• The USDA has today released its weekly export figures as detailed below:

Wheat: 465,300 mt, which is within estimates of 400,000-600,000 mt.
Corn: 1,421,000 mt, which is above estimates of 950,000-1,400,000 mt.
Soybeans: 1,322,100 mt, which is within estimates of 1,000,000-1,500,000 mt.
Soybean Meal: 186,600 mt, which is within estimates of 150,000-370,000 mt.
Soybean Oil: 17,600 mt, which is below estimates of 20,000-50,000 mt.

• Brussels has issued weekly wheat export certificates totalling 585,153 mt, which brings the season total to 32.435 million mt. This is 46,541 mt (0.14%) behind last year.

• Early strength in soybeans gave way to weaker soymeal prices and soybeans were in the red by the close on Thursday. Old crop meal again marked a new low for the month, while new crop December slipped to a three week low. Soybean export sales were within expectations at 660,690 million mt, taking annual commitments to 49.9 million. Export commitments are now at 105% of the USDA forecast, and just under last year’s record. Given recent sales announcements, commitments will again swell next week, and the USDA will likely increase their annual estimate in the July WASDE. The Argentine AgMin lifted their soybean crop estimate to 58 million mt while the BAGE held their estimate steady at 56 million. Regardless of the actual output, fob offers suggest that exportable supplies are nearly sold out. November beans have easily traded through support at $11.20, with the next target at the May WASDE report high at $10.80 and then the 50-day moving average near $10.60. Confirmation of another 2-4 million soybean acres could produce a deeper correction to $10-10.40, unless weather intervenes.

• Chicago corn futures fell another 5-6 cents as recently added long positions were unwound. On the week corn is down 50 cents! This is the largest weekly decline since the summer of 2013. Weakness in world wheat cash market (recall the wheat’s bearish seasonal is just starting), and the potential for above-trend yields has produced a dramatic change in market sentiment. A week ago, demand rationing was being discussed; today the market is searching for demand.  US export sales through June 16th totaled 34 million bu, down 1 million from last week and down 25 million from early June. As US Gulf corn’s discount narrowed vs. other origins, sales slowed, and Gulf corn is now priced above EU/Black Sea milling wheat as well as Argentine corn for Aug/Sep. Argentine crop estimates are rising as more of the crop is gathered. A further slowdown in US corn exports is anticipated. Corn has now all but confirmed a seasonal high and the trade no longer expects that the summer of 2016 Midwest weather will mirror the drought years of 1983, 1988, or 2012. Selling rallies appears to be the order of the day right now.

• US wheat futures continue to reel from improving US weather ahead of corn pollination. Wheat already was looking for better US feed consumption, and the drop in corn futures and cash prices will make this chore more difficult through the first half of the crop year. Global cash prices fell again, Argentine wheat planting has reached 46% complete, and will expand rapidly with soybean harvest winding down, and still there’s a noticeable lack of interest from major importers. US export sales through the week ending June 16th totaled 17 million bu, down 11 million from the previous week and slightly above the pace needed to meet the USDA’s forecast. The pace of sales is likely to slow as more of the N Hemisphere’s wheat crop is harvested in July and August. Russian hi-protein wheat for Aug/Sep delivery is down to $178-179/mt, French soft wheat is offered at $184-186/mt, down $1 from Wed. Following today’s break, US Gulf wheat is quoted at $193-195/mt for August and beyond. Any lasting rallies hinge solely upon heat/dryness in July, which is now looking unlikely.

• Friday’s trade will doubtless be macro driven on the back of the Brexit vote and all that it implies. The FTSE 100 index has dropped 611 points (9.6%) overnight and £Stg is 1.3233 vs.US$ down from 1.5007 last night (12% down), a level not seen since 1985. Markets are set for a day to equal or even beat the infamous Black Wednesday and Lehman Bros crisis. Fasten your seat belt and hang on – it’s bound to get wild!

• Dalian soybean meal prices have soared since the closing days of March on surging hog profitability and short bought end users expecting cheap S American soybean offers. The initial rally sparked record large volume has recently been in decline. The market is technically starting to look rather toppy with a push to new highs needed next week to maintain the upside momentum. Curtailed 2016 S American soybean production is behind the Chinese soymeal rally. China’s hog herd is only slowly expanding, due to environmental issues, even amid record feeding margins. It’s not a surge in snouts that’s rallying Chinese meal demand, but rather an expansion in the supply pipeline that had become depleted via a pervasive bearish meantaility. A top is likely forming unless Chinese or Central US weather worsens.

