8 July 2022

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  • HEADLINES: GFS midday forecast calls for crop threatening central US heat/dryness; China seeking Australian/Canadian wheat.
  • Chicago futures are sharply higher with the grains leading the bull parade. China is rumoured to be seeking additional wheat in Australian and Canadian markets, while still asking for US offers from the PNW. And pre TRQ demand from private buyers in US corn is ongoing. Amid the newfound Chinese wheat demand (most likely Sino or COFCO as buyers), it is expected that the state will return for US corn with current price offering strong import margins. China and world feed importers see the recent break as providing an economic opportunity. Although US export sales were horribly this week, an uptick in demand is being felt around the world, with the US joining in some of the new business.
  • Chicago brokers report that funds have bought 7,600 contracts of wheat, 8,700 contracts of corn, and 4,500 contracts of soybeans. In soy products, funds have bought 4,300 contracts of soymeal and 2,300 contracts of soyoil.
  • The US July Employment report showed that 372,000 joined the non-farm workforce which eased worries over a nearby recession. The US unemployment rate held at a low 3.6% with strong demand for future workers noted.
  • US wage pressures ebbed, and the outlook for US job improvement looks favourable. The US jobs market outlook allows the US FED job easier to manoeuvre into a soft landing. US growth of manufacturing is occurring, and US inflation rates will ebb by September on a year-on-year basis measures improve.
  • FAS/USDA reported that for the week ending June 30 the US sold 10.5 million bu of wheat (4.2 million bu hard and 3.9 million bu spring hard), cancelations of 2.6 million bu of old crop corn sales and 4.4 million bu of new crop, with 5.9 million bu of old crop soybean sales and 8.8 million bu of new crop. Soybean cancelations came from China and unknown destinations that were rumoured last week.
  • For their respective crop years to date, the US has sold 222 million bu of wheat (down 23 million or 11%), corn sales are 2,376 million bu (down 368 million or 13%) with US soybean sales at 2,200 million bu (down 74 million or 3.2%). US new crop soybean sales at 505 million bu are near the record highs, and a strong US soybean export program is ahead.
  • China is rumoured to be seeking Canadian/Australian wheat as their buying program spreads. And new US corn demand is also being cited from private buyers that are likely trying to get ahead of state agency buying.
  • The midday GFS weather forecast is drier than the overnight run, which has been a trend of recent model runs. A high-pressure ridge retrogrades west to a position over the Intermountain West and then progresses back into the W Midwest late next week. Midwest rains will end in the next 24 hours with a drier trend to follow as a ridge amplifies over the Plains and slowly progress east to the C Midwest during the 7–14-day period. Extreme heat builds with highs in the upper 90’s to lower 100’s. The extreme heat looks to persist into July 23. The forecast going forward looks dry with extreme heat to return and add stress to pollinating corn and podding soybeans.  Our concern for Central US weather is elevated, and rising sharply following the latest GFS forecast.
  • The holiday shortened week has produced a late week recovery on threatening US/EU weather and Chinese grain import demand. The GFS midday forecast is one of the hottest and driest that we have seen in years beyond the coming weekend. La Niña remains entrenched, and history argues for late season Central US crop stress. And the European drought looks to worsen into late July. This week’s rains have eased stress, but such rain would be gone with 6-10 days of hot/dry weather. Our US/EU weather worry is high.
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