- Chicago corn tries to stabilise on strong US cash bids; US crush margins solid into October; US finally sells new crop beans to China.
- It has been another active morning of Chicago speculative selling with corn and soybean futures pushing to new lows, while Chicago wheat test the prior contract lows. New selling emerged on the morning reopening with volume cited as “active”. Bearish charts and the rains from the tropical remains of Beryl have been the catalysts for this week’s decline with traders openly discussing record US yield potential and future weekly gains for US crop conditions. The bearish mentality of the market was thick.
- However, there are still 6-7 weeks of important growing weather ahead and key crop areas like KY, TN, NC, OH need rain, while NW Midwest crops are trying to grow out the spring excess of water. The are holes in the 2024 crop that will be noteworthy.
- The US corn market is pricing a 182-184 bushels/acre US corn yield with December corn futures at $4.00. Yet, June temperatures were 2.7 degrees above average and that heat looks to be returning to the Midwest in the last half of July. Years in which temperatures have been 2 degrees above the historical average have not produced trendline corn yield. We maintain a US 2024 corn yield estimate of 178-179 bushels/acre, which is 2-3 bushels below the WASDE 181 bushels/acre trend.
- USDA announced that finally China has booked its first US new crop soybeans on a known basis. FAS announced that China booked 132,000 mt of US soybeans for 2024/25. We understand that China continues to bid for new crop US soybeans, with Brazilian exporters saying that China has started checking corn offers from September forward. China is always a price or margin buyer, and both are attractive following the recent decline in Chicago grain valuations. Nonetheless, let’s be clear that China is dramatically behind recent years in securing forward soybean coverage from the US.
- US crush margins exploded last week with the sharp rally in soyoil to cash values over $2.00/bu. Even with the recent decline in soyoil values, the cash margin is calculated at $1.70/bu. Such margins are strong, and we see no economic evidence that crushers will cut back their runs. And with Cargill’s re-stopping of Chicago soyoil receipts from ADM, the stage is set for soyoil stocks to be cleared. There is a supply bull story developing in world minor oilseeds amid the Black Sea drought knifing sunflower yields, while European rapeseed production was adversely impacted by frosts, cool temperatures and excessive rainfall. And now the Canadian canola crop is being hit with hot/dry weather. The point is that vegoil values will be to be supportive to the US soy crush. Soyoil is developing a story not only from expanding US renewable diesel demand, but also from diminished production of minor oilseeds.
- Russian fob wheat values are bid at $216/mt and offered at $220/mt, with the mid point being down $1/mt at $217/mt. The Russian wheat market is seeking a price that sparks improved wheat export demand following their recent tender misses. Russian private crop size estimates vary from 79-84 million mt. Due to July’s heat/dryness, the impact on the spring wheat crop will likely tug the final total wheat harvest downwards.
- The jet stream is migrating northward which will leave most of the Plains, Delta and southern half of the Midwest with limited rainfall for the next 10 days. One short wave looks to pull through the Upper Midwest in the last half of next week producing rainfall of 0.25-1.25”. Heat will be returning to the Plains, Delta and the W Midwest with highs routinely in the 90’s to the lower 100’s. A Central US high pressure ridge is maintained well into late July. The GFS weather forecast is cooler than the EU model- a trend that persisted at midday.
- The corn market is showing independent strength due to strong cash basis bids. Wheat has rechecked its contract lows while soybeans fall to new lows on technical selling and the fear of new tariffs for China in 2025 via the Republican political agenda. CONAB’s Brazilian crop estimates are out Thursday and USDA due on Friday. The size of the corn short will be important in Friday’s CFTC CoT update. US weekly wheat export sales are expected to be robust on Thursday and add to an already strong start of the new marketing year.