- HEADLINES: Midday weather forecast leans hotter/drier with additional rain for Dakotas Thursday pm/Friday; US old crop corn demand understated?
- Chicago futures are mixed at midday with July corn trading in the green while soybeans/wheat slide in risk off trading ahead of the USDA June Crop Report due tomorrow. The USDA report and rain for portions of the Dakotas have set a slightly bearish market tone this morning. However, since the medium and extended range forecasts offer limited rainfall for the Plains and W Midwest, any selling pressure has been modest. And outside of July corn futures, it is more a lack of buying than any aggressive Chicago selling.
- We look for a mostly lower Chicago close today with US weekly export sales to be uninspiring ahead of the USDA/CONAB June Crop Reports. Buyers would rather wait until after the USDA June report to make sure they are not sideswiped with any bearish surprises.
- July corn futures are firm relative to new crop corn as the index fund roll is in its third day and US old crop corn demand shows no sign of abating. We mentioned that US Census corn exports through April are 153 million bu above weekly FGIS inspections (allows for 3,050 million bu of 2020/21 US corn exports) and that the weekly US ethanol grind is nearly back to 2019 levels, and well above where the USDA forecast the US corn ethanol grind for the 2020/21 crop year.
- The point is that 2020/21 US corn demand could be understated by some 350-400 million bu (not including any change in feed/residual). The high price of corn has not had much (if any) impact on US corn exports or the US ethanol grind as Americans return to their old driving ways. This old crop demand would drop US corn end stocks to just 900 million bu. And we would argue that the USDA is making an even larger demand mistake in 2021/22 US corn demand with exports and the ethanol grind too low by a huge 650-750 million bu. Why should US 2021/22 corn exports be any smaller than 2020/21 with Brazil losing 18-22 million mt of corn and China importing corn throughout the entire crop year.
- Chicago brokers estimate that managed money have been sellers of 2-3,000 contracts of corn, 2,500-3,000 contracts of wheat, and 7-8,000 contracts of soybeans. In soy products, funds have sold 2,600 soymeal and 4,700 contracts of soyoil.
- US weekly ethanol production was 314 million gallons, down just 3% from a comparable week in 2019 and up 10 million gallons from last week. US ethanol stocks stand at 838 million gallons, down 8% from last year. US ethanol margins are highly profitable, and we would argue that the USDA should raise their ethanol corn grind by 75 million bu for 2020/21. A USDA bump of 50-75 million bu is expected Thursday. The midday GFS weather forecast is like the overnight run with showers/storms for the Dakotas on Thursday night/Friday with rain totals of 0.25-1.25″ favouring the western halves of each state. A few light showers also fall on Nebraska, Iowa, and Missouri on the weekend. Unfortunately, only a few spits of rain are offered for Minnesota, Wisconsin and Michigan as their soil moisture levels sharply decline.
- A ridge of high pressure then expands across the West Central US producing another lengthy period of heat/dryness with high temperatures returning to the mid-80s to the mid-90s next week. As the summer season progresses, a high-pressure ridge will become dominate across the West Central US. We remain concerned by the N American pattern of ongoing heat/dryness into July.
- December corn futures nearly filled an open chart gap at $5.9275 before reversing. November soybeans fell to support at $14.15-14.30 with wheat unable to engender any downside momentum as Black Sea producers are not willing to sell a new crop that is 2-3 weeks away from harvest. Corn has the most bullish story followed by soybeans. We continue to lean towards a bullish corn surprise from USDA tomorrow on demand.