Author Archives: simon

22 July 2024

Posted on July 22, 2024 by simon

• Chicago expands overnight rally; GFS weather forecast features possible incredibly strong ridge in early August; Mexico buys US corn.

• Chicago grain futures are higher at midday amid the unwind of the “Trump Trade” which is pushing soybeans to strong gains of $0.30+/bushel. Corn and wheat futures have followed with farmers unwilling to sell the bounce. Traders are aware of the record net fund short position and the basis strength of the cash market as end users search for nearby supply. Chicago rallies may push higher than expected as managed money is forced out of their large net short position prior to the USDA August crop report. This report has traders on edge with NASS already alerting the industry that it will incorporate FSA Farm Program Participation data into August 2024 US seeding and harvested acre estimates.

• We have adjusted our 2024 US corn seeding estimate downwards by 900,000 acres and soybeans by 1 million acres to account for latent seeding and the flooding across the NC Midwest. Wisconsin, Minnesota, E South Dakota, and N Iowa crops look tough amid the wet spring. Illinois by itself carried US corn/soybean crop ratings last week. It is unlikely that Illinois can repeat the heavy lifting task in the weeks ahead. We look for a higher Chicago close today.

• Chicago brokers estimate that the managed money has purchased 8,600 contracts of soybeans, 5,900 contracts of corn, and 2,600 contracts of wheat. In the soy products, managed money purchased 5,400 soymeal and 4,300 contracts of soyoil.

• The USDA reported 133,000 mt of US corn sold to Mexico in the 2024/25 crop year. Mexico is expected to be sizeable importer of 820-860 million bu of corn in the new crop year.

• US export inspections in the week ending July 18 included 38 million bu of corn, vs. 43 million the previous week, 12 million bu of soybeans, vs. 6 million the previous week, and 9 million bu of wheat, vs. 23 million the previous week. For their respective crop years to date, the US has inspected for export 1,794 million bu of corn, up 33% year on year, 1,556 million bu of soybeans, down 16%, and 95 million bu of wheat, up 20% from the same week a year ago. Pace analysis suggests WASDE will keep its old crop annual forecasts unchanged amid the relatively solid performance of late season US soy sales and shipments. Corn export demand remains abnormally for mid-summer.

• Minor oilseed markets have found new life as drought worsens in E Europe, Ukraine and S Russia and dryness expands in S Canada, which follows damaging frost/freeze in spring. Spot Nov Canadian canola’s chart is below. The breach of the contract’s 200-day moving average this morning is noteworthy.

• Additionally, the major forecasting models are in agreement in keeping Black Sea rainfall confined to Romania/W Ukraine. Key areas of northern Ukraine and southern Russia face an intensification of drought between now and August 1. Heat is forecast to resume there in the 6-10-day period.

• The Central US GFS weather forecast at midday is consistent with morning output in keeping meaningful Central US precipitation confined to the eastern Midwest/KY in the 8-10-day period. Precipitation this week will be confined to the Delta/Southeast, where drought has become severe but where regional flooding is possible in the Carolinas. Mild temperatures continue for another 3-4 days. Heat expands into the Plains/W Midwest thereafter. The GFS forecast projects widespread and rather amplified high pressure ridging in the 10-15-day period, and forecasts high temperatures in the 90s/100s across the entirety of the Plains and in AR, MO and IA. Confidence in extended range details is low, but this must be monitored.

• Funds record short position in ags is being tested amid less favourable Central US weather, ongoing Black Sea drought and as US soybeans become competitive for autumn/winter delivery. The duration of Central US dryness is key over the next 2-3 weeks.

19 July 2024

Posted on July 19, 2024 by simon

• Wheat rallies strongly on European gains; GFS midday weather forecast adds rain to NC Midwest; US 2023/24 soymeal sale to unknown destination.

