- It has been another morning of sizable losses in Chicago corn, soy and wheat futures. The lack of any meaningful news from this week’s US-China trade talks is noted. Fundamentally, a wetter Central US pattern is likely beyond August 7. US weekly ethanol data again leans bearish. And EU grain and oilseed futures have followed the US market lower.
- We would be very cautious of chasing breaks from current prices amid sizeable US acreage and yield uncertainty. Production potential has stabilised, while RMA data suggests indemnity payments are rising quickly. The lack of US demand, and rising non-US crop production, will likely cap rallies. But the August crop production and WASDE reports could provide some short term market fireworks.
- FAS this morning did report a sale of soybeans to an unknown destination. The sale included 500 mt for old crop delivery and 104,000 for new crop.
- However, take-home points from this week’s meeting in Shanghai are mostly more of the same. There is talk that China will commit to buying more US ag goods, but the market is well aware that China has not followed through on similar commitments previously. The next round of meetings will take place in early September in the US.
- US weekly ethanol production through the week ending July 26 totalled 303 million gallons, down 2 million from the prior week and the lowest since late April. Ethanol margins have been squeezed since early summer. Yet, stocks are ballooning to record levels, with some in the trade calling for a strategic slowdown in future weekly ethanol production.
- US ethanol stocks as of last Friday totalled 1,028 million gallons, up 33 million from the prior week and a new all-time high. Ethanol exports continue to fall further behind the pace of last year. A slowdown in production is needed to better balance ethanol supply and demand, and we note that stocks seasonal rise from early to late autumn as consumption slows. Weekly corn export sales are expected in a meagre range of 5-10 million bu. US grain and soy markets lack a needed demand driver.
- EU and Russian wheat exports also continue to struggle against year-ago levels. Russian wheat shipments in July are tallied at 2.2 million mt, vs. 3.8 million a year ago. EU wheat exports are down 15% from late July a year ago.
- The midday Central US GFS weather forecast is wetter in IA, IL and WI next Wed-Fri, and is better agreement with this morning’s EU model output. A broad NW upper air pattern is forecast to end beginning early next week and a more zonal jet stream alignment will take its place. This will allow for better rain chances across the Eastern Midwest late next week and beyond. It is critical that rain projected across Central IL materialises as 30-day moisture there is stuck at 10-50% of normal. But the forecasting models have been consistent in the evolution of a wetter pattern in early August. Threatening heat remains absent into August 15. Rains are falling as expected across E KS & NW MO.
- Dec corn has fallen below major technical support and it is key that the contract’s 100-day moving average ($4.14) hold today. The next downside target sits at $4.07. With the all-important August WASDE still 7 trading sessions away, the demand bears continue to hold leverage.