- US wheat futures have been the upside leader in Chicago with corn/soybeans following. December corn pushed above last week’s high, confirming an uptrend, while wheat is back testing last week’s high at $5.5175 in Chicago and $5.53 in KC. There has been selling at the old highs, but we expect those highs to be lifted as world cash wheat markets keep rising as there is a growing chance that the US could sell HRW wheat to Algeria in a midweek tender. World wheat fundamentals are just too bullish to hold wheat at $5.50 for much longer. EU, Black Sea, and Aussie fob prices just keep rising as world millers chase supply. And Russian fob calendar spreads keep widening to push demand to other world sellers/exporters. But those “other seller” fob markets keep rising with Russian offers in kind of a game of “leapfrog”. At their current pace, Russia will have sold out of its wheat exportable supply by November or December, so, it has to become more expensive than the US Gulf. Corn and soybeans are following the rise in wheat with growing concern about regional dry spots across the Midwest. These dry areas will need water in early August or US crop conditions will decline. A record US large US corn yield is the one fundamental that is keeping a cap on world feedgrain prices. Any yield less than 175 bushels/acre opens a much more bullish outlook for corn.
- FGIS (Feed Grain Inspection Service) indicated that for the week ending July 26 the US shipped out; 65.3 million bu of corn, 27.2 million bu of soybeans, and 13.9 million bu of wheat. The US corn and soybean exports were above trade forecasts. The US pace for July soybean exports is record large, which along with record large crush is producing stronger than expected demand for US soybeans, despite the US/China trade war. We are confident that US 2018/19 wheat exports will be back loaded. As other key exporters run dry on supply during the crop year, the demand will be pushed back to the US. Global vegoil traders are closely focusing on Indian weather. India is the world’s largest vegoil importer and should a monsoon failure occur, there would be an immediate need for record imports. The Indian monsoon forecast are concerning into late August while a seasonal retreat occurring in mid-September. Although Chicago soyoil futures are pulling back on meal/oil spreading, the loss of EU rapeseed, Black Sea sunseed and Australian canola does not allow for anything less than a normal monsoon. We see strong support in December soyoil futures below $.2875. The midday GFS weather forecast maintains an arid and warm weather flow into August 10.
- The central US GFS weather midday forecast is drier, which is more in line with what was offered by the overnight EU model. The forecast cut rain totals across the Upper Midwest from IA into WI and including MI and N IN. The model added some rain to C IL and S IN. Mostly dry weather is expected the rest of the W Midwest and the N Plains for the next 10 days. Cool temperatures will end on Friday as the ridge of high pressure in the SW Plains builds north and east on the weekend. This ridge shifts the position of the jet stream northward and produces an arid/warming weather profile. In fact, the position of the ridge is right over the Midwest in the 10-15 day period. Note that our confidence in the extended range is low via run to run changes.
- Traders fear a Turnaround Tuesday and are reluctant to chase Chicago values higher at midday. Dec corn ran up against the 50 day moving average at $3.835 while wheat is back to the 2017 and May highs. An increase in US crop condition ratings would cause a break while any condition drop would keep the rally going amid hot/dry EU and Black Sea weather. Wheat should be the upside leader amid falling world crop production.