• Chicago grain futures are mixed with a strong rally in world wheat values leading the morning advance. Wheat crop quality issues across Western European along with a rumour that there was a nuclear leak at Russian Rostov facility spurred the strong morning Chicago rally. Corn and soybean futures followed. Newsweek and UK tabloids sponsored the Rostov nuclear leak rumour. The Russian’s have denied the leak and Chicago grain prices have relaxed.

• The opening volume of Chicago trade was active while the midday action has turned slow. Overnight internet/software upgrade issues are being resolved, but European and SE Asian traders are taking off for the weekend. We look for a choppy/mixed trade into the close. The volatility of world financial markets is increasing on speculation on whether President Biden will be ending his Presidential campaign. Traders are taking profits on the “Trump” trade following the successful Republican Milwaukee Convention.

• Chicago brokers estimate that funds have bought 6,500 contracts of wheat, a net 900 contracts of corn, and 1,200 contracts of soybeans. In the products, funds have sold 2,600 contracts of soymeal and 1,700 contracts of soyoil. The large net short structure of Chicago will be under examination later today.

• The USDA reported a 105,000 mt soymeal sale to an unknown destination. The sale was for the 2023/24 crop year. This was the second soymeal sale in recent days. There are cash connected rumours that China is securing US Gulf soybeans for Oct/November now that US soybeans are priced below Brazil through yearend.

• September Paris wheat futures closed with strong gains of €8.75/mt ($0.25/bu) due to growing crop quality concerns. The French/German wheat harvests are showing light test weights with evidence of sprout damage. Protein levels are low, and traders are worried that the new French wheat crop may not reach the deliverable 11% protein that is required by Paris futures.  Notice in the daily wheat chart of Sept Paris wheat that futures closed well above the gap left in early July, with the next upside price target being €235. We note that Europe requires at least 9 million mt of French wheat for its own domestic flour production, which could significantly short the export market. The French cash wheat market must increase its premium to Russian fob wheat to assure its own domestic supply. Russian fob wheat values closed the week at $218, steady with Monday. Russia no longer needs to be as aggressive in pricing its wheat to gain world demand.

• We caution that just 17-19% of the French and 12-14% of the German wheat harvest is completed, so making blanket assumptions on quality is risky. However, the next few weeks of harvest will determine whether the early harvest light test weights are a forecaster for the remainder of the crop.

• The  US GFS weather forecast is slightly wetter across the NC Midwest and slightly drier across the Gulf Coast and SE US. The N Plains and the Canadian Prairies hold in a warm to hot weather pattern with limited rainfall. Flooding will become an issue across the Gulf States with the corn harvest there set to begin in 2-3 weeks. No extreme heat is forecast with Midwest high temperatures to hold in the 70’s to the upper 80’s. The extended GFS 10-15 day forecast places a strong ridge of high pressure across the South-Central US with extreme heat returning.

• A base is being built in Chicago for a rally during late July/August. The milling quality loss of the French/German crop is highly important for future world wheat trade. We look for Russian wheat prices to start an advance on importer reach for protein supplies. Corn and soy futures struggle on rallies on yield ideas. Any surprise in Central US weather is tipped away from future improvement. Long range forecasts are hinting at the return of NW and Southern US heat.

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

Weekend summary 19 July 2024

18 July 2024

Posted on July 18, 2024 by simon

• Grains sag while soybean bounces on sale of 510,000 mt to unknown destination; Wheat protein spreads to widen amid low test weight EU wheat crop; GFS weather forecast more like EU Model.

• The battle is ongoing in rising new crop US supply vs strong US/world cash premiums. Rumours have China back in the US market for soybeans with 510,000 mt reported sold for 2024/25. The sale was to an unknown destination. There was also a sale of 150,000 MTs of US soymeal to an unknown destination for 2024/25. We believe that China is asking for additional soybean offers off the Gulf and PNW for October/November. Chinese and US crush margins are strongly positive, and China is a price buyer with values at 3-year lows. Chicago soybean futures have been able to recover on the news, with soymeal holding strong on record large cash premiums and ongoing new demand as Argentine sales and offers are well below expectations.

