- Chicago has been mostly lower this morning with long liquidation being featured in corn/wheat, which has acted as a drag on soy complex lower. The market lacks fresh news and traders are focusing on reducing their risk ahead of the USDA report tomorrow. Note that all of Asia and much of Europe will already be on their weekend so whatever reaction occurs, it will carry forward into Monday. Moreover, this is the first USDA monthly report that the media will not be able to release a few nano seconds early. Everyone receives the data at the same time which argues that there could be snags in market interpretation in the seconds following the report’s release.
- Friday promises to be an interesting day and we note that traders are already pulling option volatility lower in corn/soybean options as most traders are betting on big/record yields. The surprise would be yields that are under average trade estimates and expanding US export demand on world corn/wheat crop shortfalls. The report is likely to produce some swings in the marketplace, but amid unfavourable finishing weather across the Central US, most end users will see a bearish corn/wheat report as a buying opportunity. Soybean valuations will be hinged to the US/China trade dispute.
- Chicago brokers report that funds have sold 5,900 contracts of corn, 2,000 contracts of wheat, and 3,100 contracts of soybeans. In the products, funds have sold 2,400 contracts of soymeal 1,100 contracts of soyoil.
- The EU and Russian grain markets have slowed their weekly rise amid USDA report uncertainty. Most EU cash traders have ended their dealings for the week and await the USDA crop data. Russian wheat exporters are struggling with low protein wheat. It is hard to find Russian offers for 12.5% wheat beyond the end of September. And there are estimates that as much as 90% of the Bulgarian wheat crop is of feed quality. Eastern European wheat quality is a growing concern for world importers. In fact, every cash trader in this part of the world wants to buy 12.5% and sell 11.5% wheat if they can find high quality protein wheat. The protein spreads will likely widen.
- The central US GFS weather forecast is similar to the overnight run with drier than normal weather across the N Plains and the NW Midwest. The Canadian Prairies area also in a drier profile with periods of extreme heat. The finish for Canadian crops is stressful and cuts in wheat and canola crops are now feared. 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. The GFS model has halted its latest run with a computer difficulty. Thus, we have no comment on the 11-15 day outlook. They are working on a fix.
- Positioning ahead of the August USDA crop report continues to be the feature in Chicago. EU wheat futures closed lower which has pulled US wheat along for the ride. Our lean for the USDA report is bullish world wheat, a US corn yield that is 177 bushels/acre or less and a record US soybean yield of 50 bushels/acre or more. We see the decline in corn/wheat as corrective. Declining wheat crops in Canada and Australia are likely to push the cash markets higher into September.