- Chicago corn and wheat futures continue to drift lower, while soybeans remain supported on yield concerns and hope for nearby Chinese demand. We would note that another day has passed without any new export sales reported by FAS. As the GFS weather forecast began its midday run, moderate rainfall was added to the drier areas of NE and KS. Bullish input remains lacking, and while yield/acreage uncertainty remains, coming rainfall and the absence of threatening heat have allayed fears of shortages.
- The US$ has soared to an 8-week high as macro market further digest the lack of economic growth and need for stimulus in Europe. Commodity indexes look to end the week slightly lower, and our belief is that rallies in raw material markets will struggle unless the US$ falls sharply from current levels.
- China has approved imports of wheat from Central Russia and also soybean imports from the whole of Russia. Russian has been slowly growing its soybean production capacity after 2012 bull markets. Russian soybean production in 2018 totalled 1.7 million mt. Production in 2019 is estimated at 4.3 million mt. Russia’s exportable soybean supply in 2019 is pegged at just 900,000 tm, and so any exports to China in the near term will not be substantial. However, the structure of world soybean flows has changed following the advent of the US-China trade war. Goodwill purchases of US soybean are likely, but China moving forward will look to further diversify its sources of food and feed products.
- US interior corn basis continues to show signs of weakness. We doubt any lasting price break can occur until late August but there has been some measure of farmer selling following the surge in cash corn prices across the E Midwest. Spot CIF Gulf soy basis today is down 10 cents. CIF Gulf corn and wheat down 5.
- It is estimated that managed funds on Tuesday were long 145,000 contracts of corn, vs. 187,000 the prior week, were net long 1,200 contracts of Chicago wheat, vs. 19,000 the prior week, and short an estimated 52,000 contracts of soy, vs 39,000 the prior week.
- Other news is lacking. Key over the weekend will be whether the major forecasting models maintains needed Midwest rainfall in the Aug 3-10 period. It should be noted that the world ag trade will go home amid generally favourable N Hemisphere weather forecasts. Normal/above normal rainfall is offered to the whole of Europe and Black Sea into August 10. It remains that the market lacks fear of supply rationing.
- The midday Central US GFS weather forecast is drier in the Eastern Corn Belt in early August but wetter across the Central Plains and Western Midwest. The GFS forecast keeps strong high pressure ridging confined to the far Western US. Meaningful precipitation will favour the Northern Corn Belt as well as a narrow belt enveloping the far Eastern Plains. The GFS forecast also maintains the potential for soaking Central US precipitation beyond early August as a more zonally flowing jet stream develops. Soaking totals worth 1-3” are offered to KS, MO, IA and IL Aug 5-10. This forecast needs to verify, but the models since Thursday have been consistent in advertising a wetter pattern next month.
- The Aug WASDE may provide bullish supply shock, but amid improving US weather, ongoing favourable weather in the Black Sea and a lack of export demand will likely curtail bullishness.
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