- Corn, soybean and wheat futures have traded either side of unchanged amid a dearth of fresh news. Tough talk on US trade tariffs has not had any price impact helping to confirm that much of the negative tariff trade news is digested. The Brazilian fob vs US Gulf spread along with value compression in corn and wheat futures is offering Chicago support on breaks. Any additional bearishness will have to be generated by US corn and soybean yield prospects. For now, traders are holding steady or trimming their US 2018 US yield expectations. We are looking for a further fall in US crop condition ratings on Monday as seasonal condition trends are lower and regional weather issues exist. The drought across the SW Midwest is nearing levels not seen since 2012. This compares with excessive rains across MN and N IA. The point is that regional areas of US corn has more than one bad day, and traders are debating whether 2018 will produce another year of US record large yields. We look for a mixed close going home. Chicago floor brokers report that funds have bought 2,100 contracts of corn and 1,200 contracts of wheat, while being flat in soybeans.
- US Economic Advisor to President Trump, Larry Kudlow, speaking at the CNBC Delivering Alpha Conference, indicated that Chinese President Xi could end the US/Chinese trade tariffs at any time by just calling President Trump and offering a better deal. We have no idea what a better deal looks like, that would be up to the chief negotiator, The President. Could it be that the US is likely moving into the deal making phase? We maintain that the political pressure will build on the administration heading into the mid-term election
- Hot/dry German weather is causing sharp downgrades on corn and wheat yields. We are told that yields have dropped so far that that it is barely worth going through the cost of harvesting for some. The demand for German feed is likely to be record large in 2018/19 amid the drought. EU corn imports are likely to rise above last year amid reduced EU domestic feed production.
- Argentine soybean and soymeal premiums are firming as supply availability retreats as the last of their corn/soybean yields have been disappointing. US corn fob prices have dropped below Argentine offers for August. The last of the Argentine corn harvest has produced a sharp yield drop.
- The Central US GFS weather forecast is wetter across the E Midwest. Several cold fronts will pass through the E Midwest under a broad ridge/trough pattern. We believe that the GFS model is too wetand currently favour the EU model, which has been the case for much of the summer. The forecast for the W Midwest and Plains is little changed and arid. The overall NW flow through the Midwest should not produce above normal rain. The best chance of W Midwest rain is with a system on Friday and the weekend that produces 0.25-1.00”. Thereafter, the rain chances are limited to the SE US amid tropical moisture. Cool temperatures will persist with highs in the 70’s and 80’s. Lows will range from the 50’s and 60’s.
- The Chinese Yuan is weakening (again) as China looks to maintain their market competitiveness for manufacturing. An export demand story is in the making for US corn, but amid the US trade tariffs, speculators want to make sure that US corn yield is not above 180 bushels/acre. The August USDA crop report looms large for long term price direction. Our nearby view is for US grains to slowly rise, while soy futures chop in a range. Our belief is that Chicago has scored an early seasonal low.