- Red has been the colour of the morning with Chicago corn, soybean and wheat futures lower at midday. The macro financial markets have a bearish feel with US equity and crude oil prices sliding while the US$ has rallied against the Ruble/Argy Peso. The greenback is stable vs. Brazilian Real at 4.90:1. The Argentine Peso has scored a new record low of 69.1 vs the US$.
- Corn has been the downside leader on a larger than expected CONAB Brazilian corn crop estimate and historically high NASS US corn/soybean crop ratings. Amid adequate to surplus soil moisture across the Midwest/Delta and the remains of Cristobal laying down needed rain, the selling pressure has been widespread, but the near record fund short position lurks in the background.
- Uncertainty on the long-range summer Central US forecast prevails. Traders do not want to be too strong in their bearish stance amid managed money that is already short. And China is said to have secured several new crop US soybean cargoes on the morning break. The uncertainty over the summer N American weather pattern will provide levity until a wetter Midwest forecast is offered.
- Chicago brokers estimate that funds have sold 4,600 contracts of wheat, 4,200 contracts of corn, and 3,100 contracts of soybeans. In the products, funds have sold 1,200 contracts of soymeal while buying 2,100 contracts of soyoil.
- There was no USDA/FAS daily sales announced this morning. World importers see no reason to chase a Chicago rally at this early stage of the 2020 growing season.
- Brazil’s CONAB (USDA equivalent) pegged the 2020 soybean crop at 120.4 million mt (vs 120.3 million mt in May) with the corn crop at 101.0 million mt (vs 102.3 million in May). There is seasonal tendency for CONAB to raise the Brazilian corn crop as the winter corn harvest starts and yields are better than expected. We would expect this trend to be followed again in 2020. The USDA has Brazil’s soybean crop at 124 million mt vs the 120.4 million mt from CONAB, it will be interesting to monitor if USDA makes any adjustment to Brazil’s soy crop on Thursday.
- After 3 years of dire drought, Australia’s wheat production is forecast to rise a sharp 76% to 26.7 million mt based on a 27% expansion in seeding and an abundance of soil moisture. Total Australian winter grain production is forecast to increase to 44.5 million mt, some 11% above the 10-year average. Australian weather must be monitored, but rainfall is forecast to be near to above average over the next 3 months. Even Australian 2020 canola production is forecast to expand by 40% to 3.2 million mt. The abundance of grain looks to place Australia back as a major world grain exporter starting in mid-October/early November which is likely to cause world wheat prices to peak in December.
- Since we are discussing world crops, we would note that as the Argentine summer row crop harvest is pushing strongly ahead, the 25-40 days of acute dryness is promoting worry for winter wheat. Farmers are holding back on wheat seeding with soils reported to be “powder dry”. The forecast is arid for Argentine wheat for another 10-14 days, which is promoting a real worry.
- The midday GFS US weather forecast is consistent with the overnight run that any rain that falls across the N Plains and the Midwest will drop in the next 36 hours with the remains of Cristobal passing into Canada. This system is positioned across IA with its rain extending into IL. Additional rainfall will range from 0.25-1.50″ with locally heavier amounts. The storm exits through Manitoba on Wednesday Thereafter, mostly dry/mild weather occurs with warming developing after June 17. There is not another good chance of rain until June 23rd, a rather dry period lies ahead.
- It is all about the summer weather pattern for N America and the return of rain. No extreme heat is noted, but few traders want to sell the break until the Central US weather forecast is wetter. KC wheat looks to be forming a bottom near $4.50 July.