- HEADLINES: Speculative selling presses Chicago lower; NOPA crush data leans supportive beans, oil; GFS weather forecast drier at midday.
- Chicago ag futures are lower at midday, with wheat finding a newer low for the move and spot Chicago corn trading at the lowest level since winter 2021. Momentum-based selling continues, and fundamentally the catalyst has been last week’s improvement in corn, soy, and spring wheat crop ratings. Volume remains rather tepid. Macro markets provide weight as the Dow drops 300 points and crude falls $1.90/barrel at $80.60, the lower end of the recently established range. There has not yet been pushback from the end user community, but producer bin doors will be shut as new crop corn/soy well below revenue guarantee provides no incentive to sell above what is absolutely needed. We would note that RSI in all major crop markets is at or nearing oversold, which along with normal seasonal trends suggests this is no place to turn bearish. We guestimate funds’ short in Chicago wheat at a sizable 80,000 contracts this morning. Funds are short an estimated 45,000 contracts of Chicago corn.
- NOPA’s July crush data leans bullish beans and oil, and Dec Chicago soyoil at midday is up 0.7%. NOPA member crush in July totalled 173.3 million bu, vs. 165 million in June, up 3 million bu year on year and a record for the month. Meal has fallen along with corn. USDA’s 2022/23 soy crush forecast of 2,220 million bu is about right, but soybean disappearance and even meal stocks imply expansion in crush is needed in the long run, hence the recent surge in futures/cash crush margins.
- NOPA soyoil stocks on July 31 totalled 1.53 billion lbs, down 163 million from June and down 157 million from last year. Soyoil consumption in July was 2.23 billion lbs, and consumption exceeded production for a third consecutive month. Implied soyoil disappearance was also record large for any month, and it will be a challenge to prevent additional oil stocks erosion in Aug and Sep as crush rates slow seasonally. Soyoil remains a demand-led bull market.
- Paris milling wheat futures ended €3.00/mt lower. Paris corn has been weak in 14 of the last 16 sessions. The EU grain market is well supplied, and larger than previously expected Ukrainian production exists just east of the region, and debate is ongoing as to just how much Ukrainian supply will be allowed to flow into eastern Europe this autumn. Relative calm in the Black Sea (conflict-wise) has allowed for new selling there.
- The midday GFS weather forecast is warmer in the 11–15-day period and keeps in place a pattern of above-normal Central US temperatures into Aug 29-30. Otherwise, the outlook is consistent. A rapid expansion of high pressure ridging aloft Fri/Sat fuels at least 10-12 days of complete dryness and extreme heat across the C Plains and W Midwest Sat-Thurs. The GFS forecast is still viewed as overdone with its temperature forecast, with highs of 110-116 offered to much of the Central US, but the Canadian and EU models do agree that readings of 100-102 impact TX, OK, KS and NE early next week. Highs between 94-98 blanket IA, MN, WI, MO, and IL next Tues-Wed. Confidence beyond 10-12 days is low as tropical storm season begins.
- Seasonal/momentum trends have been compounded amid low volume/open interest and as it remains that every bushel produced or not has an outsized impact on global stocks/use. Broadly favourable July/early Aug US/European weather has triggered the return of fund liquidation. But US crop-finishing weather is important. Better selling opportunities lie ahead beyond summer in our opinion.