- HEADLINES: Chicago values higher at midday as soybean futures lead; NASS report completely alters soy outlook: GFS weather forecast at midday little changed.
- Chicago ag markets are mostly higher with soybeans/soyoil pacing the rally. Corn and wheat have followed soy complex gains as Chicago continues to react to Friday’s NASS crop data.
- The NASS June Seeding data completely changed the oilseed outlook amid the decline of 4 million acres of US soybeans. This was enough lost acres to prevent the normalisation of US weather to produce a bearish trend. And if the soybean market cannot decline, it means that grains will have difficulty in falling amid their need to hold acres in future cropping cycles, first in S America and again in the US in 2024. This is not to say that December corn cannot fall to $4.75, but the long-term bearishness of corn is diminished as it is pegged to soy values. We would maintain that the soybean/corn ratio needs to push out to 3:1 in forward futures. Soybeans/soyoil is a bull market that will underpin December corn on breaks to $4.75-5.00.
- World wheat values are struggling in a $20/mt price range with the EU/Russia and Canadian harvests ahead. The wheat bears have their views based on steady to falling Russian fob wheat offers, and that Russia at some point, allows its exporters to sell wheat below $230/mt. Meanwhile, the US, Canadian and EU wheat markets are more bullish on faltering new crop supplies. By mid-August, world wheat markets should be in position to sustain a seasonal rally.
- The final Chicago open interest data showed that soybean option positions exploded by 65,500 contracts on Friday with just over 45,000 contracts being new call purchases while new put positions expanded by 20,000 contracts. The massive call buying highlights the bullishness of the NASS seeding data and its importance to the 2023/24 US soybean balance sheets. Demand rationing must occur in soybeans, that can’t happen in crush due to strong margins, but only in export trade. This is why the 2024 Brazilian soybean harvest now carries paramount importance in that no additional demand can be shifted to the US.
- Chicago brokers estimate that managed money has sold 3,000 contracts of wheat and 2,000 contracts of corn, while being buyers of 6,200 contracts of soybeans. In soy products, funds have bought 3,400 contracts of soyoil while being flat in soymeal. The buying has not been large, but it has not taken much in terms of order size to move the market.
- US weekly export inspections for the week ending June 29 were 25.3 million bu of corn, 9.2 million bu of soybeans, and 12.4 million bu of wheat. For their respective crop years to date, the US has exported 1,304 million bu of corn (down 597 million or 31% from last year), 1,815 million bu of soybeans (down 91 million or 4.7% from last year), and 40.2 million bu of US wheat (down 19 million or 32% from last year). We look for WASDE to cut US 2022/23 corn exports by 50-75 million bu in the July report while trimming soybean exports by 10-20 million bu. It is premature for WASDE to adjust its 2023/24 wheat export estimate until there is more clarity on European/Russian and Canadian supplies.
- The GFS weather forecast is like the overnight solution with 70% of Midwest crop areas receiving additional rain while 30% struggles with drought/dryness. The driest areas will be across ND, MO, IL, and MI. South Dakota looks to be targeted with heavier rainfall of 1.50-3.00”. The rain will occur from ridge riding storm systems that produce thunderstorms every 2-3 days. Three storm systems are forecast to pass across the Central US in the next 10 days. And no extreme heat will be lasting with coolness centred across the Intermountain West/W Midwest. A ridge of high pressure holds across the SW US into July 19. The chill favours pollinating corn and blooming soybeans.
- Bull markets always let you in on profit taking. However, there is no indication that any break in the soy complex will last for more than a few days. This will underpin the grain markets and provide back and forth price action until more is known about US corn/soybean and spring wheat yield potential. Trade the range. Chicago will be closed on Tuesday due to the US July 4 Holiday.