- Chicago higher at midday; Mexico buys US corn; GFS weather forecast drier in 6-10-day period.
- Global markets higher; Wheat leads the way at time of normal seasonal bottoms: Chicago grain futures are higher at midday by varying degrees, with US wheat futures up 9-14 cents, corn up 4-6 and soybeans up 3-5. We would suggest that it is the cleaning of September futures positions that dominates intraday moves into Friday, and key is whether liquidation implies a shedding of short positions or market length. Chicago wheat is working on a key reversal, while similar action is noted in European corn and rapeseed markets. We would reiterate that bottoms in US/Paris wheat futures very often surround September expiration.
- Other breaking news is lacking. War rages in eastern Ukraine with reports that Ukraine’s military attempted to break through into the Bolgorod region, which follows the recent volley of strikes from the two sides since early August. There has been no disruption to grain flows, but geopolitical risk is certainly higher than zero. We also note that importers have been relatively active. Jordan this morning successfully purchased 60,000 mt of wheat. Algeria is seeking 120,000 mt of corn. South Korea announced a purchase of 68,000 mt of S American origin corn.
- Summer without glaring Central US weather threats is typically defined by the shedding of risk premium, which gets compounded by newly harvested wheat supply in importing countries and the arrival of S America’s corn surplus in Jun/Jul. It is September that usually marks a shift in focus to disappearance, and we believe it is now clear the US corn market has found demand growth, and that Chinese pricing of US soy origin soy will be active at least through early winter.
- US exporters sold 128,000 mt of corn to Mexico. New crop US corn sales to Mexico on Aug 15 totalled 176 million bu, up 12 million on the previous year, and Mexico will again secure 22-23 million mt of US corn in crop year 2024/25.
- We also continue to highlight the complete lack of rainfall forecast in E Europe, Ukraine, and Southern Russia through the first full week of September, while temperatures in the Black Sea region stay 7-13 degrees above normal. USDA in its weekly update pegged moisture is insufficient in large swaths of winter crop producing areas of E Ukraine and SW Russia. Autumn weather correlates poorly with production but does mandate a wetter than normal winter to replenish moisture reserves. 30-day climate guidance keeps this pattern of warmth/dryness intact across the Black Sea into late Sep.
- The spot cash Indian wheat market is up another $0.02/Bu at $8.94. Wheat prices in India have only been higher briefly during Russia’s initial invasion of Ukraine. Expect end users to continue to pressure the government to release reserve stocks.
- The GFS weather forecast at midday is drier than the morning solution, with moderate rainfall no longer forecast across MO, IA and IL Sep 5-7. Instead, rainfall stays confined to TX and the Gulf region, while net soil moisture loss elsewhere gets accelerated amid this week’s warmth. A few spotty showers are possible in the Upper Great Lakes and far Eastern Midwest in the next 72 hours, but nothing heavy is indicated. Max temperatures this afternoon are projected in the 90s across the E Plains, Midwest, and Delta/Southeast. Heat is forced eastward by late week. Highs in the upper 80s/90s linger across the southern Midwest and mid-South into Friday.
- A series of chart-based resistance levels lie ahead of the market, but there is more uncertainty over the details of US corn/soy yields amid regional dryness in August, late summer heat, and the potential for a lack of precipitation to be extended into mid-Sep. Our bet is that markets continue their chop this week, but that bearish enthusiasm wanes as the calendar turns to September.