- HEADLINES: Chicago sharply lower on fund liquidation; Wheat rallies sharply awaiting GASC tender results; China active buying us soybeans.
- Chicago futures are sharply mixed at midday. Soy futures sharply lower while wheat values are sharply higher, and corn is caught in between. The fundamental tugs of an expanding/intensifying Russian war against Ukraine and a needed Midwest rain is directing grain valuations today.
- Trade volume is restricted by recent week market volatility with few wanting to place new price bets until after Friday’s USDA August crop report. The August report is based on farmer survey data and farmers tend to be more optimistic on their yield than NASS is in the September or October reports.
- We are doubtful that NASS will be able to conduct an October estimate if the US Congress cannot agree on a budget extension or new pact in September. The odds of a US government shut down are high for October and November.
- Seasonal Chicago price trends are down for another few weeks before bottoming in the last week of August or the first two weeks of September. US farmers report that they will store as much of the 2023 harvest as possible. This argues that cash basis bids will firm before Chicago values turn. It is the cash market that will provide the first signal of a seasonal low in corn/soybean futures.
- Exportable cash wheat values bottomed in June and have headed upwards into early August. US futures will need to maintain a healthy premium to the world fob wheat market to prevent exports beyond traditional demand.
- Chicago brokers estimate that managed money has bought 5,200 contracts of wheat while selling 8,700 contracts of corn and 7,900 contracts of soybeans. In the products, funds have sold 4,300 soymeal and 3,800 contracts of soyoil.
- US export inspections for the week ending August 3 were 10.1 million bu of wheat, 14.9 million bu of corn, and 10.4 million bu of soybeans. The corn exports were at the lower end of expectations while soybean inspections were larger. US wheat exports were near the weekly average needed to achieve USDA’s annual target.
- The USDA/FAS announced 251,460 mt of US corn sold to Mexico and 132,000 mt of US soybeans sold to China. We hear that China remains active in booking US soybeans for November while also securing 6 cargoes of Brazilian soybeans for February. It is our belief that China will take more than 105 million mt of world soybeans in the old crop international crop year that ends on October 1. USDA is way too low in forecasting both China’s old and new crop import pace and significant upside adjustments are needed in the next 2 WASDE reports.
- Argentine imports of Brazilian soybeans have declined to near nothing over the past 5 weeks and little interest is being expressed with commercial stocks falling to a record low for August 1. The point is that Argentina will try a soy-dollar program on Sept 1 to spark farm movement of drought stored soybeans, but their export stature in the world market is in sharp decline. This will push additional meal demand to the US while the world is shorted by a hefty 2 million mt on Argentine soyoil exports through April 2024.
- Traders are debating on how much yield benefit was produced by the Midwest rain. Our best estimate is that yield was boosted by 0.5 bushels/acre back to 51.0 bushels/acre from the week following. Midwest soybeans endured germination woes that produced poor stands and smallish plants. The rain will help podding, but we doubt that the US soybean yield will be able to reach back to 52.0 bushels/acre trend.
- The midday GFS weather forecast is drier than was offered overnight for the W Midwest and the Plains with 0.4-1.50” less rainfall. The E Midwest is wetter from Indiana and Ohio. Unfortunately, there will be areas of Minnesota that keep getting missed by the moisture. And temperatures look to be rising following the middle of next week as the high-pressure ridge amplifies northward and covers most of the Central US after August 18. Extreme heat returns and would be felt if the GFS weather forecast verifies.
- The bears have their claws out on the weekend Midwest rain ahead of a key monthly USDA report. Wheat futures are rising on tightening world exportable supplies amid rising Black Sea war tensions and a limited offers of insurance for freight. Our advice is the same, don’t sell breaks or chase rallies.