- Chicago futures are higher at midday with funds squaring positions ahead of the July USDA Crop report amid a threatening extended range Central US weather forecast. The prospect of another episode of heat/dryness mid to late next week makes the coming next 5 days of rain important to yield. Showers are falling this morning across NW Iowa and through portions of KS/MO at midday.
- Complicating matters is the fact that the forecast models are having trouble identifying convective thunderstorm activity which has produced better than expected rain across the W Midwest/Plains. Chicago will be weather-driven, with Sunday/Monday trade important in determining price action into late July.
- Chicago brokers estimate that funds have bought 5,400 contracts of wheat, 7,500 contracts of corn, and 6,400 contracts of soybeans. In soy products, funds have bought 4,700 contracts of soymeal while selling 3,100 contracts of soyoil.
- US weekly export sales for the week ending July 2 included 12.0 million bu of US wheat, 23.6 million bu of old and 16.1 million bu of new crop corn, and 35 million bu of old and 14.0 million bu of new crop soybeans. The weekly corn and soybean sales were slightly better than expected.
- For their respective crop years to date, the US has sold 278 million bu of wheat (up 2 million from last year or about 1%), 1,689 million bu of corn (down 257 million or 13%), and 1,690 million bu of soybeans (down 93 million or 5%). We look for the USDA to trim their 2019/20 US corn and soybean export estimates slightly in the July WASDE report on Friday.
- Russian wheat prices are rising on the initial disappointing yield trend winter wheat harvest. A deeper expansion into the harvest is needed to determine a true Russian wheat crop size but yield reductions in Ukraine and Russia are pushing end users to expand their forward coverage. Additional yield data points on yield are required to show a full reflection of the 2020 Black Sea and Russian wheat crops. Research looks for the USDA to leave the 2020 Russian wheat crop steady at 77 million mt or maybe trim the crop to 75.0 million. Interior Russian wheat prices are up $5-6/mt for the week.
- Argentine corn for August has slipped to a new low of $0.50/bu below the US Gulf with Brazilian corn following. The Argentines remain aggressive in offering corn to the world feedgrain export arena.
- No new daily sales of US corn, soybeans are wheat were announced this morning. China purchased a few US soybean cargoes early in the week, but they have been slower than expected buyers again this week. As the calendar turns to mid-July China needs to dramatically pick up its US soybean purchase pace.
- The midday GFS weather forecast is further north with rain in the nearby forecast, but cooler/wetter in the extended range (vs the overnight run). High pressure ridging will push a bit deeper into the Central Plains in the next 24 hours and this will act to force the jet stream across the N Plains and Great Lakes. 5-day rainfall of 0.75-1.75″ will impact W IA, MN, WI, WI and northern parts of IL, IN and OH. Areas further south will see limited precipitation but also near-normal temperatures.
- The midday GFS forecast is a bit quicker in forecasting the return of Midwest precipitation and cooler temperatures as it no longer expects the strongest ridging to reach into the heart of the Corn Belt. A pattern of light but daily showers is offered to the N Plains and C and E Midwest July 18-24. Cumulative totals are pegged at 0.25-1.50″. The E Midwest will be favoured.
- Uncertainty over Black Sea production and late July Central US weather will sustain fund short covering/buying in the near-term. Yet, massive downgrades to global end stocks forecasts are needed to prevent a more bearish pattern beyond summer. Work maintains that supply-driven rallies should be rewarded.