- HEADLINES: Corn, soy firm at midday; US ethanol production slows; GFS weather forecast trends drier again.
- Chicago ag markets are mixed, with row crops firm and wheat slightly lower on profit taking. US and European wheat futures markets are perched at overbought levels, but weakness in wheat between now and winter will be mostly be confined to periodic long liquidation. Spot Paris milling wheat at midday is up €1.75 per ton ($.06 per bushel). Rapeseed futures are up sharply. Brazilian corn futures are up slightly, with the Nov contract sitting at $8.06 per bushel. December Black Sea wheat has rallied to $303 per ton. The bulls lack leverage ahead of NASS’s August yield data, but the bears too lack momentum as international markets rise and new crop corn and soy export demand begins to surface.
- US exporters this morning sold 132,000 tons of soybeans to China. Another 4-6 cargoes should be announced Thursday as we hear of new activity at both the PNW and Gulf. Interestingly, there are two vessels scheduled to arrive and load soybeans at the Gulf this week, which aligns with talk of China seeking old crop US soy. The market awaits Chinese buying to begin in earnest (1.5+ million mt per week), but it is clear China is there under the market and recent large Brazilian imports will only last so long.
- Brazilian fob soybeans for September shipment are offered $15/ton above US origin. Brazilian beans are not offered beyond October.
- US ethanol production through the week ending August 6 totalled 290 million gallons, down 8 million from the prior week and the lowest since early May. Ethanol stocks did contract by 15 million gallons as export disappearance remains elevated. But US gasoline use last week was just 9.43 million barrels/day, down 4% from previous week. Gasoline use has failed to reach and stay above 2019 levels. Last week’s ethanol grind matched the pace needed to hit the USDA’s industrial corn use forecast. Yet, it is tough to be bearish of energy values as US crude stocks erode seasonally. Spot WTI crude has uncovered new buying and is up $0.10/barrel at midday.
- The S American weather forecast has extended dryness across 40% of Argentina’s wheat belt into August 26. A pattern change is needed immediately thereafter if trend wheat yields are to be realised. This is a new threat to exporter wheat production and stocks as Argentine weather has been worryingly identical to last year, when wheat yield fell 7% year on year.
- The midday GFS weather forecast has again eliminated rain from the Central and Northern Plains in the 6-10 day period. Tropical Storm Fred makes landfall in FL on the weekend but its impact on the North American upper air pattern will be minimal. Expansive high pressure ridging stays anchored aloft the Plains and Midwest into August 20, which keeps meaningful precipitation confined to the Delta/Southeast and eastern Midwest. The midday GFS has also trended warmer across the Plains over the next 5-7 days as soil moisture there erodes. Max temperatures in the 90s remain common into late next week.
- A demand driven market looms as non-US exportable surpluses decline. The rate and intensity of this forthcoming recovery will be determined by US crop size, specifically NASS Sep yield forecasts. We continue to maintain our recommended strategy to get ahead of global importers by adding to coverage on near-term weakness.