- Chicago values at mixed at midday with spread unwinding/position squaring featured ahead of next Wednesday’s USDA Crop Report. Corn has been underpinned by the liquidation of long soybean/short corn spreads, while the same is occurring in wheat following record large private estimates of 2020 Canadian production. Traders are discussing how big-is-big in terms of US corn/soy yields, but the bears would like to see a soaking rain across IA before they lean into a larger net short corn position.
- Funds are modest longs in wheat while continuing their exodus of long soybean futures. The market has a heavy tone with favourable Central US weather and upside surprises on world crops (Russia wheat/Ukraine corn/Canadian wheat) keeping the bulls on the sidelines. It would be historically rare for the US corn market to forge a bottom in early August prior to the USDA August crop report. Late August to mid-September is a better timeframe for corn/soybean futures to start carving out a bottom.
- Chicago brokers estimate that funds have bought 3,900 contracts of corn, while selling 4,200 contracts of soybeans and 3,200 contracts of wheat. Funds have sold 2,800 contracts meal and bought 2,700 contracts of soyoil.
- For the week ending July 30, FAS reported that the sold 22.2 million bu of wheat, 106 million bu of corn (both crop years combined), and 64.3 million bu of soybeans. The wheat sale was larger than expected, while corn/soybean sales were right at trade expectations.
- For their respective crop years to date, the US has sold 376 million bu of wheat (up 32 million or 9%), 1,724 million bu of corn (down 242 million or 12%), and 1,725 million bu of soybeans (down 67 million or 4%). We anticipate the USDA trimming its 2019/20 US corn and soybean export estimates by 25 million bu next Wednesday. WASDE is unlikely to adjust is new crop estimates based on the mid July surge of Chinese demand for US corn and soybeans. FAS reported that China booked 2 cargoes of US soybeans (126,000 mt) for new crop delivery. China continues to book US soybeans, but at a pace far less than late July. No other daily grain/soybean sales were announced.
- Brazilian farmers are happy with a +50% profit margin on planting new crop soybeans due to the cheap Real. Farmers are looking to plant soy wall-to-wall according to S American sources. Brazilian soybean seeding can start on Sept 15 and a yearly seeding gain of 4-6% is being discussed. The Brazilian Real is priced at 5.35:1 US$ today. A year ago, the Real was trading at 3.92:1 with Brazilian soybean profit margins just 15-20%. The 35% annual fall in the Real is providing a massive economic incentive to farmers
- The midday GFS’s weather forecast details are slightly drier in NW IA, but wetter for the E Midwest/Missouri over the next 10 days. Rainfall deficit pockets will exist in W IA, but positive moisture anomalies stay intact elsewhere. The forecast features mild temperatures into the weekend with a warmer/wetter pattern to follow next week. Daily rain chances will help N Plains and Midwest crops from Aug 16-24. The forecast leans positive for Midwest corn/soybean yield potential into mid-August. No extreme heat is offered across the Midwest for at least the next 2 weeks.
- Outside of a dry pocket in IA, the US corn/soy yield potential will likely further increase. 2020/21 US corn and soybean stocks will be on the largest in years. We doubt that the cash market has yet come to grips with the abundance of grain. Also, Canada has a big wheat/canola crop in the making which will produce record large North American supplies. Research maintains a market stance of selling any rallies of substance. Sept Chicago corn should test key support at $3.00 while Nov soybeans drop to $8.65-8.75.