• Soybeans bounced on technical buying and rumors of both old and new crop exports to China. November caught support just above $11, where at the low of the day was nearly $.83 under last week’s high. The product markets were mixed, with old crop. Brazilian soybean basis has been over the US since March, while Argentina has been at or above (last week) the US. Any additional world demand will likely be directed towards the US from here forward. The USDA Quarterly Stocks and Acreage reports are a week away, with just one trading day between the report and the long holiday weekend. Independence Day has proven to be a critical pivot point in weather markets, but ahead of the USDA reports, November soybeans are likely trapped in a broad range of $10.75-11.50. The June soybean seeding data has often confounded and caught out even the most astute trader.

• Corn continues to struggle as rain moves across the E Midwest and S American basis levels are in fast retreat. Lower Argentine fob basis and reducing Brazilian domestic prices as harvest advances should see overall S American prices  fall further in the next 3-6 weeks. Export competition is now well and truly back for the US into early 2017. Note also that China has so far sold 8.8 million mt of its corn reserve stocks into the domestic market with auction prices in decline. Heavy rains will linger across the E Midwest through Thursday and a series of weak systems are forecast to follow next week. Uncertainty over totals and coverage persists, but a broad Ridge/Trough pattern through the next 10 – 12 days will boost rain chances and maintain seasonal temperatures. Pollination begins across the S Midwest next week and yield potential remains high. As we have said previously, June weather does not correlate with yield. Tuesday was important for corn’s chart pattern, and substantial damage has been done. Additional long liquidation is expected without adverse weather in early July.

• In wheat short covering was noted early, but US futures and global cash prices ended little changed following Tuesday’s decline. US weekly export sales on Thursday are expected in a range of 400-600,000 MTs, but otherwise fresh news is lacking. The USDA did update its vegetation health maps for all major producing countries this morning. Of note, ratings deteriorated further across Central Europe, and the USDA’s yield forecast may be overstated, but elsewhere conditions remain well above normal and last year. The N American weather pattern maintains above normal precipitation and near/above normal temps across the Canadian Prairies, ND and MN through early July. There’s still no sign of an Egypt’s first new crop tender, and now fraud has been attached to its domestic purchases this spring. Political/economic turmoil has weighed on N Africa/mid-East wheat import demand. A period of consolidation may lie ahead until EU quality can be assessed, but we maintain a bearish outlook on rallies. It remains that the US only competes for world trade below $4.50, basis Sep Chicago futures.

• Our  latest thoughts on the wheat situaion in Russia can be downloaded by clicking on the link below:

 Russian wheat S&D

• The chart below reflects that spot Chicago corn futures have held the upper end of a trading range of $4.40/bu (despite the forecast of a 1983 type of Midwest drought by many private forecasters). July Chicago corn rallied on Friday to the $4.40/bu high scored last June and has quickly retreated with futures limit or near limit down today (Tuesday). The sharp corn price drop strongly suggests that a seasonal high has been scored with funds holding a sizeable net long corn position. The next downside price target for spot corn is the $3.50 the lows scored in March. If spot corn futures were able to drop below $3.50, the next downside target is $3.20 – the 2014 low. Of course, if July corn were to take out Friday’s high the next target is the gap at $5.50. Weather, weather and more weather will be the driver!

• Favourable weather forecasts and crop ratings keep soybeans under pressure in Chicago. Prices turned lower in overnight trade and the pace of liquidation quickly increased as the morning opening. Despite some building heat in coming weeks, the crop looks as if it will receive good and welcome rains in the next 5-7 days. Monday’s NASS Crop Progress report expectedly showed a decline in subsoil moisture ratings, and as with crop ratings, a decline in subsoil ratings is typical as the summer progresses. here is relief coming, with drier areas to see good rains later this week. November soybeans closed just above last week’s low, with the next level of support noted at $10.80/bu. China has unsurprisingly showed up as a regular buyer of both old and new crop beans, which should underpin the market on a further correction, and they continue to ready an auction to sell reserve soybeans.

