- HEADLINES: Chicago mixed at midday; Wheat and corn test recent lows; GFS drier; crude up $1.90/barrel.
- Chicago futures are mixed, with grains weaker and soybeans and meal higher, in very thin volume. The choppy nature of the marketplace and the inability to established new lasting trends has eroded participation. Key supply updates also lie just ahead, beginning with USDA’s August WASDE and followed by Pro Farmer’s Tour of the principal Midwest in mid-August. Calls for a mild/wet August are coming to fruition, but damage has been done to yield potential in July and amid last week’s extreme heat keep questions over exact final output intact. Funds have resumed adding to an already decently sized net short wheat position in Chicago amid expectations, right or wrong, that Black Sea exports will be normalised in the long run.
- Neutral/bearish seasonal trends and a lack of new US weather threats have weighed on the market this week, but secondary seasonal lows are close at hand. Yet, we note that the port of Asov in Russia is still operating below capacity, and only during daylight hours, and wheat futures markets are discounting Southern Hemisphere crop risks entirely. Exceptional drought will remain in place for another 10 days in all but the southern part of Buenos Aires in Argentina, with high temperatures into August 11-12 will exist in the mid-80s and 90s (or 9-15 degrees above average) in Cordoba and northern wheat producing regions.
- This along with developing dryness in Western Australia and New South Wales needs very close monitoring. Already USDA projects combined Argentine/Australian exports to drop 4 million mt year on year in 2023/24 to a 4-year low. This discrepancy rises to 6-8 million mt if weather stays adverse.
- We also note that the details of Egypt’s tender Wednesday featured aggressive Romanian offers for Sep arrival but substantial risk premium in non-Russian origin thereafter. We currently strongly doubt the Black Sea export corridor will be restored, and risks to Ukrainian and Russian infrastructure remain elevated. Wheat’s break seems short-sighted in nature.
- US export sales in the week ending July 27 included 4 million bu of old crop corn, vs. 12 million the previous week, 3 million bu of soybeans, vs. 7 million the previous week and 15 million bu of wheat vs. 9 million the previous week. Spot corn and soy demand remains lacklustre, while wheat sales continue to keep pace with USDA’s forecast. Exporters sold 14 million bu of corn for new crop delivery and a sizable 96 million bu of new crop soybeans. New crop soy sales in next week’s report will be a large 50-60 million bu following recent daily announcements, including a new sale to China this morning worth 134,000 mt.
- New crop corn export commitments to China as of July 27 total 21 million bu, just 0.5 million short of total physical exports to Canada so far in the 2022/23 crop year. Corn exports to Canada are expected to reach 50-70 million bu following dire drought there and falling barley, oat, and wheat yield potential.
- Spot WTI crude oil at midday is up $1.90 at $81.50. The Dow is down 10 points.
- The GFS weather forecast at midday is much drier in MO, IA and IL than this morning’s run, and rather abruptly the model has eliminated rain chances there through late next week. The GFS forecast keeps the jet stream aligned a bit further north than previously, and heavy precipitation into mid-August instead will continue to favour the Central Plains and southern Midwest/mid-South. This is a significant change, but the EU model must validate it this afternoon. Extremes stays absent.
- Russia’s supplying of the world wheat market, for now, and the expectation of a neutral/bearish August WASDE have triggered a test of recent lows in corn and wheat. Wheat markets add premium rather quickly if weather fails to change in the S Hemisphere or Black Sea infrastructure is damaged. Soy is a bull market until sizeable acreage expansion occurs in the US next spring. Corn stays choppy until US yield is known. 57% of US corn area is still experiencing drought.