- Low volume and mixed has been Chicago grain trade this morning. The initial rally was based on short covering in Chicago wheat ahead of first notice day on Friday. However, wheat has turned lower as the squeeze relative to spot futures appears to have eased.
- The US winter wheat harvest will gather steam next week with merchandisers reporting that they are expecting enlarged cash sales. Questions abound on US SRW and HRW crop quality relative to weeks of above normal rains, but the harvest weather looks warm/dry/promising which should help cash wheat movement. Storing and paying commercial wheat storage rates does not appear to make much economic sense.
- Corn and soybean futures are weaker amid the improved Central US weather forecast. Midwest producers report that recent days of sunny/warm weather are allowing crops to recover from their ragged appearance due to late seeding dates and excessive rain. NASS condition ratings should improve on Monday.
- We look for weaker Chicago prices into the close as the bulls bank profits ahead of the NASS Stocks/Seeding Report and trade developments in Japan.
- Chicago brokers estimate that funds have sold 3,100 contracts of corn, 2,600 contracts of soybeans and 1,100 contracts of Chicago wheat. In soy products, funds have sold 800 contracts of soyoil while being flat in soymeal.
- For the week ending June 20, the US sold 22.5 million bu of wheat, 11.6 million bu of corn and 6.2 million bu of soybeans. New crop corn sales were 4.3 million bu with soybean sales at 11.7 million bu. US corn and soybean sales continue to badly lag prior year averages and the WASDE forecast for 2018/19. China showed up as buying a cargo of US soybeans and shipping out 14.4 million bu. China now has 5.6 million mt (205 million bu) of sales that are open and unshipped. Commercials expect that some 3.0 million mt of this total could be rolled to the new crop year.
- For their respective crop years to date, the US has sold 255 million bu of wheat (up 51 million from last year), 1,919 million bu of corn (down 334 million or 15% from a year ago), and 1,715 million bu of soybeans (down 333 million or 16%). The US corn sales pace argues for an additional 100-150 million bu cut and for a further 25 million bu cut in 2018/19 soybean export estimates. The slowing US corn export pace is due to the abundance of cheap non-US corn offered for export.
- The Plains wheat harvest is gaining speed with hedge selling expected on Friday’s close ahead of the weekend. Yield results are solid and well above last year. Although not all fields are running records, the harvest yields likely to cause NASS to increase their July production estimate. Protein levels are so far down ranging from 10.8-11.4%.
- A drier weather forecast is offered for SD/WI/IA/in (down 0.35-1.50″) and slightly wetter for MO/IL/in (up 0.25-0.75″). A ridge of high pressure will hold across the Central US for the next 8-9 days. This ridge will promote near to above normal temperatures and near to below normal rain. The forecast models are moving bands of heavier rains either north or south as they try to bullseye their exact location. These rains were further north in the EU model, but further south in the latest GFS run. Most of the GFS rains fall as afternoon thunderstorms. Any soaking rain will be localised allowing waterlogged crops to slowly improve into mid-July. A more zonal flow is offered in the 11-15-day period with near normal temperatures.
- The bulls are taking profits ahead of the USDA report and concern that with improved weather, that if the report is not bullish, a steeper correction could unfold on fund liquidation. At least through mid-July, we see no real weather threat in terms of new rounds of excessive rain or extreme heat. Bulls need to be fed every day and although a bullish surprise could come on Friday, the market’s focus thereafter will be on improved Central US weather.