• Corn and wheat futures are mixed to weaker on mild Midwest temperatures which could produce a larger yield. The corn market is falling on the potential for a record US corn yield and how big is big. Current values are pricing in a US corn yield of 182-184 bushels/acre, or some 5-7 bushels/acre above last year’s record. The corn market is searching for a low that deciphers this year’s US corn in the backdrop of rising Brazilian/Ukraine fob offers. Brazilian corn is offered at $0.96-1.05 over for August/September, $0.20-0.24/bu above the US. The weakness in corn has pulled Chicago wheat values back into the red.

• Chicago brokers estimate that the managed money has sold 5,600 contracts of corn, while buying a net 2,100 contracts of soybeans and 1,200 contracts of wheat. In the products, the managed money has bought 2,200 contracts of soymeal and 1,700 contracts of soyoil.

• US weekly export sales for the week ending July 11 were 21.3 million bu of wheat, 17.2 million bu of corn, and 13.2 million bu soybeans. For their respective crop years to date, the US has sold 284 million bu of wheat (up 93 million or 49%), 2,154 million bu of corn (up 589 million or 38%), and 1,667 million bu of soybeans (down 264 million or 14%). A US 2023/24 soybean export estimate of 1,675-1,700 million bu is realistic with corn at 2,200-2,250 million bu.

• China is way behind on its US new crop soybean purchases, something that we have been reporting for  some weeks. There is talk that China is adding to their soybean purchases, but nothing near the volume of the past 36 hours. Traders are questioning whether China steps forward and catches up on its soy purchase pace with US tariff levels known into February. China needs US soybeans since Brazilian offers are limited beyond the next 60 days. If China wants to place itself in a strong trade negotiating position with the US, they will increase their soybean import needs into early 2025. We suspect that China will be a more active buyer following the Milwaukee Republican Convention. Time will tell, but some traders are exiting long corn/short soybean spreads amid the potential for China to be a larger buyer of US Sept-January soybeans. Also, we suspect that 2 cargoes of US old crop sales, are new crop and misclassified.

• World wheat protein spreads are expected to gain amid the reported poor quality of the French/German wheat crops. And if yield cuts are produced by dry weather across Canada and the Northern US Plains, spring wheat protein supplies will be tightening. 12% Russian, US HRW/HRS and Canadian/Kazakh wheat will be sought. The EU will likely feed more low-quality wheat in 2024/25.

• The Central US GFS weather forecast is more like the EU model solution and drier across the W Midwest, the N Plains, and the Canadian Prairies than it showed overnight. Limited 10-day rainfall of traces to 0.6” is forecast above the NW Midwest and the N Plains, while heavy totals of 2-6.00” drop across the Gulf States and the SE US. Flooding will become an issue across the Gulf States with the corn harvest set to begin in 2-3 weeks. No extreme heat is forecast with Midwest high temperatures to hold in the 70’s to the upper 80’s.

• Black Sea weather is the biggest threat to world crop production with corn/sunseed crops in decline and the midday GFS forecast returning drier. The non-threatening Central US weather forecast caps Chicago rallies. Traders will be closely following net short corn, soybean, and wheat positions in Friday’s CoT report. The market is excessively bearish, but a US supply threat is lacking amid uncertain future Chinese demand.

17 July 2024

Posted on July 17, 2024 by simon

• Chicago mixed at midday as traders sell early Chicago rally on cool temperature forecast: US weekly ethanol grind third best on record; Midday GFS weather forecast little changed.

• It is a battle of US supply vs rising US and world cash premiums in Chicago.

• The bears talk about record large US corn, sorghum, and soy yield potential, and that the coming cool Central US temperatures with widely scattered showers will further boost potential. WASDE pegs the US corn yield at a record 181 bushels/acre, but the marketplace is trading/discussing a corn yield of 182-184 bushels/acre and a soy yield of 53-53.5 bushels/acre. WASDE has the US soybean trend yield at 52 bushels/acre.

