• HEADLINES: Chicago drops with the wetter midday GFS weather forecast with rains for IA/IL; Russian wheat yields disappoint; Canadian canola reverses early loss.

• Chicago futures are mostly lower at midday in mediocre volume. StoneX’s lower yield projections have failed to spark much new buying interest, while weaker crude futures have weighed on Chicago soyoil. A larger than expected build in US crude stocks has reduced bullish energy market momentum at $74 per barrel, basis spot WTI crude. Concern over the rise in global Covid cases is noted. We doubt US energy consumption/consumer spending will be much affected in the near-term, but more uncertain is how European and Asian governments respond to the spread of the Delta Covid variant as autumn approaches. Interest in new ag positions remains lacking.

• We note that Canadian canola futures. after filling an open chart gap, have reversed recent losses. November canola is up $9 per ton at $691, which compares to November Chicago soybeans at $485. Elevated US soyoil production will be required into early 2022 to fill the void left by reduced Canadian canola crush and exports. Recall world vegoil markets tend to find seasonal bottoms in midsummer, and so spot Chicago soyoil at $0.61 foreshadows newer highs by early winter.

• Russia’s cumulative wheat yield at 49% harvested is down 7% from last year. This reflects a rapid widening of year on year discrepancy, which was largely expected as yields in the Central and Volga regions were unlikely to match last year’s incredible results. Russian wheat data must be analysed on a week-to-week basis, but the seasonal trend in yields (lower) implies a final crop size of roughly 75 million tons, 10 million below the USDA. US and European milling wheat futures are weak today, but only due to profit taking. Algeria bought an estimated 300,000 tons of EU origin wheat this morning. Turkey secured 245,000 mt of optional origin supply. Pakistan returns to the world wheat marketplace in late August.

• US ethanol production through the week ending July 30 totalled 298 million gallons, unchanged from the prior week and 7 million above the pace needed to hit the USDA’s corn grind target. Assuming weekly ethanol production is unchanged over the next 30 days, corn used for ethanol in 2020/21 will be 5,060 million bu, 10 million above the USDA forecast. We would also highlight that US gasoline disappearance last week totalled 9.8 million gallons per day, up 1% from the same week in 2019. Elevated US ethanol production is required to prevent stocks contraction. US crude stocks last Friday totalled 439 million barrels, vs. 436 million the previous week and unchanged from 2019.

• Other breaking news is absent and little change in volume/open interest is expected into next week’s USDA report. NASS should begin the process of lowering US production, but a dramatic bullish supply shock is unlikely.

• The GFS weather forecast is wetter from E Iowa and into Central Illinois as the model has pushed the rains further south than what was indicated by the GFS/Euro models overnight. We would mention that the GFS ensemble is holding the rains further north in reduced amounts (E MN/WI) through next Wednesday and the Canadian model is similar. The Canadian model keeps Iowa drier with only 0.25-0.75″ of rain from E Iowa and NE IL. The EU model will be watched before the close as to the positioning of the rain next week. Our bet is that he rains will stay across the Northern Lake States.

• The 11–15-day forecast features a US high pressure ridge West and another system passing through the Central US offering 0.25-1.00″ of rain. Confidence in the extended GFS operational model is low due to run-to-run differences.

• Price is following the raindrops; Chicago futures fell amid the wetter forecast for Iowa/Illinois at midday. Yet, China cash soymeal trade was massive today for January-April with nearly 700,000 mt changing hands. China pig producers are tentative with nearby coverage as feeding margins are only neutral. A host of world end users have poor forward coverage and hope for a bearish August crop report to start purchase programs. We see strong support below $5.40 Dec corn and $13 November soybeans. Wheat drops are corrective. The Chicago soymeal market looks to be scoring seasonal lows against $350/December futures. Notice the bottoming chart pattern below.

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