- HEADLINES: Can the EU import US GMO corn, debate rages with EU traders saying yes; GFS weather forecast drier.
- EU can secure US Corn on Government GMO missive issued in early March due to the Russian war. Look for EU purchases of US corn to grow beyond October on price competitiveness vs. Brazil. Active Bull spreading of Sept/December corn on old crop cash tightness and latency of 2022 Delta harvest. US soybeans cheapest in the world as Brazil is virtually sold out with Inflation Reduction Bill to push renewable diesel producers to complete their plant buildouts.
- Chicago grain futures are mixed at midday with the grains firmer while new crop soybeans sag on the weekend rains and the cooler weather forecast for the E and Central Midwest this week. Wheat has recovered from early day selling as taxes and the war limit Russian grain export logistics.
- Chicago trade volume was active for the first 10 minutes with massive September/ December corn spreading and commercial corn buying. Demand was focused on corn and the worsening EU drought. Wheat/soy markets have been followers with traders trying to keep their risk profile low heading into Friday’s USDA report. We look for a mixed to mostly higher close with corn to be the stalwart on growing evidence that the EU can secure US corn for import without GMO trait concern. Ukraine corn can be bought spot amid a few cheap offers.
- Chicago brokers report that managed money has secured 3,400 contracts of wheat, 4,000 contracts of corn, and 2,600 contracts of soybeans. In the products, funds have bought 3,100 contracts of soyoil and sold 2,400 contracts of meal.
- USDA reported that 132,000 mt of US new crop soybeans were sold to China, 105,000 mt of US corn to Italy, and 120,000 mt of US corn to an unknown buyer (rumoured to be Spain). The corn sale to Italy has produced considerable discussion of US corn exports to the EU in the 2022/23 crop year.
- Traders indicate that back in early March due to the war, Brussels changed regulations allowing corn imports from all, including the US (unconfirmed by us at this time). GMO trait concerns were abandoned on war/supply concern. We are seeking confirmation from Brussels, but the dropping of US GMO import limitations could allow a significant amount of US corn to flow into the EU due to the ongoing drought. We guestimate EU 2022/23 corn imports forecast at 22-24 million mt. If the EU could secure 5 million mt of US corn, it is something that is not in the USDA’s current US 2022/23 corn export estimate.
- The EU has been active booking Brazilian corn, but on a landed basis, US corn is cheaper from LH October onward. This allows the US an export window of opportunity. We note that spot Ukraine cargoes could work into the EU under the corridor deal, but forward offers of Ukraine corn are not available and the certainty of supply is unknown. The EU will take cheap corridor Ukraine corn via spot prices, but no one knows how long the corridor will stay open.
- The midday GFS weather forecast offers dryness across the Plains and W Midwest into August 20. Showers are forecast for the E Midwest and Michigan every 3-4 days on ridge riding storm systems. A Plains/W Midwest high pressure ridge limits rainfall totals while producing heat with highs in the 90’s/lower 100’s. The heat and dryness will continue to impact the crop. Crops in the Delta and the E Midwest will enjoy near normal rains and seasonal 80’s/lower 90’s. The GFS weather forecast has been too dry in recent weeks and did not do a very good job catching the weekend rainfall across MN/N IA. The EU model will not be fully released until after the Chicago close. The overnight EU run offered better rainfall across the n Plains and Minnesota.
- Chicago values will chop into Friday’s USDA report with the industry looking to weekly crop condition ratings to assess yields. We hear that corn/soy in KS, NE, MO and S and SW IA are really struggling. Crops elsewhere are improving, it is a case of the have’s and have not’s. However, such hugely varied crops do not often add up to trendline. This is no place to turn bearish Chicago values.