- HEADLINES: Chicago mixed in slow volume on a lack of passion; China loading out US old crop soybeans; Egypt’s GASC wheat purchase at 6-year high.
- Chicago futures are mixed at midday. Soy futures are lower on the weakness in other vegoil futures, and the rain forecast for the Northern Plains and W Midwest on Friday and the weekend. The forecast calls for 0.25-1.25″ of rain for key crop areas that have been in a dire drought since May. Corn/wheat futures are firm due to a 180,000 mt purchase of wheat by Egypt’s GASC at the highest FOB price in over 6 years. There were just 6 offers of wheat from E Europe and Russia. If freight costs are included, the CIF Egyptian GASC wheat purchase is the highest looking back to 2011/12 (recall the dire US drought at that time). World wheat prices keep rising sharply with buyers chasing the market upwards. We look for a mixed Chicago close with the grains staying firm heading home, while key support should underpin November soybeans below $13.50.
- Paris wheat futures are up €5.25 at $248.00 amid strong demand and tightening milling wheat supplies. The fundamentals of world wheat are bullish on limited exporter supplies and concern that arid weather could damage Argentine hard wheat without needed rain into the middle of September. The Argentine weather forecast does not offer much rain into September 3, so traders are starting to sit up in their chairs and pay close attention. The world cannot afford the loss of any Southern Hemisphere wheat, either in Argentina or Australia.
- China booked another 131,000 mt of US soybeans in a new crop position. We see that China is actively loading out old crop soybeans from the Gulf with vessels going under spout and another 3 boats waiting. We look for China to export 500-600,000 mt of US soybeans during August.
- Chicago brokers estimate that funds have sold 3,200 contracts of soybeans, while buying 3,000 contracts of corn and 2,500 contracts of Chicago wheat. In soy products, funds have bought 900 contracts of soymeal while selling 3,100 soyoil. The fund selling in soybeans is falling into commercial pricing.
- US farmers are widely discussing the soaring price of fertilisers for the 2022 crops. Midwest farmers are considering backing down fertilisation programs, but the real nearby impact is that pulling in new marginal farmland into production in the Plains/Delta looks unlikely. US/corn seeded acres may be capped around 180 million acres in 2022. US farmers will choose wheat/soybeans vs corn via the high price/outlay for nitrogen, potash, and phosphates to plant corn. This is a reason why December 2022 corn futures continues to rise on the need for additional acres.
- The US ethanol industry produced 286 million gallons of ethanol vs 290 million gallons last week. The US now needs to produce 300 million gallons/week to reach the USDA 2020/21 forecast.
- The midday GFS weather forecast is consistent with the overnight run. Another 48 hours of warm/dry weather will prevail before rain starts to fall across the N Plains and Minnesota. Most of the remainder of the Midwest/Plains stay dry into Monday. Highs are in the 80′s and low 90′s before a slow moving cold front pushes southward. Weekend rains are estimated in a range of 0.25-1.50″ across the Dakotas/Minnesota while totals further south range from 0.2-1.00″. Coverage of the Central US rain through next Friday is 65-70%. However, the forecast is changeable due to the likely development of Hurricane Grace in the Gulf of Mexico. The hurricane targets the Yucatan Peninsula with inundating rainfall. Warm/dry weather returns to the Plains/W Midwest during the 10–15-day period.
- Low volume and low interest is producing mixed Chicago values at midday. The Pro Farmer Tour is not finding much to argue about in relation to crop size. Soy pod counts could be better, but heat is quickly pushing corn to the finish line. China is expected to remain a buyer of US soybeans while world wheat prices rise on tightening exportable supplies. A Chicago price bottoming process is underway as the market awaits elevated import demand for the new crop.
- UPDATE:
- Today, Egypt’s GASC purchased 180,000 mt of wheat from Romania and Ukraine for shipment in Oct 05-15. The average FOB price paid was $296.65 mt. That is up $35.16 mt from the average price paid at the tender held two weeks ago. For the second time in a row, there were only 5 offers. The lowest Russian offer was $21 mt above the lowest Romanian offer. The average CIF price paid in today’s tender was $331.58 mt. That is up $37.84 mt from the last tender price. Ocean freight rose $2.68 mt to $34.93. Freight is believed to be a record. GASC will pay for the grain within 180 days. Payment in 180 days is estimated to add $4-5 mt to the cost of the wheat. This is the 6th tender in a row that non-Russian origins captured most or all of the business. The average FOB price paid in this tender was $35.16 mt above the last tender. It is also nearly $87 mt more that the average price paid at a tender held a year ago.
- Spot Paris milling wheat has recovered all of Tuesday’s break. Non-US cash wheat markets are being driven by the abrupt decline in Russian production and a real lack of high protein milling supply in Western Europe. European milling wheat premiums have added further value to wheat. Spot milling wheat cash basis in Northern Germany has recovered swiftly from harvest lows in mid-July. Like futures, the seasonal trend in EU wheat basis is positive until new crop production is known. That cash markets are keeping pace with futures is important given it is only August and new Northern Hemisphere wheat production isn’t due for another 11 months. We also note that the surge in Black Sea feed wheat (and barley) will work to shift demand back to corn beginning in early autumn. The US corn market in particular stands to benefit from this shift.