- HEADLINES: Global wheat markets shed premium; Row crops supported by uptick in export demand.
- Wheat market finds new lows for move on Black Sea headline-based liquidation. Uptick in new crop export demand support corn, soy. Reality of Black Sea’s contribution to global grain flows still very uncertain.
- Global wheat futures are down sharply, though have bounced from session lows, amid a flood of negative headlines from Russia and Ukraine. Headlines suggesting today’s meeting between UN, Turkish and Ukrainian officials would aim to boost diplomacy with Russia sparked early heavy selling in wheat, but our feeling is that talks will centre on and around sustaining the recently established Black Sea corridor, the release of Ukrainian prisoners of war and the lack of Russian cooperation at Ukraine’s Zaporizhzhia nuclear facility. The market can see and feel the sluggish pace of Russian wheat exports, but the future of Black Sea exports is opaque. It is clear Turkey has benefited from the recent release of stuck Ukrainian grain cargoes and Ukraine’s ability to supply feed markets in Europe is uncertain. Geopolitics will continue to dominate wheat price discovery until the market can better evaluate global grain trade flows.
- Additionally, European wheat basis remains incredibly firm. Finding high-pro wheat offers has become difficult, and the 22/23 crop year is only 1.5 months old. Importers in the next 30-45 days will be forced to decide between relying on Ukraine and Russia, despite challenging logistics, or funnel demand to other traditional exporting countries. That the EU cash wheat market is working to ration supply so early in the season is noteworthy.
- Combined old/new crop corn export sales through the week ending Aug 11 totalled 33 million bu, vs. 15 million the prior week and the largest since mid-June. Combined soy sales totalled 51 million bu, vs. 15 million the previous week and the largest since mid-April. China secured 29 million bu of new crop soy, and total 2022/23 US soy commitments, including outstanding old crop sales, sit at 776 million bu, vs. 525 million a year ago. We understand that China must price massive tonnages of soy for autumn/early winter delivery, which will occur on breaks despite rising tensions over cosier relationships between the US/West and Taiwan. US wheat sales were a disappointing 8 million bu, vs. 13 million the previous week. Combined old/new crop meal sales were a decent 363,000 mt.
- NOAA’s updated autumn climate outlook features ongoing warmth/dryness across the C Plains and Midwest in Sep, an extension of the current pattern. Frost risks are lower than normal but additional rain is desired across KS, NE, SD and western IA to recoup soy yield potential lost by summer heat/dryness. Drought improvement is offered to TX, OK and AR, which is mostly based on heavy projected rainfall there over the next two weeks.
- The midday GFS weather forecast is wetter in eastern KS next week but is otherwise unchanged from the morning run. A pattern of inundating rainfall will be place through the weekend across the far Southern Plains and Southeast, with cumulative totals across TX and LA pegged at 3-5”. Drought in C and E TX will be eased considerably. Showers elsewhere will be highly regional in nature. Temperatures warm to normal/above normal levels by early next week, with highs in the upper 80s/90s resuming across KS, NE, SD and western IA. The outlook is not overly threatening but there is little doubt 1-2 heavy rain events are desired across the C Plains prior to early Sep.
- The wheat market will be driven nearly exclusively by Black Sea headlines over the next 30 days, with physical grain flows and cash market to more directly determine fair value thereafter. Corn and soy stay rangebound in the Sep crop report, but current values are not overpriced amid strong end user margins, soy crush margins particularly.