- HEADLINES: Chicago mixed; Soy adds premium ahead of US heat and rising global oilseed markets; Funds sell wheat; Indian wheat imports probable.
- Ag markets are mixed at midday, with corn up slightly, soybeans up 13-15 cents amid upcoming Central US heat and dryness and rising global rapeseed/canola prices, while fund selling persists in both US and European wheat markets. Volume is again tepid as next week’s Pro Farmer estimates are awaited, but work suggests bottoms are close at hand. Following independent tours of IA and IL, Pro Farmer is expected to find soy pod counts measurable below last year. Corn yield potential is decent but record yields are off the table, and overall we view the market’s corn/soy yield expectations as a bit too high.
- Newswires are again reporting that India is in talks to purchase 8-9 million mt of Russian wheat to build stocks and cool food inflation.
- Cash connected sources indicate 7 million mt is indeed in the works, with price, logistics and timing still yet to be worked out. Indian imports of even 3-4 million mt would be a big deal and would displace the same amount of Russian origin shipped to other destinations, at a time when S Hemisphere production and export potential is in retreat. Argentine wheat crop ratings will be published after the close. Recall Argentine wheat good/excellent rating last week was a disappointing 21%, vs. 18% the prior year. Ratings below 20% in early Sep hint strongly of sizeable yield loss relative to trend. Wheat is undervalued.
- Rampant inflation in Argentina is also sparking questions over producers’ ability to finance 2023/24 production. The blue Peso, which is used by the population, this week has surged to 780:1. Early planting in Argentina lies just ahead, and long-term research continues to suggest that it will be difficult to solve corn supply issues on a lasting basis amid a lack of acreage expansion in Argentina, Ukraine and the US. The Central Bank’s devaluation of the official Argentine Peso this week, Argentine beef exports were suspended initially, with the government now working to negotiate a cap on prices. There is a risk that similar measures are applied to grain/oilseed.
- US export sales in the week ending August 10 featured 37 million bu of corn (both crop years combined), vs. 36 million the previous week. New crop soy sales totaled 55 million bu, unchanged on the prior week. US wheat sales were 13 million bu, vs. 21 million the previous week, but 2 million above the weekly pace needed to meet the USDA’s forecast. We note a Chinese delegation will make its way to the Midwest next week. There is no word on whether frame buying contracts will be signed, but new crop soy sales will stay at 50+ million bu into late autumn.
- Spot WTI crude at midday is up $1.40 at $80.80/barrel. Sub-$80 has so far been short lived. The Dow is flat.
- The midday GFS weather forecast is little changed and maintains a pattern dominated by expanding and intensifying high pressure ridging. Light showers are forecast in MI and OH in the next 12-24 hours, but a pattern of complete dryness will be established elsewhere. Temperatures in the Central Plains peak Sun-Tues in the low 100s. Temperatures in the Midwest peak next Thurs-Sat in the mid/upper 90s. Maximum pod size is needed to counter reduced pod counts, and beyond Sep 4-5, weather plays limited role in yield determination. Heat/dryness in the second half of August is concerning.
- India’s need for wheat imports, S Hemisphere weather issues, still-uncertain US yields and global economic fragility argue that extreme volatility continues well into 2024. It is the wrong time of year to add to sales. An autumn recovery lies in the offing.