- The midday GFS weather forecast returns flooding rains across NW Midwest/N Plains; Egypt rumoured buyer of US soybeans (Unknown Buyer); China bidding for US Gulf soybeans ; Central US Weather in focus into the weekend.
- Chicago futures are higher at midday with China bidding for additional US soybeans, while cash traders report low test weight on S Midwest SRW wheat, which is being balanced out by heavier test weight HRW wheat across Oklahoma/Texas. The early S Plains HRW harvest has solid protein levels. Early US wheat harvest results are supportive to Chicago wheat and slightly bearish to KC. We look for the Chicago/KC wheat spread to trade at a premium.
- Corn and soybean futures are higher on dry weather forecasts for the US and Central China. Traders are trying to assess the duration and the impact of hot/dry weather on summer row crops. July corn reached above $4.60 and a close above $4.61 will set an upside price target of $4.77, the 200-day moving average. We estimate that funds are short 190,000 contracts of corn which could spur significant covering should hot/dry weather extend past the next 10 days. A more volatile weather market lies ahead for corn/soy/wheat futures.
- The USDA reported that an unknown buyer secured another 120,000 mt of US soybeans, the third day of old crop US soybean sales. The buyer is rumoured to be Egypt. Price spreads indicate that US soybeans are equal to Brazil. This has end users looking at US for soy supplies.
- China has been a recent buyer of US soybeans. China is taking US soybeans to replace those sold from the reserve in recent months. US soybeans store better than Brazilian soybeans amid a lower seed moisture content. China is bidding for additional US soybeans today for August/September, which could include the season’s first new crop purchases. China has yet to show on a US weekly export sales report as securing new crop US soybeans, but they have purchased 24 million mt of US old crop on their way to taking 25.0 million in total.
- For the week ending June 6, the US sold 12.5 million bu of wheat, 41.6 million bu of corn, 13.9 million bu of soybeans. For the crop year to date, the US has sold 178 million bu of wheat (up 33 million or 18%), 2,060 million bu of corn (up 540 million or 35%), and 1,609 million bu of soybeans (down 288 million or 15%). We believe that WASDE will raise their old crop corn export estimate by 25-50 million bu in future monthly reports.
- Managed money has bought 3,7000 contracts of wheat, 5,900 contracts of corn, and 7,800 contracts of soybeans. In the products, the managed money has bought 5,200 contracts of soymeal and sold 1,500 contracts of soyoil. Much of recent day buying is tied to July contract liquidation amid the start of the Central US weather market with areas of too much and too little rain.
- The midday GFS weather forecast is back to adding considerable rain to the W Midwest and sparking widespread flooding. Rains of 5-9.00” are unwanted, but also not backed by the EU model. Rainfall overnight across the NW Midwest was disappointing, and we suspect that that GFS forecast is probably too wet and too far south with the moisture. That said, the heat is on and high temperatures will be reaching into the 90’s with frequency. The hot/dry weather for the Central and Southern Midwest will cause crops to root down, but also increase the need for rain to return in late June/July. The weather risks are rising and model debate is active between areas of too much and too little rainfall. The emerging heat is not being debated, it is ahead.
- Short July futures liquidation is ongoing. Key will be if July corn can close above $4.61. EU rainfall amid the ongoing wet weather has caused issues for the soon to be harvested winter wheat crop. Crop quality and quantity are both in retreat. World corn and wheat crops are still in decline with US weather in focus. Monitor US weather forecasts closely heading into the weekend. Increased volatility is ahead.