- HEADLINES: Chicago slides at midday on macro financial market weakness; Midday GFS weather forecast adds rain in the 10-15 day period; Choppy trade ahead of the USDA report.
- Red is the colour of Chicago midday trade with corn, soybeans and wheat retreating from Friday’s rally. Green blobs on the Central US radar and the sharp fall in US energy/metal prices has produced a risk off trading mentality. The US$ is firm with gold values down $35/oz as the US will be able to better manage through the Delta Covid outbreak with 71% of its population vaccinated.
- Questions as to when the US Central Bank will begin to taper their bond buying program has added to the selling pressure. The US economy is strengthening amid a heated labour market. The US CPI will be released midweek which will likely show a strengthening of inflation. The rising cost of freight is a growing concern for shippers and end users with few new vessels being built in replacement. Ocean freight costs will stay elevated for months to come.
- China has interest in US soybeans/corn while Black Sea wheat values continue to gain. December Black Sea wheat futures at $295/mt is getting close to $300/mt on limited Russian selling. The rise in Black Sea wheat/grain values is based on tight farmer holding and the diminished harvest. The USDA announced that 2 cargoes of US soybeans were sold to an unknown destination.
- Chicago brokers report that funds have sold 3,400 contracts of corn, 1,900 contracts of wheat and 5,400 contracts of soyoil. Funds have bought 1,400 contracts of soybeans and 3,800 contracts of soymeal. It is the second day of the Goldman Roll as fund managers roll out of September futures and into December. Dec ’21 vs Dec ’22 corn spread has narrowed into 35 cent December 21 premium. The Dec/Dec spread below 30 cents will be an opportunity to bull spread corn for the coming demand led bull market.
- For the week ending August 5, the US exported 26.6 million bu of corn, 4.2 million bu of soybeans and 22.2 million bu of wheat. Last week’s US corn and soybean export pace was disappointing. For their respective crop years to date, the US has exported 2,500 million bu of corn, 2,145 million bu of soybeans, and 161.6 million bu of US wheat. Census corn exports are running 213 million bu ahead of inspections, so it is premature to cut US corn exports in the August USDA report.
- US producers report that they expect crop condition ratings to soften by 1-2% in the good/excellent category this afternoon for corn/soybeans. Last week’s lack of rain and heat in the Plains/W Midwest impacted yield potential. Pro Farmer will be holding a Crop Tour from August 16-19 to gauge if the USDA August Crop Report is correct. We maintain that it will be the September Crop Report before an actual accurate assessment of US crop size is known. The 2021 US corn and soybean crops will be mature enough for actual ear and pod weights to be determined. The September report is now the all-important measure of the 2021 US corn and soybean crop size.
- The midday forecast is wetter in the final 12 hours of the 10-day run with rains for North and South Dakota. The extended range model is adding rain in the 11-15 day period amid the tropical activity that will impact Florida and the SE US. Until August 19, the forecast for the Plains/W Midwest is arid. We look for 40% of the E Midwest to receive 0.25-1.00″ of rain in the next 36 hours. The lack of rain is taking a toll on Plain’s/NW Midwest corn/soybean crops. High temperatures this week will range from the upper 80′s to the lower 100′s into the weekend. The rains following August 20 will be closely followed to see if it verifies and if temperatures subside.
- Minnesota corn and soybean yields have the most to lose during August following the second driest July on record.
- Chicago corn, soybean and wheat futures are correcting Friday’s rally as price action is choppy. The trade can dispute US corn and soybean yields in the weeks ahead. What cannot be disputed is the crop losses for Canadian crops, Brazilian corn, and Russian wheat/corn crops. The world shortfall is expected to produce a demand led Chicago rally from September onward. Early August crop sales do not correlate with final US totals. Wheat will be the upside leader.