- HEADLINES: Chicago bounces with July leading; Midday GFS weather forecast stays with active weather pattern for Central US into July; Brazilian corn crop still in decline.
- Turnaround Monday – July futures lead on cash premiums; Traders debate Central US July weather; Following rain related opening selling, Chicago futures were able to recover with July leading the gains as first notice day looms with cash markets still priced at a premium. July soybeans and soyoil paced the recovery with traders remembering the strong rally that occurred in late April as the shorts covered, fearful that they would be forced to perform/deliver. The rains may help make additional new crop supply, but the old crop is tight, and users do not have as much coverage as many in the industry have pencilled in. End users are hoping that farmers sweep bins clean in July, but most Midwest farmers have already sold out any/all cash length.
- 100 deliverable receipts were cancelled in soyoil leaving just 767 remaining. Illinois rail soyoil is trading at 7-7.5 cents over July Chicago futures which is likely to cause zero deliveries. Major grain and energy companies are pushing through with their renewable biodiesel plant construction plans. No one is concerned by any wavier from the EPA/Biden Administration..
- Since the morning reopen, Chicago brokers estimate that managed money has bought 3,000 contracts of wheat, 6,000 contracts of corn and 5,500 contracts of soybeans. In the soy products, funds have bought 2,000 contracts of soymeal and 1,200 contracts of soyoil. The algo buyers have been on the long side of the market following the push lower to new lows on the reopening.
- FGIS export inspections for the week ending June 17 were 58.3 million bu of corn, 20.1 million bu of wheat, and 6.4 million bu of soybeans. The exports were in line with trade expectations and weekly vessel loadings. For their respective crop years to date, the US has shipped out 2,185 million bu of corn, 2,093 million bu of soybeans, and 45.7 million bu of wheat. Remember that monthly Census exports are running 753 million bu more on corn and 124 million bu more on soybeans. Research argues for a 3,000-3,050 million bu corn and 2,325 million bu US 2020/21 soybean export estimate. Both are well above the latest June USDA forecast.
- USDA/FAS reported that 336,000 mt of US soybeans were sold to China with another 120,000 mt sold to an unknown destination. The combined sale is 456,000 mt and we have heard that another 200-400,000 mt could be announced on Tuesday or show up in Thursday’s weekly export sales report. The buyer is (unsurprisingly) rumoured to be Sinograin for their reserve. China crush margins in the new crop position are improving, but still negative, which has China crush importers concentrating on Brazilian/Argentine supplies for August/September.
- Brazilian corn crop estimates continue to slide on poor yield performance. Although just 5% of the Brazilian corn harvest has been completed, yield data points to a Brazilian corn crop of 86-88.6 million mt. Some sources are refining their estimate awaiting additional information from Deral, Parana’s crop ministry. Such a meagre Brazilian winter corn crop is going to limit their July/August exports and shift demand back to the US.
- The midday GFS weather forecast is drier than the overnight run across the SW Midwest and the E Plains, but slightly wetter for North Dakota. Extreme heat is forecast for early next week with rains to return starting Thursday/Friday. NW Iowa, Nebraska, Minnesota, and the Dakotas remain extremely dry and in dire need of rain. This NW Midwest and N Plains drought looks to worsen in the coming weeks. Crops cannot endure extreme heat amid the lack of soil moisture. It is heat that will become of sizeable importance
- Mother Nature cannot make additional old crop supply. It is July futures that will lead Chicago upwards into mid-summer. Yet, it is July weather that determines Midwest/N Plains corn yield and August weather for soybean yield. We maintain a bullish bias in that any yield loss is too large amid US 2021 corn end stocks under 1,000 million bu and soybean stocks under 120 million bu. Don’t sell sharp breaks.