- Just imagine that your small grain or oilseed farm received just 0.35-2.00” of rainfall since April 1. Such rain is historically low and follows a year of drought. This is the second year of drought across Australia and our hearts go out to those farmers, livestock and wildlife that are impacted. The drought is so bad that many cash connected grain sources doubt that Australia will harvest a wheat crop larger than 15-16.00 million mt vs. the USDA’s estimate of 22 million. It is the second year of a drought that normally holds the biggest adverse impact on yield. Rain is desperately needed by the first week of September.
- Chicago prices are slightly higher with corn, soybean and wheat futures pushing to the upside amid rising Chinese meal prices and the coming USDA report. The trade expects that NASS will be conservative with its US yield estimates and that US export outlook will be lifted via falling world production. The August report holds as much interest in world crops, as it does US production. We look for a slightly higher Chicago close as concern over the warm/drying trend across the N Plains, Canadian Prairies and Australia offers support, and domestic Chinese sellers are retracting meal offers.
- Chicago floor brokers report that funds have bought 3,900 contracts of corn, 2,100 contracts of wheat, and 2,000 contracts of soybeans. In the products, funds have bought 2,800 contracts of soymeal while selling 900 soyoil. Funds appear to be getting smaller in their net short soybean position. China retaliated against tariffs on $16 billion of US goods this morning including crude oil. China is already applying tariffs across a host of US ag goods and so the broadening of the US/China trade war is not impacting ag pricing besides the emotional selling that comes with the announcement. The key question is does this broadening trade dispute help or hinder negotiations.
- The recent decline in Chinese soybean imports is tightening domestic soymeal supplies. There are rumours that some sellers are pulling offers from the market on the expectation of reduced Chinese soybean imports going forward. Traders are speculating on whether China could secure Argentine soymeal to help avoid a shortage. Argentina has an estimated 7-8 million mt of soymeal left to sell, which is just a third of what they offered last year.
- Rumours abound that Russia at some point could place an tax or restrictions on wheat exports. In Russia, where there are rumours there is often action, but the timing of an announcement is uncertain. The Russian Government is worried about rising bread/feedstuff inflation, and budding shortages of world wheat supplies. Russian exporters hearing the export tax or trade restriction rumours are trying to push as much wheat out of the country as possible. Farmers there are fretting about whether to hold or sell cash stored supplies. Germany cut its wheat crop estimate to 19.2 million mt, down 20% from last year. Speculation persists that the EU wheat crop will be in a range of 128-135 million mt. The bet is now one of an EU all wheat crop of less than 135 million.
- The central US GFS weather forecast is similar to the overnight EU model with drier than normal weather across the N Plains and the NW Midwest. The Canadian Prairies area also in a drier profile. Some light showers are possible after August 16, but amounts look to be below 0.75”. No extreme heat is noted with above normal readings in the N Plains and the W Midwest with more seasonal levels in the E Midwest and Delta. Our confidence is building in the 10-15 day period which offers a return to better rainfall chances. Nearby, the big concern are those fields that missed the rains in the past 48 hours where soil moisture is in fast retreat. We estimate that some 20-25% of the US corn and soybean crops are under this dry profile.
- Positioning ahead of the August USDA crop report continues to be the feature in Chicago. EU wheat futures closed slightly lower which has pulled US futures off their highs. As world price keep rising, we just don’t see much downside price risk. Key resistance arrives in November soybeans above $9.25. China is showing no willingness to secure US soybeans. Our stance remains bullish of wheat, positive of corn and bearish of soybeans.