- HEADLINES: Chicago recovers from morning lows; GFS weather forecast abruptly drier in Plains, Western Midwest.
- Chicago selling has slowed dramatically at midday. The fear of a sizeable hike in corn area (4-6 million acres) along with precipitation expanding into the Eastern Plains this weekend up until now has sustained a ‘get me out’ mentality in Chicago. Yet, at current prices, the market is now trading record corn and soy yields along with a sizeable acreage hike in corn. Whether NASS on June 30 confirms corn seedings in excess of 94 million acres is unknown, but unless such expansion is confirmed, and Mar-May corn and soy residual use collapses, the market will quickly add premium in early July. Spring wheat futures are now trading higher, as that market’s chore of assuring area expansion in 2022 will be arduous. And the Jul-Dec spread reached its exhaustion top on Wednesday, with Dec to take over bullish leadership moving forward.
- Weekly US export sales were uninspiring but did include modest new purchases of old crop soy by China. Corn sales through the week ending June 17 totalled 8.5 million bushels, vs. 1 million the previous week. FAS pegged physical corn shipments last week at 67 million bushels, vs. FGIS’s tally of 58 million. FGIS continues to underestimate the reality of corn exports.
- Soybean sales totalled 5.2 million bushels, vs. 2.4 million the previous week and included a cargo of new demand from China. Wheat sales totalled 14 million bushels, vs. 11 million the previous week, which matches the pace needed to hit the USDA’s target. US meal sales through the week ending June 17 were an impressive 388,000 metric tons. The highest since mid-January. S American meal basis has rallied $20-22 per ton in just the last 30 days.
- US meal is now very competitive in the world marketplace. Enlarged meal exports through the remainder will be highly supportive of crush margins and crush rates, as crushers in recent months have been reluctant to crush for oil production.
- We also believe that China will be in the market for US soy supplies in late August as Brazilian fob premiums rise and freight costs work less against importing from the US. The message is that already pace analysis suggests US corn and soy exports are understated. Balance sheets can barely tolerate new Chinese demand prior to Aug. We note that weekly soy sales of just 3 million are needed to meet USDA’s forecast.
- Chicago brokers report that funds have sold a net 5,000 contracts of beans, 3,500 contracts of meal, 3,000 contracts of wheat, while funds have bought a net 1,500 contracts of oil and as of midday have turned into net buyers of 4,500 contracts of corn. A drier midday forecast is noted. Drought relief across the Plains, western IA and Minnesota is unlikely into July 10.
- The midday GFS weather forecast is noticeably drier across western IA and the entirety of the US Plains over the next 10 days. Active showers will be spread across the Central and Eastern Midwest over the next 72 hours. Cumulative totals of 1-2″ will be widespread, with totals upwards of 4-12″ to impact Missouri, Illinois and Indiana. Rainfall there will likely trigger short-term flooding issues.
- Beyond the weekend, rain chances into July 10 will be strictly confined to the eastern Midwest and Delta. Upper-level ridging moves into the Plains next week and is forecast to cover the whole of the US beginning July 8. Confidence so far out is low, but how the models handle high pressure ridging moving forward will be critical. The return of heat/dryness in July is most probable in areas already facing deeply negative soil moisture anomalies. We also note that max temperatures in Canada next week reach into the mid-90s.
- NASS’s June stocks and seeding data will determine whether corn/soy markets are fairly valued or whether premium must be added dramatically. This has pushed the spec community to the side-lines. It is a long growing season and it remains that not a single bushel of yield can be lost if US and world stocks are to build in 2021/22. Sales are not advised at current prices.