• Corn prices fell sharply as weather forecasts remain non-threatening into July, and the market settled limit down on the cooler and drier conditions.  We also focus on demand potential (as we have so often said!), with global feed wheat cash prices trending weaker and still offered at a substantial discount to Gulf corn.As some stage this has to become a price pressure point for corn. Two months ago US Gulf corn was the world’s cheapest feedgrain, offered at a discount of $2/mt to feed wheat and $1-10/mt to S American and Black Sea corn. Today, however, Gulf corn is one of the more expensive grains. Black Sea feed wheat for Aug/Sep is offered $173/mt, vs. Gulf corn at $188. Argentine corn is now quoted $.08-.15/bu below US, and Ukrainian corn is the world’s cheapest corn for Oct and beyond. The window for US corn exports is rapidly closing and buyers are taking note. Fund liquidation was evident, and if current weather forecasts are extended forward we will likely see further substantial liquidation from the recent, close to record, net long positions held by the funds. Technically we believe Chicago and global fob corn prices have forged a seasonal “top”. Some research is suggesting a US yield of 173 bushels/acre, but it remains early days and despite the US corn crop looking good, and withstanding the warm and dry June conditions, we would remind that June weather and final corn yield correlates very poorly!

• Wheat prices hit and/or neared contract lows on the back of weaker corn and weaker global cash markets. Kansas wheat made new lows whilst Chicago (Sep ’16) came within 8 cents of its May low. The markets biggest job right now is to work lower in order to alleviate the burdensomely high US and global stock levels via increased feed offtake, and trend yields and falling corn prices make this more difficult to achieve. EU and Black Sea wheat cash prices fell $1-2/mt, and Russia is still the world’s cheapest origin at $179-180/mt for Aug/Sep. Assuming current Gulf basis, this is equivalent to $4.30, basis Sep Chicago; however, the graphic below (as well as Russia’s expanding crop size) suggests further downside risk exists in global cash markets. We also note that Egypt appears ready to relax its standards on ergot, and so its first new crop tender may be forthcoming. This will be important in determining an actual trend in world prices. We fully expects exporters to be very aggressive!

• Funds might well be back (as of last Tuesday – latest data) holding their largest net long positions in corn, soybeans and wheat since the middle of 2014, which given good weather so far in the N Hemisphere suggests that they remain in the situation of almost demanding an adverse weather issue if the Chicago rally is to remain in situ.

• Soybean futures started the week lower on a wetter weather forecast, which ultimately left them, and products (meal and oil) lower at the close. Rain chances across the corn belt (oddly named as it includes huge swathes of soybeans as well) were predicted this coming week, especially in the drier parts of the east where last week saw a fall in crop ratings. Overall, it has to be remembered that the US soybean crop condition is well above average and one of the best rated in recent history! Does it justify current pricing? A price break lower feels unlikely until such time as we know more about summer weather patterns.

• Corn markets were easier as weather premium eroded on improved weather forecasts and their widespread rainfall prospects. It is important that the rain falls, not just for the crop but also for prices, as soil moisture levels in the eastern midwest are in sharp decline. Crop condition remains good, and it should be noted that we are 4% above last year (good/excellent), and just 1% shy of this week in 2014 when record yields were set! As with soybeans does this justify current pricing? Again, as with soybeans, we need to see what the remainder of the summer weather pattern brings!

• Wheat in Chicago also fell in line with corn as well as the proximity of the N Hemisphere harvest. Unlike corn, US wheat has to build a demand story, and the most likely route seems to be via livestock feeding rather than already price pressured exports. In Russia it seems interior cash prices are at a peak with harvest just around the corner and private forecasters edging their output estimates still higher. Some are talking of 65-66 million mt, which would simply add to global end stocks and from this perspective it does not feel that we have yet seen the market bottom.

• The fears of a British vote to exit the EU appear to be on the wane and £Stg rallied strongly as a consequence. The impact for London wheat vs. its MATIF counterpart was evident. Doubtless the market will retain some concerns until the result is announced in the early hours of Friday morning, UK time.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 17 June 2016

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions

• The USDA has today released its weekly export figures as detailed below:

Wheat: 762,800 mt, which is above estimates of 250,000-450,000 mt.
Corn: 1,088,400 mt, which is below estimates of 1,100,000-1,600,000 mt.
Soybeans: 1,585,000 mt, which is above estimates of 1,100,000-1,400,000 mt.
Soybean Meal: 192,900 mt, which is within estimates of 150,000-450,000 mt.
Soybean Oil: 15,700 mt, which is within estimates of 10,000-50,000 mt.

