- Chicago futures at midday are steady but little changed. There is talk circulating that RMA indemnity payment data suggests total Prevent Plant for all crops will reach 15-20 million acres. Extended range forecasts in IA and IL need close watching as dryness lingers there. There is also talk that US and Chinese negotiators will meet face-to-face in late June.
- Do not forget that RMA and FSA keep separate data series. RMA data is not easily interpreted, and we cannot chase down what number the trade is using to quantify such Prevent Plant estimates. There is no doubt Prevent Plant acres will be record large this year, but we doubt precise numbers can be determined by weekly RMA data. Note also that there is only a modest correlation between FSA prevent plant acres and changes in NASS acres from June to Final. Work suggests corn Prevent Plant acres of 8 million would equate to a NASS reduction of 3.5-4.0 million. Rather, the strongest correlation between NASS and FSA data is total planted and failed acres.
- Another day has passed without any new Chinese soybean purchases. There are still expectations that China comes to the market for its bean needs in late 2019. Today, President Trump offered to give “timely license decisions” to allow US tech companies to sell services to Huawei. China has responded with enquiries into US ag products if tariff waivers can be granted. However, US Congress’s concern over Huawei and security issues hasn’t been resolved. There are still issues the US and China are far apart on. Also, Chinese crush margins remain deeply in the red amid recent weakness in soymeal values there. The structure of world oilseed markets remains weighed down by Chinese demand contraction.
- Brazil’s safrinha corn harvest continues to roll along well ahead of recent years. As of last week, harvest was 62% complete, vs. 45% on average, and estimates are that safrinha harvesting will reach 67-70% complete this week. We also note that Argentina still some 17.5 million mt of corn left to harvest. The sheer size of S America’s crop will keep fob premiums there low into the latter part of August.
- Egypt secured a sizeable 300,000 mt of wheat for late Aug/early Sep arrival from Russia, Ukraine and Romania. Egypt paid an average fob price of $202/mt. Last week Egypt paid a fob price of $201/mt. Egyptian purchase prices do move slightly higher beyond mid-summer, but we expect only a modest rise between now and early autumn as exportable wheat supplies are abundant.
- The midday Central US GFS weather forecast is drier in IA and northern IL, but is drier across the Midwest thereafter. The best chance for meaningful Midwest precipitation in the next two occurs Sun-Wed. Totals of 0.10-0.50” will be widespread. Totals of 0.50-2.00” are projected to favour IA, N IL, S WI and MI. This will be helpful but additional rain is needed across the Plains, MO and IL in the first half of August. The GFS forecast features the return of expansive high pressure ridging to the Corn Belt Aug 1-7. Fortunately, temperatures are forecast to be near normal, but a close eye will be paid to the length of dryness in August.
- Demand bears have held leverage since mid-July. However, we doubt breaks can be sustained in the next two weeks as the Aug crop report looms and as the models have done a poor job at forecasting weather beyond 5-7 days. More expansive rain is needed in early August.