- Rising Russian fob wheat and a sharply higher Brazilian Real are two Chicago fundamental price drivers this morning. Funds have been modest buyers of the rally with US farmers starting to increase their sale of old crop corn stocks. With an estimated 50% of the US corn crop to be pollinating by July 14, the time window for a new crop weather problem is shrinking. Chicago corn prices were weaker early and rallied back to unchanged following the gains in soy/wheat.
- We look for a mixed Chicago close. Doubt exists that the Brazilian Real can fall too far below 5:1 US$ as the break seems to be largely technical of out of positioned Brazilian Real shorts. The Brazilian economy is a mess and a rise back near 6:1 could easily develop by September. This is no place to turn bullish the Brazilian Real.
- The USDA announced another 186,000 mt of US soybeans to China with 66,000 mt being old and the remainder being new crop. China appears to be back securing 1-5 cargoes of US soybeans daily. We note that Trump Administration blocked Chinese airlines flying to the US after June 16 in a political tit-for-tat. China blocked US carriers from flying into China last week and the US is just counter punching China’s actions. The move is likely to further inflame political tensions between the US/China.
- The Russian July fob wheat price has moved up to $207/mt amid the coming difficult transition between and an old crop quota and a new crop sales system that is more state controlled. Russian farmers will be more interested in selling into the higher priced domestic market, than for export. Research looks for Russian fob wheat prices to rise into July, with their seasonal price break being delayed this year to August/September. US weekly ethanol production expanded with American’s slowly driving more miles.
- US weekly production rose to 225 million gallons vs 213 last week. 27% of the US ethanol industry remains shut down. This week’s production total is well below the USDA forecast, and cut is expected from WASDE in their June report next week.
- Chicago traders estimate that funds have bought 2,400 contracts of wheat, 3,200 contracts of soybeans and 2,600 contracts of soymeal. Funds have sold 3,200 contracts of soyoil and 900 contracts of corn. Chicago corn open interest has been rising each of the past 13 trading sessions. We hear that this rise is related to funds taking a larger net short position through swap transactions.
- The US midday weather forecast is slightly drier across IA and the Central Plains, but wetter for IL/IN as the remains of a tropical storm turn eastward more quickly. 10-day Midwest rainfall totals will range from 0.75-3.00″ with coverage pegged at 85%. The overall pattern is progress with no indication of a blocking high pressure ridge. The forecast is favourable for Central US row crops.
- Rising Russian wheat prices and a declining US HRW wheat crop are offering support to US wheat futures. However, the soybean rally is largely based on the sharp drop in the Brazilian currency, the Real, to 5:1 vs the US$. We doubt that the Real decline will continue and Nov soybeans above $8.75 appear overvalued.