- Wheat continues to probe for a bottom; Duration of Midwest heat important; Crude scores newer 7-week high.
- Chicago is mixed at midday as the European wheat market continues to probe for a bottom, while row crops add modest weather premium. Intense debate over the Central US climate pattern will define daily activity this week and next, and key is whether recently updated weekly weather model guidance is right in projecting continuation of net soil moisture loss into mid-July. Corn’s seasonal price trend typically turn down just before or after the 4 July break, but risk premium will be added if the E Midwest, mid-South and Delta stays hot/arid. We note that the E Corn Belt has largely avoided major weather issues since 2019. Combined corn and soy acreage in IL, IN, OH, KY and TN accounts for a third of total US planted area. Note the GFS forecast has begun to follow the better-performing EU model in extending Central US heat, particularly east of the Mississippi River.
- No new US export sales were announced today. Brazilian fob soy premiums late last week eased slightly, just as the US was becoming competitive for spot delivery. US corn, however, remains competitive as US, Ukrainian, Argentine and Brazilian fob offers exist with $5/mt of one another. Importantly, spot fob basis in Brazil is quoted at $0.70 over Chicago, vs. $0.65 last week, and vs. negative $0.20 a year ago in mid-June. Our bet is that weekly US corn sales stay perched above 20 million bu for the remainder of June. Corn sales in the last 6 weeks have averaged 36 million bu, vs. -1 million a year ago in the same period.
- Tours of Russia’s wheat crop this week have yielded total crop estimates of 80-82 million mt, vs. USDA’s 83 and vs. 91.5 a year ago. Solid yields in the very far south of Russia will partially offset more intense frost/drought damage further north. However, exporter stocks/use will still be the lowest on record unless world trade is curtailed, and there has been no evidence of slowing trade in crop year 2024/25. The market on this break will encourage, rather than discourage, importer purchases.
- Other breaking news is absent. Spot WTI crude is up $70/barrel at $81.05, a newer 7-week high. The Midwest swap ethanol market is quoted at $1.88/gallon, vs. $1.77 30 days ago. Margins are positive. A secondary peak in weekly US ethanol grind typically occurs in July. Weekly EIA data will be published at mid-morning Thursday.
- The midday GFS weather forecast is slightly drier in the E Midwest but otherwise consistent with morning output. 5-days of heat and complete dryness are offered to MO, the E Midwest and mid-South, while additional cumulative rainfall of 2-4” is advertised in SD, IA, MN and WI. Upper level ridging relaxes in the 6-10 day period, but returns the E Midwest/east Coast Jun 29-July 1. Confidence in details beyond 8-10 day is low, but there remains general agreement that heat persists across the primary Corn Belt. Notice the Gulf stays rather active, with flooding rainfall probable to impact south Texas in the next 2 hours.
- We would caution strongly against chasing moves. Central US weather is most important, and we reiterates potential threats are emerging in the east amid sizeable fund short positions in corn, soy and soyoil. It is the covering of these positions that provides short-term upside fuel if extreme heat lingers into July. We see value in wheat below $6.20, basis Dec Chicago.