• Corn is a crop of July, and the weather has been favourable. How high is high in the 2024 US corn yield, which will hinge on the filling stage and foliar disease pressures. Last year’s US corn crop witnessed limited foliar disease amid low humidity and the residual smoke from Canadian wildfires that produced a record large US ear weight. It was record 2023 ear weight that surprised the farmer.

• The bulls point to surging US cash market basis and that (low) price is doing its job of stimulating use. The morning Chicago corn/soybean rally was sold on nearby non-threatening weather forecasts. The Western Canadian Prairies, the Northern US Plains and the NW Midwest can endure another 7-10 days of dry weather without undue crop stress. These are areas to monitor into August.

• Plainly stated, if Chicago is to score new lows it will be based on the US corn yield rising above 184 bushels/acre or soy above 53.5 bushels/acre. Such big yields are possible amid improved July weather, but there are a key 6-7 weeks of Central US weather remaining. How big is big is the question for US corn/soy yields. However, one eye must be kept on corn foliar diseases and their early arrival.

• The bulls point to rising cash markets and improving demand. Interior US cash corn/soybean basis keep on strong soybean crush/ethanol production margins. And refilling the US soymeal pipeline has been a lot more difficult than expected, especially with 3 new Midwest crush plants taking an extra 375,000 bu/day of US soybeans each day by October. The point is that world corn and soy product values are historically strong with Brazilian corn $1.00 over the Gulf and Brazilian soyoil +1 cent over Chicago August futures. And even Argentine cash soymeal has stayed stout with Sept at $15/mt over. Black Sea wheat values are steady/higher with Russian/Ukraine farmers not selling to replace yesterday’s GASC purchase. US Gulf corn is offered at $0.77-0.80 over.  The point is that world/US cash basis bids are strong on demand.

• The US ethanol grind was the third largest weekly total on record at 325 million bu. This big corn grind was a bullish surprise. Yet, hefty US ethanol production was not a surprise with margins exploding to the upside. And weekly US ethanol stocks fell 19 million to 972 million gallons. We maintain that WASDE is too low by 15-25 million bu on the 2023/24 corn grind.

• The GFS weather forecast is slightly cooler for the next 10 days, but little changed in the outlay of precipitation. The only forecast change is slightly drier for the S Plains, with limited rain for the Northern Plains and the NW Midwest. Heavy rain totals are forecast for the Gulf States and the SE US. The Western US and the Canadian Prairies hold in an arid forecast trend. Our future crop risk concern is the N Plains and the NW Midwest. High temperatures hold in the 70’s/80’s with high humidity levels.

• Chicago is cheaply priced relative to the future supply risks ahead amid surging Brazilian and Black corn and oilseed basis bids. And look for Russian wheat fob values to score a bottom in the next few weeks. Unfortunately, Black Sea crop losses will worsen with an ongoing arid trend. If you are bearish, it is a bet on record large US corn/soybean yields. The market has already priced large US stocks and yields,  can they grow even larger is the difficult question.

16 July 2024

Posted on July 16, 2024 by simon

• Chicago recovers on rising cash basis bids; Egypt receives wheat offers with Russia the lowest offer at $226/mt; GFS weather forecast unchanged at midday.

• Chicago grain futures are mixed at midday with wheat futures sagging to new lows on additional speculative selling while corn/soybean values are stabilising following Monday’s lashing. Like August of 2020, the damage from strong windstorms across Eastern Iowa and NW Illinois can only be known by satellite maps that help define areas of flattened corn. The market is aware of some toppling of corn during pollination, but the degree is unknown. A cautious approach to crop damage is being taken.

• Monday’s Chicago open interest data reflect that managed money was not big sellers of corn but added to their net short positions in wheat/soybeans. Open interest fell 1,419 contracts in corn, while rising 3,868 contracts in soybeans and 4,786 contracts in Chicago wheat. Monday’s big gain was in soyoil with open interest up a strong 12,745 contracts. Soyoil is attracting end user pricing on breaks which has to be closely followed.

