- Chicago is holding in the green heading into the midday hour with Chicago wheat the upside leader. The rally in Chicago wheat does not appear to be based on any fresh fundamental news, but rather technical considerations as wheat rallies through the 20-day moving average with Chicago futures forming an outside day up. The chart-based aspect of wheat is underpinning corn and soybeans at midday. The volume of Chicago trade since the reopen is pitiful with few wanting to add to risk ahead of first notice day in August futures and the end of the month.
- The USDA August Crop Report looms in just 10 trading sessions and fund managers are growing impatient with long corn futures. We look for a firm close without much bullish conviction.
- Chicago brokers estimate that funds have bought 3,200 contracts of wheat, 3,500 contracts of corn, and 2,400 contracts of soybeans. In soy products, funds have bought 1,200 contracts of soymeal and 2,100 contracts of soyoil.
- US export inspections for the week ending July 25 were; 25.4 million bu of corn, 37.9 million bu of soybeans, and 14.3 million bu of wheat. For their respective crop years to date, the US has shipped out 1,742 million bu of corn (down 284 million or 14%), 1,481 million bu of soybeans (down 447 million or 23%), and 139 million bu of wheat (up 27 million). The US wheat crop year is just starting, but US exports are expected to slow amid high prices vs other origins. Research argues for another 50-100 million bu decline in US 2018/19 corn exports and a 15-25 million bu decline in soybeans.
- US cash ethanol prices have fallen sharply during July with losses of $0.14-0.16/gallon. The ethanol price decline follows the drop-in energy values amid the soaring cost of corn. US ethanol producers are being pinched by high corn costs and are cutting run rates on margin. This fact along with the largest US corn stocks since the mid 1980’s has caused the collapse of the September–December corn spread to a 10-cent discount.
- We look for steady/1% decline in good/excellent crop ratings for the week ending Sunday for US corn and soybean condition ratings. Areas that missed the rain last week are likely to see condition rating declines with 50-55% of the US corn crop pollinating. Early August is like early July in terms of US corn pollination importance and the current rain and this week’s much cooler temperature s will aid the crop. It appears that there is some very good corn in the N and W Midwest which helps aid some of the dire crop woes of IL/IN.
- The US$ keeps rising with a test of the spring highs likely in the coming weeks. The US$ strength looks to persist.
- The midday Central US GFS weather forecast is drier across the W Plains/Delta, and slightly wetter across the Midwest. The major weather models continue to struggle with passing short waves through the Midwest and a potential tropical system that pulls along the Eastern US. Our thoughts remains that better rains will drop across the Midwest and the good news is that no real heat is foreseen (next 2 weeks) in a broad ridge/trough pattern.
- It is the same story of the supply bulls vs the demand bears. Non US feedgrain and wheat supplies are abundant. But, the Aug 12 USDA Crop Report is just 2 weeks away and the bulls hope for a sharp drop in US corn/soy seeded acres. No one will believe August US corn/soy yields with the crop so immature and satellite information lacking a historical precedence. The bears will sell an August rally while the bulls will secure a post report break. A sustained price trend will be lacking until the September Report.