steam after strong growth over the past year. The US added 209,000 jobs in June, the smallest monthly gain since the end of 2020 and revised job growth downwards in April and May. The US unemployment rate fell to 3.6% with job growth coming from health care and the government. The slowing of job growth will likely cause the US Central Bank to only raise its lending rate by 0.25% in late July. The US dollar fell sharply on the news with the Brazilian Real at 4.86:1. Why we should be so focused on the Brazilian Real is that it impacts Brazilian farm profitability tremendously in the upcoming crop year.
- Featured in Chicago is that there has been some big bull spreading in August/December soyoil futures (4,300 contracts) due to strengthening cash basis bids while there was a buyer of 3,000 contracts of September $10.00 wheat calls at 2 cents. The $10.00 wheat call buying must be related to Ukraine and the worry surrounding the Zaporizhzhia nuclear plant that continues to surface in the media. Some are speculating that Russia could attack the plant to halt advancing Ukrainian troops.
- US export sales for the week ending June 29 were 14.9 million bu of wheat, 9.9 million bu of old and 16.5 million bu of new crop wheat, and 6.9 million bu of old and 21.8 million bu of new crop soybeans. We understand that China has been a sizeable buyer of at least 18-22 cargoes of Brazilian soybeans for August/September and 3-5 cargoes of US soybeans for October/November. China is using the price break to step up its soybean purchase pace.
- The midday GFS weather forecast is wetter for the W Midwest and the Northern Plains than was offered in prior runs. The EU model started to shift rainfall northward into IA/WI and MN overnight and the GFS model extended the rain with totals of 0.5-1.50”. Such rain late next week would be timely for US row crops but be advised that the rain does not occur until the 6–10-day period from 2 ridge riding storm systems. A system for Thursday/Friday of next week produces 1-2.00” rains across Iowa. No extreme heat is noted with coolness centred across the Intermountain West/W Midwest for another 5-6 days with warmth returning after July 18. A ridge of high pressure is expected to amplify north in the last half of July with heat noted across the Delta/S Midwest with highs in the 90’s to lower 100’s.
- The USDA will release their July Crop Report on Wednesday which should include an increase in US corn feed/residual use in 2022/23 and 2023/24 crop years along with 2 million extra new crop acres. The US 2023/24 soybean balance sheet will be bullish with a drop of 4.0 million harvested acres. One must not be too bearish ahead of this report. We remain bullish of US soyoil, and we doubt that Nov soybeans can drop too far below $13.00. The grains are held in a range.