- HEADLINES: US corn in drought at 64%; US soybeans in drought at 57%; An Indian rice export ban is a big deal; GFS weather forecast drier at midday in the 6–10-day period.
- Chicago grain futures are sharply higher at midday with soyoil/soybeans pacing the advance. Corn and wheat futures have followed in the wake of July USDA crop report as the market’s focus shifts to weather/yield and the sharp fall of the US dollar. The volume of Chicago trade is average with brokers suggesting that new money is entering the market from macroeconomic managers due to the acute weakness of the US dollar. The sharp fall of the US dollar boosts foreign purchasing power and curtails the profitability of farmers outside the US. This is having a noted impact on S American farmers.
- A key 6 weeks is ahead of US crops and as indicated this morning by the Drought Mitigation Centre in Nebraska. A large 64% of the US corn and 57% of the US soybean crop are in drought. The area of drought has been falling far slower than the bears would have hoped for which accentuates that crops will be surviving off surface water. This means that regular rainfall is required each week if there is any chance for US corn, soybean, and sorghum crops to reach the yields depicted by WASDE yesterday. Central US crops cannot withstand any fresh periods of dryness or extreme heat without an immediate and adverse impact on yield.
- Chicago brokers estimate that funds have bought 4,600 contracts of wheat, 11,500 contracts of corn, and 8,000 contracts of soybeans. In the products funds have bought 4,400 contracts of soymeal and 4,800 contracts of soyoil. One can see the fingerprints of new money coming into the Chicago markets from the intraday volume spikes on the buy side of the market.
- US weekly export sales for the week ending July 6 were 14.5 million bu of wheat, 18.4 million bu of old and 18.5 million bu of new crop corn, 3.0 million bu of old and 7.7 million bu of new crop soybeans. Respective crop year to date US wheat sales stand at 184.4 million bu (down 75 million or 30%), 1,556 million bu of corn sales (down 823 million or 38%), and 1,933 million bu of soybeans (down 249 million or 23%). WASDE has correctly reflected the existing old crop US corn/soybean export paces within their balance sheets. It is too early in the crop year to make any comment on US wheat exports.
- Although not much fanfare was associated with a media report that India was going to halt rice exports due to domestic shortages and rising prices, it is important. India is the world’s largest rice exporter according to USDA at 23.0 million mt in 2023/24 out a world total of 56 million mt. This would be an incredible 41% of world rice trade. No other exporter can fully make up for the Indian shortfall. World rice fob prices would start rising sharply with China taking 5.0 million mt of Indian rice. If rice is not available, it is wheat that would produce the next grain of food sustainability. World wheat trade/demand would likely set new records. Watch developments on Indian rice trade closely.
- The midday GFS weather forecast is drier in the 6–10-day period that was offered overnight. The model extracted rain from the N Plains and the NW Midwest which will stay dry over the next 10 days. Near normal rainfall of 0.5-1.50” is forecast for the Central and Eastern Midwest. Temperatures will stay near to below normal with no extreme heat into July 23. The midday GFS forecast has been running cooler vs either the overnight GFS or the European model run. The 11–15-day forecast was like the overnight run with limited rainfall for the Midwest as high pressure ridge retrogrades west and then builds north. The coming dry weather in the week 2 forecast needs to be closely monitored with soybean podding to accelerate during August.
- Soyoil futures are on the doorstep of scoring new rally highs while November soybeans are nearing initial resistance at $13.75-14.00. The grain markets are forming longer term lows with dry Central US weather a worry for late July and early August. CONAB estimated the 2023 Brazilian corn crop at 128 million mt, 5 million below WASDE with soybeans at 154 million mt, down 2 million. Brazilian basis bids are in a rally as is W Midwest corn basis on a lack of farmer movement. We stay bullish on Chicago breaks. Cash is leading the advance in corn.