- HEADLINES: Chicago corrects off overnight highs on index fund roll and expectation of strong crop ratings; Spring wheat crop suffers under weekend heat.
- Chicago futures are mixed at midday with an early Chicago wheat break unable to follow through to the downside on tightening world wheat supplies and talk that the Black Sea wheat harvest will be delayed by 2-3 weeks. The initial wheat selling was tied to the GFS operational weather forecast model that is trying to place needed rain across the drought-stricken Dakotas. The Dakota rain is desperately needed, but as has been the case for months, the GFS forecast has been overpromising and underdelivering on actual rainfall totals. The Canadian and European forecast models offer far less rain for the Plains/W Midwest over the next 10-14 days.
- However, the GFS weather model is free to the public and is often cited by analysts. Chicago values are all about US weather forecasts with concern building that 2021 could be a close sister to the 2012 Central US drought year. The next few weeks will be key in this price determination. The lack of a US old crop supply cushion in terms of stocks produces an acute focus on US 2021 crop yield potential with the market trying to decipher the price that finally starts demand rationing. Currently, there is no evidence that demand is being rationed by $7.00 cash corn or $16.00 cash soybeans. November soybeans and soyoil futures scored new contract highs today.
- Chicago brokers estimate that managed money have sold 2,900 contracts of wheat, while buying 7,800 contracts of corn, and 3,900 contracts of soybeans. In soy products, funds have bought 3,600 contracts of soyoil and 2,100 contracts of soymeal. Resting orders above or below the market are limited on the widening daily trade ranges.
- FGIS/USDA reported that for the week ending June 3, the US exported 55.6 million bu of corn, 8.7 million bu of soybeans, and 15.4 million bu of wheat. The US corn export total was disappointing with vessel loading calling for a significantly higher total. For their respective crop years to date, the US has exported 2,063 million bu of corn (up 887 million or 75%), 2,082 million bu of soybeans (up 767 million or 58%, and 4.7 million bu of US wheat (not yet comparable to last year). The US will have to export circa 72 million bu of US corn per week to reach our 3,000 million bu export estimate for the 2020/21 crop year. China exported just 17 million bu of US corn last week, down from loading counts which called for a total over 40 million bu. We anticipate a large upward revision in next week’s report.
- Private crop scouts assessing the coming Ukraine and Russian winter wheat crops bemoan that although yield prospects are promising, the harvest will be delayed due to slow maturity by 2-3 weeks. This raises the risk of heat/dryness impacting yield in the last 2 weeks of June and first 2 weeks of July. Moreover, old crop stocks are already tight in Ukraine/Europe which makes old crop supplies dearer. European corn values are trading well above feed wheat and compounders are anxious for the coming winter wheat harvest.
- Private traders fear that ongoing hot/dry weather has produced big yield/crop falls in the Iranian, Turkish and Pakistani wheat crops. Well placed private sources estimate that Iran’s 2021 wheat crop will only be 5-6 million mt vs the USDA estimate of 15.0 million. And Turkey’s wheat crop has declined from 17 to 13 million mt. Iran and Turkey are actively seeking additional world wheat supplies.
- The midday GFS weather forecast has cut its rainfall estimate almost in half of the overnight run for the Dakotas with totals of 0.25-1.50″. A ridge of high pressure sets up residence across the 4-corner area and the lntermountain West creating an arid NW Upper air flow through the N Plains and W Midwest beyond Friday. This produces warm/dry weather which further reduces soil moisture as the flow of Gulf moisture flowing northward is shut off. High temperatures range from the mid 80′s to the mid 90′s. Gone are readings in the lower 100′s until the mean position of the ridge progresses back eastward.
- The index fund roll and the prospect of high US corn and soybean crop ratings has pulled Chicago values from their overnight highs. However, the Central US weather forecast is threatening, and any corn/soy market fall will likely be modest.