• Egypt’s GASC received wheat offers for September wheat with the lowest offer being $226/mt for Russian origin. The most recent sale of wheat to GASC was completed at $227/mt, so the current offer is down $1.00/mt for a more forward sale period. The world wheat market is holding much better than Chicago where speculative selling is ongoing based on bearish charts. Russian fob wheat is said to be bid at $215/mt and offered at $219/mt, little changed in recent weeks. It appears from harvest data, that Russian wheat crop estimates are again starting to slide, and SW Russian corn yield are being adversely impacted by the heat/dryness that persists.

• Ukraine’s corn yield could fall by 30-35% according due to extreme heat/ dryness according to the Ukraine Agrarian Council in a forecast that was made today. Such a yield decline would drop Ukraine’s 2024 corn production to 18-19.4 million mt. Such production would drop their exportable corn supplies to 15.5-16.5 million mt vs USDA’s current forecast of 24.50 million. The loss of 8-9.0 million mt of Ukraine corn trade is important to the world balance sheet and further makes the coming US corn export program look to be too modest. Ukraine fob corn offers keep rising as farmer’s there hold back on sales. Note that Eastern Europe is also enduring the same heat/dryness with Ukraine corn imports becoming more feasible. Non-US corn exportable corn supplies are in decline which should push demand to Brazil, Argentina, and the US.

• China is showing up in the Brazilian vessel line up as being a buyer of more than 900,000 mt of corn. China again appears to be targeting Brazilian corn. The import margin of US corn into China is at one of the highest levels in years at over $1.50/bu. Traders expect that China will take Brazilian corn but remember that US corn is not out of the question for importers that desire to use their TRQ allocations.

• The midday GFS weather forecast is similar to the overnight forecast with rain across the Gulf States, Delta and the Southern Midwest. The NW Midwest and the Northern Plains hold in a drier pattern. A warmer/drier pattern unfolds following July 25 which persists into early August. The only real concern is the lack of rain across the NW Midwest and the N Plains.

• Chicago is paying more attention to cash markets today with corn/soy basis levels firming as end users try to stimulate movement. US and Black Sea farmers are tight holders of grain. The premium of the cash market is unusual heading into late summer with US farmers holding 1,877 million bu of corn and 345 million bu of soybeans. Ukraine and Brazilian fob corn basis continues to firm in the background. The US is in position to be a near record exporter of corn in 2024/25.

15 July 2024

Posted on July 15, 2024 by simon

• Chicago stays under intense pressure on weather and Trump China worry; Wheat tests trendline support at $5.30.

• Chicago grain futures continue at sharply lower levels at midday. Non-threatening Central US weather and ongoing speculative selling pushed November soybeans to downside price target at $10.40 while September wheat futures test a monthly uptrend line at $5.30, and corn tests last week’s low. End users are scale down buyers as debate rages on 2025 US corn/soybean yield potential. The market has a bearish feel at midday.

• Chicago is trading a 182-184 bushels/acre corn yield and a 53-53.5 bushels/acre soybean yield. It appears that either a threat to this yield must occur or these big yields need to be ratified by USDA before crop losses in the EU/Black Sea becomes a market topic. Chicago momentum is down which has algos/AI trading systems wanting to sell rallies. Yet, the rubber band is very stretched when considering the money managed short in terms of a percentage of open interest.

• Scale down end user pricing is noted, but so far, the needed interest by China to turn the market’s tide is not being seen. Chinese buyers believe that the weekend assassination attempt of Trump helped his re-election chances. Chinese buyers are worried about rising US tariffs in his second Administration. However, the new tariffs will not become active until February at the earliest, which allows a window of purchase opportunity for China.

• Chicago brokers estimate that the managed money has sold a net 5,500 contracts of wheat, 4,400 corn, and 6,700 of soybeans. In the products, speculators have sold 4,100 contracts of soymeal and 2,100 contracts of soymeal.

