- It has been another brutal day of heat across the Central US with high temperatures ranging from the lower 90’s to the lower 100’s across the Plains and the W Midwest. Producers tell us that winds of 15-30 mph and the intense heat are taking a real toll on crops with corn and soybeans both rolling on non-irrigated acres. The promised rains cannot come soon enough and are extremely important for yield.
- Soybean futures were sharply higher overnight and lower by the close, with November soybeans trading a wide 43.5 cent daily range, and closing 17 cents lower. The surprising 4% drop in Monday’s crop ratings offered the overnight support, while a wetter extended forecast for the W Midwest and Plains triggered selling throughout the day. The afternoon EU weather model update did not confirm the heavy/widespread rains that were projected by the midday GFS forecast, and is far drier in the 10 day outlook. Our lean is with the historically more accurate EU forecast, and we are not willing sellers under $10 November. The weather models are causing traders angst.
- Fund liquidation continued in the corn market (official open interest on Monday was down a hefty 30,000 contracts) as the trade debates the US’s late July/early August weather pattern. The GFS model today was extreme, shifting from very dry to very wet weather in the 8-15 day period. The EU operational model is bone dry next week; the EU ensemble features limited precipitation into August 8th. Our bet is with the much more correct EU model. With July nearly finished, corn ear weight models suggests a national corn yield closer to 162-164 bushels/acre, and should the EU model forecast into early August verify, slight declines in crop ratings are most likely in the next two weeks. US ethanol production and blending margins are rising on recent corn weakness and even the decline in Brazilian ethanol prices has paused. The potential for the loss of some 550-650 million bu of US corn supply should allow technical support at $3.80 basis December ’17 futures, to hold. Weather-based volatility will continue into the August USDA report.
- US futures ended lower, European futures ended followed, and cash market are little changed. We note that higher protein offers, in particular, are higher today as the market is better digesting ongoing rainfall in N Europe, and of course expanding/worsening drought across Canada. Standard HRW at the Gulf is now at parity with German fob and just $5/mt over comparable Russian. Egypt bought a massive 420,000 mt of Black Sea wheat at $204/mt, basis fob, unchanged from a week ago. This week’s spring wheat tour has uncovered a wide range of conditions. Conditions in eastern ND are of course better than the west and stories abound of producers simply grazing fields rather than harvesting them. The tour’s yield estimates will be available on Thursday. Funds have sold an estimated 30,000 contracts in the last two weeks, and with cash markets steady/higher and with Egypt’s buying spree ongoing, we would advise caution and argue that US wheat is becoming cheap.