- It has been a mostly green morning in Chicago with wheat pacing the rally on Russian rumours. Corn and soybean have tried to follow but left over old crop farm selling is capping the rally ahead of first notice day against Sept futures on Friday. The Chicago tone of the marketplace is different from prior sessions with traders expecting that seasonal lows are forming. Another run of fund buying is possible before the close tonight. US and world wheat futures are sharply higher as rumours abound on what the Russians will be doing to slow or halt its wheat exports in the weeks/months ahead. Meetings were held yesterday at a lower ag ministry level and will be held again at a higher level on Sept 3. The meeting yesterday was with Russian deputy ag ministers and politically influential livestock industry.
- The Russian Sept 3 meeting will be with grain exporters. The rumours have Russian ag ministers discussing that it will limit Russian total grain exports at 30 million mt, including 25 million of wheat. This compares to a WASDE forecast of 35 MMTs of 2018/19 wheat. The 10 million mt of reduced Russian wheat exports would be highly important with world wheat exporter stock/use ratios at a record low. The meeting elevates the potential for additional wheat futures market risk with the US on holiday on Monday. We estimate that Russia will have exported a record 8.1-8.4 million mt of wheat during the July/August period. We understand that brokerage firm FC Stone could be releasing their September Crop Estimate after the close on Thursday. Most other analytical firms will release production estimates next week. The USDA September Crop Report is out on the 12th.
- Weekly US ethanol production was 1,070 thousand barrels per day last week that produced 314.6 million gallons of ethanol. This compares to 315.5 million gallons in the week prior. US ethanol stocks fell to 968 million gallons vs 977 million last week which is up 8% from last year. US crude oil stocks remain depressed at 406 million barrels, down 11% from last year. It is this drop in US crude stocks which is likely to rally crude oil to $75-80.00 by the end of the year.
- Canada is suggesting that there could be deal with the US/Mexico by Friday. This would renew NAFTA type of agreement for another 6-7 years. The sticking point of huge Canada dairy subsidies/a closed market is being resolved.
- The central US GFS weather forecast is slightly farther south with heavy rains compared to the EU model overnight. A steady flow of moisture will be centered on the WC Midwest and the Great Lakes into Sep 10. The wet weather flow persists into the 10-15 day period which could raise concern for early harvest. Accumulations through the period in MO, IA, MN, WI and IL is estimated upwards of 2-5plus inches. The heaviest totals will favour MO, IA and WI. Localised flooding is likely. Temperatures stay near to above normal. Minimum lows into mid-Sep across the Northern US/Southern Canada will remain perched in the low/mid-40s. New heat will be centered on the E Midwest with highs in the 90’s.
- The bull story continues to build in wheat. There is too much smoke in Russia for their not to be a fire somewhere in terms of a grain trade restriction. The Stats Canada report is now key on Friday while the US/Mexico and likely Canadian trade deal helps the demand outlook for US ag products. Our view remains that seasonal lows are forming, and research argues that wheat will score new highs.