• US weekly grain exports were 42.5 million bu of corn, 19.6 million bu of wheat, and 6.2 million bu of soybeans. For their respective crop years to date, the US has shipped 1,755 million bu of corn (up 439 million or 33%), 83.3 million bu of wheat (up 18 million or 28%), and 1,543 million bu of soybeans (down 290 million or 19%). The US is on track to reach USDA’s revised corn/wheat annual export estimates, although we could argue that WASDE is too high with its soybean export estimate by 15-20 million bu.

• NOPA members reported a record June Crush rate of 175.6 million bu, a record and up 6.4% year on year. US soyoil stocks fell to 1,622 million pounds, which was below the average trade estimate of 1,686 million pounds. The August/December soyoil spread has pushed out to a $1.40 premium as cash US soyoil supplies tighten. The next upside price target is a test of the 2023 highs just above $2.00. The strength of cash soyoil and spreads offers limited downside potential for soyoil values.

• We look for US good/excellent ratings on corn/soybeans and spring wheat to rise 1-2%  later this today. Rating gains are unseasonal in mid-July as the crop enters the reproductive stage. However, corn disease pressures are mounting with Grey Leaf Spot, Tar Spot and Northern Corn Blight worsening.

• The midday GFS weather forecast is drier for the W Midwest and the Northern Plains and more in line with the EU overnight run. Following a storm later today across IA/N IL, the forecast  becomes more arid across the NW Midwest and the Northern Plains. Heavy rain will fall across the Gulf States and the SE US with totals of 2.50-4.50”.The midday forecast is warmer with heat returning to the Central US after July 20 as the western high pressure ridge in the west pushes eastward. A ridge in this position would spur the return of heat and 90’s/100s.

• The bears are in control amid favourable Central US weather and the fear of a trade war with China as President Trump prepares to address republicans in Milwaukee this week. The bears expect that Trump will continue his strong rhetoric against China and promise even larger tariffs in 2025. Wheat, corn and soybeans are at major chart support amid strengthening cash basis bids. And humidity levels are high with scouts concerned about corn foliar diseases. The bearish cast is set for today and maybe early Tuesday, it is a hard place to make sales with speculators so short.

11 July 2024

Posted on July 11, 2024 by simon

• Chicago mixed at midday as volume thins ahead of Friday’s July WASDE Report; Midday GFS weather forecast drier with heat across the N Plains; US Dollar declines on slowing inflation.

• Short covering has featured ahead of Friday’s USDA July Crop Report. Wheat has witnessed the heaviest covering, while more modest totals are being tossed about in corn/soybeans. Also, active corn spreading has been featured with the September/December spread pushing into 7 cents and then moving back out to 11 cents. And the rally in soyoil has jumped crush margins back higher with spot board crush at back over $1.52/bu with oil share pushing out to 41%. There is a bullish undertone in wheat/corn, while the soy complex languishes awaiting additional Chinese demand.

• Chicago brokers estimate that managed money has secured 6,200 contracts of wheat, 3,500 contracts of corn, and 1,200 contracts of soybeans. In the products, managed money has sold 3,100 contracts of soymeal and 4,200 contracts of oil.

• US weekly export sales were disappointing in the US holiday week. The US sold 8.8  million bu of wheat, 25.8 million bu of corn (21.2 old and 4.6 new crop) and 14.6 million bu of soybeans (7.6 old and 7.0 new). For their respective crop years to date, the US has sold 262 million bu of US wheat (up 78 million or 43%), 2,136 million bu of corn (up 582 million or 37%), and 1,653 million bu of soybeans (down 276 million or 14%).

• There were early day rumours that China was seeking US corn. We cannot confirm any US corn interest, but China does appear to be willing to ask for offers on Brazilian corn for September/October shipment. Export sources argue that China has purchased modest amounts of Brazilian corn for September. Last year, Brazil had a monster China purchase program. This year, China has been far more patient with corn/soybean purchases for autumn delivery. US new crop soybean futures are in decline seeking an increase in China interest. Normally, China is a price sensitive buyer, but the political rhetoric this year has importers not wanting to get caught with additional tax beyond the installation of the next US President on January 20.

