- Soybeans are higher, wheat is lower with corn caught in-between in midday Chicago trade. Favourable world weather is pressuring wheat values while soybean futures are reacting to China’s return as a US soybean purchaser/importer. We look for a mixed Chicago close with November soybean futures running into resistance above $8.70 while July KC wheat uncovers support below $4.50. Chicago lacks direction for now, but in the coming days, the seasonal price trends will turn down for the entire Chicago complex. It is difficult to bull a Chicago market beyond mid-June without a summer Central US weather problem.
- China’s USDA confirmed purchase of US soybeans overnight has calmed nerves regarding US Farm Goods retaliation for Friday’s US Hong Kong sanctions. Cash connected Gulf traders report that China is back bidding for US soybeans in a new crop position. USDA confirmed that China booked 2 cargoes or 132,000 mt for 2020/21. The China buying confirmation has produced a short covering Chicago soybean rally with July futures posting double digit gains. The US/China appear to have avoided any political spill-over to the Phase One Trade Deal which is a positive development for US agriculture.
- China is asking for US new crop soybean bids, a welcome sign. China and the US continue to work through trade pact implementation, but the Phase One Trade Deal has withstood some harsh politics from both sides without bending in the past few weeks. US Senator Grassley says he is not worried about China adhering to their Phase One Commitment. That said, cash traders report that China remains highly selective in their US purchases and won’t chase rallies.
- Questions arise as to whether WASDE will raise their US corn yield estimate above trend (178.5 bushels/acre) in the June WASDE report. WASDE has shown flexibility in raising or lowering yield in June to account for weather and seeding dates. WASDE typically waits until July to make any adjustment in their soy yield. The point is that the 2020 US corn crop is off to a favourable start and condition ratings are likely to rise further amid the coming mix of weather in coming weeks. US corn crop conditions are likely to show further gains.
- GASC secured 2 cargoes of Ukraine wheat at $210/mt with freight costs amounting to just over $10/mt for a landed price of $220.40-220.90. It is not surprising that the Ukraine will be the early world wheat seller to GASC with interior Russian wheat prices above the export market. The initial Russian wheat harvest should flow to domestic millers with Russia becoming more active in world trade in August/September.
- The value of the US$ has been hurt in recent weeks against the Brazilian Real, Russian Ruble or the €uro, but not the Argentine Peso. The decline in the US$ would have been important had it occurred prior to Northern Hemisphere seeding. Today, Argentine corn is offered $0.30/bu under the US Gulf with Russian wheat being $0.54/bu cheaper. Yet, the weaker US$ could start to slow S American ag expansion in 2021.
- Chicago traders estimate that funds have bought 3,000 contracts of corn and 4,600 contracts of soybeans, while buying 2,900 contracts of wheat.
- The midday US weather forecast shows no sign of a Midwest blocking high pressure ridge with near to above normal rainfall for the next 2 weeks. Midwest high temperatures in the 80′s to lower 90′s will prevail for the next 5 days with cooling temperatures after June 8. A low pressure trough will sag southward during the 10-15 day period. The forecast is favourable for Central US row crops.
- If a Midwest weather problem does not surface by mid-June, Chicago summer row crop prices will turn down (again) led by corn. The Chicago corn market has been consolidating for over a month. The urban unrest is again cutting into fuel demand while US corn/wheat export demand is slowing. We would sell a significant corn rally as any above trend yield will only add to the 4 billion bu end stock total.