- HEADLINES: GFS weather forecast is wetter in the midday run for C and E Midwest with 0.4-1.25″ of rain; NASS crop condition ratings in focus; Old/new crop spreads rally on order flow.
- Chicago grain futures are firmer at midday, but well off their early morning rally high as uncertainty regarding US weather and key USDA crop reports later this week dominate trading activity. Few want to chase a Chicago rally or a break, leaving price to chop sideways until more information is available.
- Soyoil appears to be the only Chicago market with strong domestic demand with deliverable receipts being cancelled into first notice day due to a strengthening cash market. US corn, soybean and wheat export demand is tepid with Russian and Brazilian fob grain offers well below the US Gulf. The US corn/soybean market lacks a demand story that makes the bulls nervous. The bears are nervous as too much Midwest real estate is dry and crop conditions are in decline. Until Midwest crop conditions stop declining, it is difficult to be overly bearish with several weeks of key growing weather ahead.
- And the cries of worry are widespread from Midwest farmers that did not receive at least 0.50” of rain this weekend. Crop stress is rising and becoming acute with a 2-3-day period of intense heat just ahead. Key will be NASS crop condition ratings later today (yield determinations) which have been more important than Sunday night’s forecast in recent weeks. This is based on there being no “dome of doom”, a high-pressure ridge that produces heat/dryness.
- Chicago brokers estimate that funds have bought a net 600 contracts of wheat, 2,600 contracts of corn and 4,100 contracts of soybeans. In the products, funds have sold a net 1,800 contracts of soymeal and bought 1,900 contracts of soyoil. The volume this morning has been rather slow from the funds.
- US weekly export inspections for the week ending June 22 were 21.4 million bu of corn, 5.2 million bu of soybeans, and 7.5 million bu of wheat. The totals were disappointing and reflect the limited world demand for US crops due to non-competitive pricing. Russian wheat and Brazilian corn/soybeans are offered well below the US Gulf.
- For their respective crop years to date, the US has shipped 1,278 million bu of corn (down 589 million or 31%), 1,806 million bu of soybeans (down 83 million or 4% and 27.8 million bu of wheat (down 21 million or 43% in the first month of the crop year. US corn, soybean and wheat export demand continues to struggle with US corn and wheat export estimates to be potentially lowered by USDA in July.
- Old/new crop spreads have rallied strongly today on liquidation prior to first notice day on Thursday. There does not appear to any fresh news that would “hike” the spreads, and the rally is more an indication of order flow. Cash corn/soybean markets are trading marginally above Chicago July futures with Central IL spot soybean bids at $1.00 over August while spot corn is at $0.60 over September futures. It appears that the weakness in new crop futures is centred on the prospect of improving Central US weather.
- The midday GFS weather forecast is wetter than its overnight solution for the E Midwest with a ridge of high pressure forming over the SE US on July 4 to shunt Gulf moisture northward into passing cold fronts. Other models do not offer a SE US ridge and we are in doubt about its correctness. However, the SE ridge placement is behind the better rain for the Central and Southern Midwest in the midday run, an area that missed the moisture on the weekend. The midday GFS forecast offers E Midwest crops 0.4-1.25” of rain during the July 4 holiday week. Limited rain is offered into the weekend with heat developing from Texas and pushing NE into Illinois with highs ranging from the mid 80’s to the upper 90’s. The coming heat/dryness will adversely impact Midwest corn/soybean crops that did not receive at least 0.50” of rain last weekend. A zonal flow pattern follows with near normal rain.
- We look for a 2-4% fall in US corn/soy crop conditions today. Thereafter it is all about late week NASS stocks/seeding reports and Central US rainfall. The Canadian model forecast is much drier and like the EU model overnight solution. The GFS model has been highly erratic and confidence in the midday solution is low. We see no reason to sell today’s Chicago break.