- Red is the colour at midday with corn, soybeans and wheat enduring fresh selling pressure. Funds are trapped long in corn/wheat (at higher prices) and are deciding to liquidate heading into the end of the month. December corn is trying to hold support at $4.20 while November soybeans tested their July 9 low at $8.90. World wheat prices have not moved in either direction in recent weeks which limits rallies and breaks in Chicago. Cash basis is firm for Chicago SRW as elevators look to profit from selling forward futures and collecting storage.
- Fund managers are not wanting to add to their bull risk in grain and soy with seasonal price trends down into late summer. Unless the August crop report holds a bullish surprise, old crop cash and fund longs could keep pressure on Chicago heading into the end of summer. It is key that December corn futures close above $4.20 and November soybeans above $8.90 going home.
- The US and China will hold another day of meetings overnight before USTR Lighthizer and Sec Treasury Mnuchin head back home. The USTR will be holding a meeting with Japan’s economic minister to end the week which will hopefully produce a break through that lowers Japan tariffs for US ag US ag goods. Rabobank is forecasting that China has lost 40% of its pig herd to ASF with losses to reach 50% by year end. If true, this would have a major impact on China’s demand for imported soybeans and feedgrains. A cut in China’s pig herd of 50% would imply that China’s 2019/20 import of soybeans could be 10-14 million mt lower than WASDE forecast at 73-77 million mt. Such a reduction on China’s total annual soybean imports would be a significant drag on world soybean values. Note that China’s ag minister forecast that China’s pig herd was down 26% from a year ago, which is sizeable. The point is that China has been lost as a bullish demand driver in world soybean trade for some years to come. Monthly Chinese soybean import data will become important to gauge import losses.
- Brazilian farmers report that they are planning on ramping up first crop corn production based on existing prices and margins. S American farmers are likely to ramp up soybean seedings also, but first crop corn shows more appeal today. Note that winter corn yields have been record large as farmers are wrapping up their harvest of a 100 million mt crop. Brazilian corn export commitments are record large and rapidly growing. US corn export demand is being lost amid steep export competition from S America and Ukraine.
- The midday Central US GFS weather forecast is slightly wetter across the Midwest and Delta than the overnight run. 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. Portions of E IA and NC IL remain too dry with some additional crop stress likely. However, there is no heat indicated for the Central US into mid-August which will favour corn pollination. The 10-15 day forecast offers better rain chances across the Central US which would be timely for blooming and podding soybeans. Some 20-25% of the Midwest is too dry and in need of immediate rain.
- The demand bears received help from Trump tweets this morning that US/China trade talks were struggling. Yet, some 20-25% of the Midwest remains too dry, but temperature are cool which is aiding corn pollination. Chicago seasonal price trends are down during August and corn fund longs are losing patience. December corn is holding support at $4.20, but a bullish August crop report is needed to alter softening price trends. Without a bullish August USDA report, seasonal lows are likely to be formed in late August or early September.