- HEADLINES: Rain forecast sinks new crop corn/soybeans at midday; China books 5-7 cargoes of new crop soybeans off PNW for October.
- Chicago mixed at midday; The battle of condition ratings vs wet weather for Illinois, Indiana, and Missouri. It has been a broadly mixed and thinly traded morning of trade. July contracts continue to outperform on the upside amid the lack of supply that is producing premium cash markets. The July/Dec corn spread has gained a hefty 17.50 cents to $1.20 premium while July soyoil is back to gaining on December with the nearby rail soyoil basis priced at 7.5 cents over. July futures are expected to keep performing with shorts caught on the wrong side of the futures market. The July/December corn spread is back at contract highs with a close above $1.22 projecting a $1.40-1.50 July premium.
- Farmers in N Plains, Minnesota and Nebraska worry about heat returning without rain, while farmers in the E Midwest report that their crops are looking better. Traders continue to debate US production with weather producing differing outcomes depending on your Central US location. E Midwest crops are improving following the coolish/wet weather, while crop struggles deepen amid short soil moisture across the N Plains and the NW Midwest. The one thing that N Plains and NW crops cannot endure is heat. Any temperatures above 90 degrees in the next few weeks is going to cause a sharp fall each state’s crop conditions.
- Since the morning reopen, Chicago brokers estimate that managed money has sold 3,200 contracts of wheat, 2,900 contracts of soymeal and 9,000 contracts of corn. On the buy side, funds have purchased 4,300 contracts of soybeans and 3,700 contracts of soyoil. Active soyoil/ meal spreading is returning.
- There are strong cash reports that China used the morning decline to secure another 5-7 cargoes of US soybeans off the PNW for October. The demand lifts recent purchases close to 14-17 cargoes since Friday. Sinograin is said to the be the buyer for the reserve. China’s cash soybean crush margins are still in the red which is keeping crush demand limited. We hear that China’s Government will be using breaks in Chicago soybeans and corn to add to their new crop purchases. China is rumoured to have resting buy orders under $5.20 basis December corn futures for late 2021 export.
- Central IL cash corn is trading at 27-32 cents over according to elevator sources. This makes taking July receipts profitable with a US export program to China underway in the Gulf.
- Central Illinois spot cash soybean bids are 70 cents over November or $13.81/bu. This price is below spot July futures. The July/November soybean spread is trading at $.98/bu premium, well off the highs that were set back in May at over $2.00 over. With a US soybean export program that will be ramping up during July, stopping deliverable receipts makes some economic sense for an exporter, but not for a domestic crusher.
- The midday GFS weather forecast is outright wet across Illinois, Indiana and Arkansas with 10-day rains of 3-7.00″. The forecast is wet enough that worry of localised flooding is real/concerning. Some areas of IL/IN could receive more than 7-10″ of rain which following the weekend rainfall, will spark low level flooding. On the other side of the Midwest is Iowa, Minnesota, Nebraska and the Dakotas where the forecast has gone starkly drier. A cut-off low pressure vortex that is a slow mover will produce Midwest “haves and have nots”. Chicago will see E Midwest rain as bearish, but we hold a growing concern that Illinois/Indiana and Arkansas will see excessive rain. Pattern stagnation is a growing problem of climate change, and this looks to be playing out with some rigor into July.
- Wet weather is seen as bearish to Chicago, but it is all about rainfall locations and amounts. The N Plains and the NW Midwest will be short-changed on the rains with coming heat for the western half of the US adding to yield worry. China is back securing US new crop soybeans while US spring wheat yield potential is in sharp decline. Dec corn is nearing downside targets at $5.25-5.35. This is no place to make new sales.