• The value of the US dollar fell sharply following the confirmation of negative price growth in the US economy.  The CPI, a broad measure of the cost of US goods fell 0.1% in June with a decline in gasoline prices helping to offset modest gains in foods. The year on year CPI rose 3%, down 0.3% from May. The decline in the US inflation rate should spur the US Central Bank to initially start cutting interest rates in September. The June CPI was the first time since May of 2020 that the monthly inflation rate showed a decline. We are now raising the risk that the US Central Bank will cut their lending rate in September and again in Q4. The US economy is slowing now that the US labour market is balanced. A falling US dollar will be bullish to commodities.

• Russian fob wheat offers stand at $218/mt, steady with last Friday. Black Sea dryness and extreme heat is causing farmers to slow any new cash sales.

• The jet stream is migrating northward which will leave most of the Plains, Delta and the Midwest with limited rainfall for the next 10 days. One short wave pulls through the lower Midwest in the last half of next week producing rainfall of 0.15-1.00”. Heat will be returning to the Plains, Delta and the W Midwest with highs routinely in the 90’s and a few lower 100’s. More seasonal upper 70’s to mid-80’s will prevail across the remainder of the Midwest. The warmer/drier forecast will draw down Central US soil moisture. However, any extreme heat will hold across the Northern Intermountain West with record lower 100’s possible. The Northern Plains will see the warmest/driest weather into early August which is the crop area at the biggest risk.

• The USDA reports on Friday are widely expected to bearish with growing new crop US corn and wheat stocks. US 2024/25 soybean stocks could fall on reduced seeded acres, depending on how the USDA sees future China demand. China has a flotilla of Brazilian soybeans heading in their direction. China is asking for offers on US October/November soybeans and Brazilian corn. No new sales can be confirmed. Crop weather for the rest of the US 2024 growing season holds the key for prices.

10 July 2024

Posted on July 10, 2024 by simon

• 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.

8 July 2024

Posted on July 8, 2024 by simon

• Chicago new crop corn/soybeans fall to fresh contract lows; Rains from the remains of Beryl to aid E Midwest; French wheat yields disappointing.

• Chicago futures are sharply lower at midday with new crop corn and soybean futures scoring new contract lows. December corn fell to $4.08 while November soybeans declined to $10.9425 amid improving Eastern Midwest weather tied to the remains of hurricane Beryl. Moreover, the Monday following the July 4 holiday week always produces big price moves, and today’s drop falls into that category, in a big bearish way.  Wheat futures have been a follower of the summer row crop decline and are back testing the lows following the June Stocks/Seeding Report. Managed money has been sizeable sellers this morning as they add to already large net short positions. We look for Chicago to form a low early this week with a recovery into Thursday’s Brazilian CONAB and Friday’s USDA July Crop report. The momentum in the market is down and the algo systems are trading accordingly on the short side of the marketplace.

• Chicago brokers estimate that the managed money has sold 12,400 contracts of corn, 8,700 contracts of soybeans, and 5,900 contracts of wheat. In the products, the funds have sold 5,100 contracts of soyoil and 6,500 contracts of soymeal.  The fund selling slowed at midday but may return prior to the close. The market has an exceptionally bearish feel all morning long.

• The USDA reported the sale of 135,636 mt of US corn for delivery to an unknown destination. Of the total, 50,800 mt were for delivery during the 2023/24 marketing year and 84,836 mt for 2024/25.

• US weekly export inspections for the week ending July 4 were; 40.3 million bu of corn, 10.0 million bu of soybeans, and 12.5 million bu of wheat. For their respective crop years, the US has shipped out 1,713 million bu of corn (up 393 million or 30%), 63.6 million bu of wheat (up 7.7 million or 14%), and 1,536 million bu of soybeans (down 291 million or 19%). The US is on track to export 2,150 million bu of corn and 1,675 million bu of soybeans.

