- Ag markets at midday are higher on renewed fund buying in Chicago corn. Sep corn is up 12 cents on strong basis levels in the Eastern Midwest. Producers there remain unwilling sellers amid massive production uncertainty. There are also news reports suggesting China will buy some measure of US ag products as a goodwill gesture following last week’s G20 summit. We can find no evidence of China buying US products today, but as US/China talks resume, politics are back in play.
- Following the recent Chicago break, we estimate that managed funds this morning long net 110,000 contracts of corn, vs 188,000 contracts last Tuesday. Funds were long a net 9,000 contracts of Chicago wheat, vs. 32,000 last Tuesday, and were short a net 60,000 contracts of beans, vs. 34,000 contracts a week ago. A pause in selling was due.
- This week’s EIA report features another massive weekly ethanol grind, but also a surge in US ethanol stocks. Through the week ending last Friday, US plants produced 318 million gallons of ethanol, up 3 million on the prior week and by far record large for late June.
- Strong early summer ethanol production has accelerated the rally in E Corn Belt basis with plants there willing buyers even at current cash prices. However, unlike recent weeks, US ethanol stocks on June 28 were 959 million gallons, up 53 million on the prior week, 4% above last year and also record high for late June. Spot futures-based ethanol production margins are in retreat amid today’s rally in corn.
- Otherwise, holiday-reduced volume is noted and debates over prevent plant and yield potential will rage on. WASDE is not mandated to use NASS’s June acreage data, but never before has WASDE deviated from NASS. Next week’s supply and demand tables will be dismissed by the trade, but new crop US corn stocks are expected in a range of 1.7-1.8 billion bu.
- We also mention that, on a dollar basis, Census Ag imports in May exceeded exports by $252 million. This follows a negative trade balance in April of $865 million. The last time the US posted two consecutive months in which the value of Ag imports exceeded the value of ag exports was Apr-May 2016.
- European grain markets have followed the US higher, but only slightly. EU wheat looks to settle €1.00/mt ($.03/bu) higher, with EU corn up fractionally. The world wheat and corn markets have been content to maintain large discounts to US origin.
- Yet, Chicago corn’s recovery from chart-based support is noticeable. Next resistance in Dec corn lies at $4.48. We maintain that a broad range between $4.05-4.50, Dec 19, is probable into early August.
- The midday Central US GFS weather forecast is drier in the Midwest but wetter in Kansas through the next 10 days. The GFS features the return of moderate but expansive high pressure ridging in the 6-10-day period. Confidence in the GFS’s solution is low, but the return of the ridge will keep Central US temperatures at or slightly above normal into July 15. Moderate rainfall will be widespread into Sun/Mon. A drier pattern will be established next week.
- Near to normal Central US precipitation and temperatures are all that can be asked for following a challenging spring.