• Brussels has issued weekly wheat export certificates totalling 893689 mt, which brings the season total to 31.85 million mt. This is 246,396 mt (0.77%) behind last year.

• We have today seen Chicago markets (also mirrored in London and Paris) reacting to some degree of risk minimisation from hedge funds (Brexit) and longer range central US weather forecasts that do not foresee dire drought conditions. Funds appeared as aggressive sellers taking corn, soybeans and wheat to sharp morning losses, soybeans and meal in the lead with the grains following behind. Consequently tonight we see the technical chart analysis as somewhat more bearish although a rally into the weekend is not out of question but this will not be seen (by ourselves at the very least) as bullish right now.

• Interestingly, the US Climate Prediction Centre called for near to above normal temperatures during July and August as well as failing to offer any severe dry conditions in the same time frame. Fund managers seem to have taken this message on board today, liquidating some of their long positions and take exposure off the table.

• Brazil has announced that it would provisionally drop their restrictions to some US GMO corn to open the chance of imports. The harvest in Mato Grosso is just 10% completed, but will seriously ramp up in July. It will take at least 3 to 4 weeks to move US corn to Brazil, which means that it would arrive during the gut slot of their harvest. Most see the Governments move as too little too late with S American corn premiums in what seems to be fast retreat.

• Currently there is just not enough rain for the heart of the central US over the next 10 to 14 days to sustain the current Chicago decline. There are signs of tropical systems forming in the Gulf, but that does not occur until early July and consequently confidence is low. A secondary price rally could well unfold until better Midwest rains are confirmed by the forecasting models.

• Chicago markets started higher but failed as fund selling on the rally was noted as midwest cash grain movement grew. Old crop grain selling on the back of rains in the northern midwest encouraged farmers although their southern counterparts are less happy with rainfall amounts and are reporting some crop stress. Eyes are clearly on coming weather and how much heat/dryness is on the cards in the coming week.

• It feels as if the market is already trading reduced yields (below trend), the question being are we to expect a decline from here or see improvement with better rainfall? Current pricing in corn suggests a corn yield somewhere around 11-14 bushels/acre below trend at present, which would equate to 154-157 bushels/acre. Markets appear to be assuming warm/dry conditions will persist into July. Soybeans are much better able to withstand adverse conditions as we well know and have witnessed in previous years.

• The morning saw sharp gains in Chicago markets as less than expected rain was predicted for the week as well as warm to hot temperatures. July soybeans saw $12/bu tested (but not reached) and July corn saw the 2015 spot high ($4.3875) also tested (similarly not breached). Wheat was somewhat less inclined to rally given the record large US and world stocks forecast by the USDA in Friday’s release.

• Latter trade was somewhat less robust than was maybe anticipated, lower than early trade. Fund profit taking ahead of prospective midwest rain this week and some issues/concerns over Brexit, which has prompted some suggestion that others may follow if Britain does indeed exit.

• It seems that corn is leading the market at it is about to enter its key pollination stage whilst soybeans are more tolerant of any prospective heat and/or dryness. It should be noted that such conditions are, as yet, not in the forecast and we are merely seeing some fairly substantial weather risk premium in pricing at present.

• Informa estimated 2016 US corn seeding at 92.566 million acres, below last month’s 93.376 million and USDA’s 93.6 million. Soybeans were estimated at 83.761 million acres, up from 83.006 million a month ago and significantly above the USDA’s 82.2 million. Total wheat acres were estimated at 50.2 million, above 49.994 last month. The estimates failed to move the marketplace.

• It is a yield and weather discussion going forward. US 2016 corn and soybean crops still holds a considerable amount of yield potential if cooler/wetter conditions return. However, the current pattern does give rise to some concern with soil moisture in fast retreat. It is difficult to be overly prescriptive until there is more clarity on the 2016 summer weather outlook.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 10 June 2016

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions

Our review of the latest USDA report can be downloaded by clicking on the link below:

June 16 USDA contemplation

To download our recap of today’s USDA WASDE report please click on the link below:

USDA-Recap-10-June-16