- Chicago markets are mixed this morning with wheat holding in the green while corn/soybeans sag on favourable Central US weather and rising yield potential. USDA/FAS did not announce any new Chinese purchases of US soybeans, for the second day in a row. It appears that China’s buying has slowed since late last week with there being no new interest in US corn/wheat purchases. The volume of Chicago trade has slowed at midday with interest waning. End users already have strong forward coverage in corn/wheat amid summer declines. The end users will have to see even cheaper values to extend their forward coverage into Q1 2021. We anticipate a mixed close wheat gaining on the summer row crops going home.
- There are rumours that Brazil booked 2-3 cargoes of US HRW wheat in the past 24 hours. This along with private analysts cutting their French/EU wheat crop estimates on disappointing yields has helped US/French wheat futures rally. Brazil has been booking Russian wheat, but based on CIF costs, it appears that some of this demand is being pushed back to the Gulf. US wheat remains expensive in the world market, but Mexico and Latin American buying has supported recent price breaks.
- For the second day in a row, China is a “no show” for US soybean buying. FAS announced no new sales of US grain or soybeans under the daily reporting system. China is being a more measured buyer of US soybeans this week with traders estimating the purchase of 2-4 cargoes since Monday. Yet, a few days is not enough to make trend and traders will stay laser focused on China interest as other key world soy/grain importers are being impacted by Covid-19 and a deepening world recession.
- Chicago traders estimate that funds have sold 4,700 contracts of corn and 400 contracts of soybeans, while buying 4,200 contracts of Chicago wheat. In soy products, funds have sold 1,200 contracts of soymeal and bought 2,000 oil.
- The EIA Weekly Biofuel report was supportive with production reaching a post Covid-19 high and getting closer to the weekly level needed to validate WASDE’s 4,850 million bu 2019/20 corn grind. We now estimate 2019/20 US corn ethanol grind at 4,800 million bu based on this week’s data. US ethanol stocks recovered slightly to 852 million gallons, up 20 million on last week, but down 17% from last year. The US summer driving season will be ending by the middle of August, with miles driven normally in decline into September.
- The midday GFS is consistent with the overnight run and further north with rains into W/S IA this weekend. Rainfall totals for parched W IA are estimated in a range of 0.4-1.25″ which would go a long way to stabilising corn/soy crops. Otherwise, the rainfall forecast is little changed from the overnight run with 0.5-3.00″ of rain expected across the Central Plains, the Delta and the southern half of the Midwest. Little rain is expected north of 1-80 into August 8, but soil moisture there is adequate with seasonally cool temperatures. The midday GFS forecast keeps any high-pressure ridging located across the SW corner of the US into mid-August. There is no evidence of any Central US extreme heat into August 13.
- Other than unexpected Chinese demand for US corn or wheat, it is hard to find another fundamental that alters the bearish supply theme. Whatever US corn/soy yields that come out in the Aug 12 NASS report, traders will add to it based on normal/ favourable August weather conditions. This means that seasonal lows could be forged in mid-September or mid-October following updated NASS crop estimates. How big is big is the question that every farmer and grain traders is now pondering on yield.