- Last week saw grain prices fall (as we reported) amid upgrades in crop forecasts, harvest pressures and ongoing Covid-19 demand cut fears. In addition the funds added to short positions. We have now seen a further cut in EU wheat output as forecast by the EU, 4.3 million mt down to 117.2 million, which is now 7% below average. That said, global production continues to grow according to the IGC who pegged 2020/21 output at 768 million mt, up from 762 million in 2019/20. EU woes are being offset by improved prospects in China and Australia continuing the theme of abundant global supplies. Prices are expected to remain pressured however as the threat of Russian export quotas from January 2021 could well point towards a front loaded export programme.
- In a reversal of Friday’s price action, corn/wheat futures are higher while soy futures hang in the red amid a concern for an expansion of seeding within Tuesday’s NASS report. The average trade estimate looks for a decline of just over 2 million acres of corn and an increase of 1.8 million acres of soybeans which is working to push traders to cover soybean/com spreads. Wheat is following corn as the US winter wheat harvest pushes closer to being 50% completed. The volume of trade has been active. US farmers are hoping for a bullish report to advance old crop corn sales. Movement last week was one of the best in weeks and most farmers are looking to sweep out their bins. We look for a mixed close with July weather forecasts being closely eyed along with the upgrade to the EU weather model on July 1.
- Chicago brokers report that funds have bought 11,300 contracts of corn and 3,200 contracts of wheat while selling 2,500 contracts of soybeans, in the products, funds have sold 1,300 contracts of soymeal while buying 1,900 contracts of soyoil. It is the coming end of the month and quarter which has some fund managers looking to bank profits.
- Weekly export inspections for the week ending June 25 were; 48.6 million bu of corn, 11.9 million bu of soybeans, and 18.9 million bu of wheat. China shipped out a modest 56,000 bu from the interior. The US soybean and wheat export pace was deemed disappointing by Chicago traders.
- US growers report that their crops have improved following last week’s sunshine, warmth and needed rainfall. The improvement should allow for modest gains in good/excellent ratings as soybean/com crops grow. Normally, corn looks its best just prior to pollination when ratings tend to seasonally start to stabilise or slide. We would estimate a 1-2% gain in good/excellent ratings with corn rising to 73-74% good/excellent and soy 71-72% good/excellent.
- Chinese interior corn prices have risen to the same levels as wheat as the recent weekly auctions have failed to stem corn’s price rise. According to USDA data, China has an abundance of corn and wheat stocks, but much of the supply is under Government control. Potentially, Chinese hog feeders could use feed wheat vs corn, but the key is that China wants to underpin its farm income. China needs a high domestic corn price to underpin its 2020 farm income profile.
- Warm temperatures and hit-and-miss showers will be the theme of the late week and weekend weather pattern across the Midwest. The midday forecast is slightly cooler and slightly wetter than the overnight run. The flow of Gulf humidity remains into the Central US which will fuel frequent afternoon thunderstorms. This is not a weather pattern that will choke off Central US rainfall. However, no organized rains look to drop into Tuesday July 7. The 11-15 day forecast keeps high pressure ridging intact aloft the Plains and W Midwest. Light showers will be widespread across the N Plains and Great Lakes, but rainfall in excess of 1″ will be confined to the eastern Dakotas, MN and pockets of IA.
- A sizeable fund short in Chicago wheat and a near-record fund corn short are being unwound prior to NASS’s stocks and seedings data due at midday Tuesday. Some premium is being added amid concern over a lasting pattern of above normal Midwest temperatures, which will overlap the beginning of corn pollination. Stocks and seedings will grab market attention briefly on Tuesday, but thereafter it is all weather into early August.