- The funds are out selling the summer row crops, corn and soybeans, this morning as the US$ surges and trade worries between the US/Canada/Mexico and China increase heading into the G7 Summit and next week’s US/North Korean meeting in Singapore. US trade policy uncertainty and the lack of Chinese demand for US soy are the two primary ingredients that are causing July soybeans to fall to the next chart based support at $10.60. The Brazilian Real has fallen to 3.92:1 this morning, and is likely heading to 4:1 as Brazil’s economy flounders ahead of the October Presidential election, without a clear favored candidate to help their future. The weakness in the Real is pushing Brazilian new crop prices to farmers higher with forecasts growing to 119.5-122 million mt of production with 2018 Brazilian soy seedings to expand nearly 5%. The falling value of the Real, Peso and Ruble are all stimulating non-US production for the next growing cycle. The rising greenback against the ag currencies act to collectively cap Chicago rallies. Chicago charts are down, US trade worries persist, and the Central US weather forecast is favourable for the next ten days. Chicago is searching for demand.
- Chicago brokers report that funds have sold 11,000 contracts of corn, 9,000 contracts of soybeans, while buying 6,700 contracts of wheat. In soy products, funds have sold 4,700 contracts of soymeal and bought 900 soyoil.
- The USDA weekly export sales report for the week ending May 31 reported new sales of; 33.0 million bu of corn, 9.2 million bu of wheat, and 6.1 million bu of old crop soybeans. The wheat and soybean sales were disappointing.
- China shows no interest in securing US soybeans amid the uncertainty of forward tariff/tax rates. There are rumours that China’s Government will soon start to release or auction off reserve stocks of rapeseed/canola oil to meet domestic demand. Their soymeal market is oversupplied, but Chinese crush margins have pushed back near the black. China is active in booking Brazilian soybeans for July and August amid the US uncertainty on pending trade tariffs.
- The Black Sea weather forecast maintains mostly dry weather over the next 10-12 days with uncertain/better rain chances thereafter. The dryness persists across Ukraine, Poland and much of Germany. Temperatures will be warming this weekend
- The midday GFS North American weather pattern forecast is cooler and slightly drier for the N and W Midwest over the next ten days. The mean position of the high pressure ridge is farther south and less amplified. Rains will fall across the western fringe of the ridge which looks to produce an abundance of rain for; IL, IN and the Ohio Valley. In the 11-15 day period, the model forms a high pressure ridge across the SE US which would push an abundance of humidity into the Central allowing for widespread and soaking rains. The 11-15 day forecast is wetter than what was offered overnight (which offered a tropical storm for the Florida Panhandle). Confidence in the GFS forecast beyond the next seven days remains low.
- No bull likes uncertainty in trade or the weather. The US and EU forecast models have been in poor agreement for weeks, and our confidence in the GFS model is low, and the US is missing its largest buyer, China. If the US made trade progress with NAFTA or China, a strong and quick rally would unfold in Chicago. World wheat traders know the importance of declining Russia and European wheat crop sizes.