• Headlines:

• Soybeans trade lower on Thursday whilst meal ends mixed.

• July corn rallies for the fifth consecutive session.

• Wheat ends slightly weaker on global production estimates.

• Thursday saw a mixed and uneventful session in Chicago Thursday with profit taking in evidence in the wake of Wednesday’s move higher in soybeans. Further end user buying has been seen on price breaks, which has seen losses being limited.

• A prominent satellite crop forecasting firm has further raised US and world wheat production potential. Russia’s wheat crop is estimated just above 64 million mt, vs. the USDA’s 63, and has potential to reach 65-66 million mt amid a coming warmer temp pattern there. US wheat is estimated at 2,200 million bu, up another 200 million from the USDA’s estimate in its May WASDE. We note that some producers across the Central Plains speak very highly of yield prospects, with some seeing the best conditions in years. The wheat market is always subject to money flow, and influence from neighboring corn and soybean markets, but we reiterate that fundamental input has trended more bearish over the last week. Without adverse weather in the next 3-4 weeks, the sheer size of US and world wheat supplies will weigh on global grain trade.

• Speculative traders will be reluctant to give up their huge net long positions in the soy complex, with many forecasters leaning towards a hot/dry Midwestern summer, the latest climate update is still rather wet through August, and as elevated Chinese hog prices maintain the potential for export demand growth. We would question whether a record large fund net long position is needed amid US old crop soybean stocks of 400 million bu and new crop stocks of 300 million, and stocks/use levels are projected nearly double those of 2011-2014. US and world grain prices will eventually have to be reconciled with massive (record) world supplies. Soybean meal futures in China, which weakened substantially into Wednesday night’s close, will be watched closely overnight.

• As an aside, the US’ EPA proposed raising the mandated blend level of corn-based ethanol to 14.8 billion gallonsl, vs. 14.5 billion previously. Gasoline consumption has been higher than expected since 2015, but there still exists a blend wall just below 15.0 billion. Whether this proposal becomes a final rule will be debated over the next 5-6 months. US ethanol stocks are in seasonal decline, but still remain rather lofty, and at 886 million gallons stocks are 3% above last year and record high for mid-May. There’s more than enough ethanol to meet any change in the RFS mandate, and already the US is on track to produce 14.8-14.9 billion. The EPA’s proposal is therefore not likely to have any material effect on the US corn balance sheet.