• French harvested wheat yield data continues to show a sharp drop in production potential with some traders discussing a crop of 25-26 million mt. The decline is based on the 8% drop in seeding and the season long cool/wet weather that hindered seed development and is starting to produce crop quality issues. A 25-26 million mt French crop will drag total EU wheat production down to 126 million mt or less. And a big unknown is the milling characteristics of the  French harvest amid reports that grains are already germinating. Paris wheat futures have fallen with the Chicago decline in a test of the €220 support area. French wheat values are priced $30/mt above the Russian fob market. Why Russia keeps lowering its wheat price offers is being questioned as Russian farmers will not be in a hurry to sell wheat off the combined at breakeven or lower prices and poor yields, that reflect the ongoing drought. We see the world wheat market as “cheap” relative to prevailing fundamentals.

• The midday GFS weather forecast is like the overnight solution with the remains of Beryl taking a track from far NE Texas into Michigan with rain in the narrow 200-mile pathway equalling 0.75-3.00”. The positioning of the storm is slightly further north. Following the storm, the overall Midwest goes dry for the next 6-10 days. Heat is initially absent, but it returns with vigour beyond July 16. The western ridge of high pressure progresses eastward and sets up across the Central US which will produce above to much above temperatures with highs in the upper 80’s to the upper 90’s and even a few locations that will exceed 100 degrees. The coming hot/dry weather will initially be favoured by the NW Midwest, but the last half of July is forecast to be warmer/drier.

• US corn, soybean and spring wheat crop conditions are forecast to be steady to 1% better in the good/excellent category at 67% for corn/soy and 72% for spring wheat. The US winter wheat harvest is forecast to be 68% completed. The coming Beryl rains will help ease dryness across the E Midwest, but a lasting period of cool/wet weather is not offered. As the jet stream pushes north, an extended period of Central US heat/dryness is forecast during the last half of July.

5 July 2024

Posted on July 6, 2024 by simon

• Chicago rally on warm to hot Central US weather after July 16; Additional wheat receipt cancellation: Midday GFS weather forecast adds rain to the Delta/S Midwest.

• Chicago futures are higher at midday with wheat being the bullish stalwart. The decline in the French wheat crop due to lower than expected harvested yield data and the decline in the value of the US dollar (US employment outlook showing weakness with more than 65% of June’s job gains coming from government) is underpinning commodity valuations heading into the weekend. Corn and soybean futures have been followers of the wheat rally with managed money short covering in soyoil lifting August futures closer to key resistance at $49.80-50.20. Like the wheat market in April, managed money can enter too large a net short which forces a dramatic rally. Longer term upside price targets for August soyoil rest at $0.53-0.54/pound.

• US traders are reluctant to take any large new positions until Monday when crop condition ratings and the CFTC Commitment of Traders report will be released. Trading volume is thin with the July WASDE report due next Friday with NASS stocks/seeding updates being incorporated. WASDE will not alter their corn and soybean yield estimates at 181.0 or 52.0 bushels/acre, respectively. The unknown is whether WASDE will drop their US 2023/24 US corn feed/residual estimate by 50-75 million bu. The only bullish hope for the July WASDE would be world crop cuts.

• The Anderson’s cancelled another 198 wheat deliverable warehouse receipts against Chicago futures today taking total to 561 contracts. The bulk of the wheat is being held in Maumee. The hefty 918 contract drop in Chicago deliverable wheat receipts/supplies is a surprise with the Midwest harvest reaching a frenzied pace. Either the US is seeing fresh export demand or the old crop wheat is needed for blending purposes. The sharp fall in deliverable receipts is helping to confirm seasonal lows.

• Indonesia is claiming that it is not targeting China with import duties against textiles and other consumer goods. However, Indonesia seeks to protect its domestic manufacturing sector from unfair competition. Whether this recently announced government comment, will prevent Indonesia from announcing duties of 100-200% on more than 50 Chinese consumer goods is unknown. