- HEADLINES: Markets widely mixed at midday; Wheat stays volatile on Russian currency; GFS weather forecast maintains blast furnace heat in Central US.
- Chicago futures are widely mixed at midday, with renewed fund selling forcing new lows for the move in wheat, soybeans rapidly adding weather/supply risk and corn caught in between. Volume remains somewhat deflated, which exacerbates daily moves, and there remains a general feeling of exhaustion within the speculative community.
- The Russian Rouble today has traded a 7.4-point range as the currency’s scoring of a new 17-month high sparked an emergency Central Bank meeting. The Rouble at midday is now quoted slightly stronger than last week, but general weakness in the Rouble since spring along with rising Russian fob wheat prices have allowed exporter margins to resume. Interior wheat prices valued in Roubles in southern Russia are unchanged this week. Wheat in Southern Russia valued in US dollars is down $4/mt, and this has allowed Russian export margins to expand. July-August Russian wheat shipments will be record large, and large Russian supplies linger in the background. EU and US wheat markets fear extremely high competition from Russian origin continuing well into early 2024. Risk premium has been shed, and we believe this is the weakest time of year for wheat (and corn and soy) seasonally.
- And wheat risk management stays challenging. One targeted missile strike halts a measurable percentage of Russia’s export capability, while any return of a Ukrainian export corridor frees large tonnages of Ukraine stocks into the world marketplace. Unfortunately, there is no sign that wheat market volatility ends any time soon, though our guess is that, like normal years, a lasting low is scored by late Aug/early Sep.
- US export inspections through the week ending August 10 featured 16 million bu of corn, vs. 15 million the previous week, 11 million bu of soybeans, vs. 10 million the previous week and 7 million bu of wheat, vs. 11 million the prior week. Corn/soy shipments will limp into harvest, but pace analysis suggests further USDA adjustments are not necessary. Recall official US census corn exports through June are 16% above cumulative weekly inspections. Cumulative US soy inspections through August 10 are a very normal 95% of USDA’s annual forecast. Wheat shipments were disappointing, but given better than expected sales in recent weeks, a seasonal uptick lies ahead beginning in late Sep/Oct.
- Exporters also sold another 416,000 mt of new crop beans to unknown destinations, which is expected to be China. Soy crush margins there have been solid, and ongoing strength in meal market provides further evidence that Chinese soy demand is understated. Physical meal trade has been active at Chinese ports in recent days.
- Macro markets have done little since this morning’s open, with crude down $0.90/barrel at $82.30 and the Dow up 1 point.
- The midday GFS weather forecast is unwavering in calling for near complete dryness into the final week of August as well as blast furnace heat throughout much of next week. The GFS forecast is no doubt overdone with its temperature forecast, with high readings Sun-Wed pegged as high as 110-116 across the Central Plains, MO, IA, MN and western WI, but abnormally hot weather does lie ahead. Expansive high-pressure ridging will define the North American climate in the second half of August, and temperatures across the Plains and W Midwest most likely reach the mid/upper 90s and low 100s. All models agree on a real lack of precipitation nearby. The GFS forecast extends hot/dry conditions into August 29.
- Physical supplies will be adequate in late summer/early autumn, and EU/Black Sea stocks remain elevated. However, sourcing wheat from the US, Canada, Australia, and Argentina will be arduous amid tight supplies. This leans supportive markets there. And US soy stocks become untenably tight if US heat/dryness is extended into early September. The US weather forecast is concerning.