- The market this week so far has shed considerable weather premium based on favourable changes to Midwest 6-15 temperature and precipitation forecasts. However, it is only mid-June and weather/supply risks remain sizeable. In fact, our concern over soil moisture and yield potential remains the highest since 2012.
- The afternoon run of the EU weather model, the last of the day, trended significantly drier across all but the far Upper Midwest. The EU’s latest guidance confines rainfall to MN, WI and parts of northern IA. Heavy rain is also offered to the Delta/Southeast, where it is unwanted. Market action in recent weeks is evidence that the trade will be incredibly sensitive to both bullish and bearish weather forecasts. This won’t change until the middle part of August. Latest EU weather model guidance leans bullish as widespread soil moisture erosion continues into late June.
- Soybean futures fell for the third day on technical pressure and forecast rains at the end of the week.
- NOPA’s soybean oil stocks declined for the fourth consecutive month. NOPA soybean oil stocks were down 11% from a year ago at a 6-month low of 1,671 million lbs. This was also the smallest May stocks figure in 6 years. Based on the NOPA data, we look for NASS to report total US stocks near 2,140 million lbs.
- The midday weather models maintain that rains will begin falling at the end of the week, with cooler temperatures next week. But for today, crops in the West are suffering under 100+ degree temperatures. Quantifying any crop losses at this stage is impossible. But the need for record yields has not changed. Support for November soybeans holds around the 50-day moving average near $13.60.
- Chicago corn futures ended mixed, with July adding premium as delivery approaches. New crop futures ended weaker, but we strongly caution against chasing this break. On the margin, weather model guidance has trended drier in Iowa and Minnesota, and there are doubts as to whether soil moisture will improve at all in the next two weeks. Heat and dryness have also returned to the Black Sea region, which we note as climate forecasts have targeted Ukraine and Russia with adverse summer growing conditions. There has been no change to this year’s massive weather risks.
- Dec Chicago corn has held major chart-based support at $5.60. An outright weather pattern change is unlikely across the Plains and Midwest prior to early July. Brazil’s interior market remains perched at $310 per ton, which keeps exporters there out of the world marketplace until safrinha harvest reaches 50% complete in late summer. A recovery in price is anticipated prior to NASS’s June stocks and seedings release.
- US wheat futures ended mixed, with winter contracts lower but spring wheat stabilising on the return of arid/warm weather to the US Northern Plains. We also mention that soil moisture loss will continue across much of Central Russia and Kazakhstan into the end of June. The spring wheat’s market goal is to prevent acreage contraction next year, and further breaks are unlikely until North American spring wheat yields are known.
- Elevated fob prices and soaring freight costs pushed Egypt’s GASC to cancel this morning’s tender for August supply. Note that only three vessels were available to Egypt this morning, and the availability of freight will be more closely watched moving forward. Actual demand is strong, but logistical issues already are disrupting early season grain flows. Note that ocean freight rates do not tend to peak until early autumn.
- Some measure of downside risk remains present in Chicago/KC contracts as harvest looms. But work indicates Sep Chicago is undervalued below $6.50. Sep KC is too cheap below $6.00. Continue to use nearby weakness to add to long-term supply coverage. Concern over corn yield potential remains elevated, which lends further support to wheat on breaks.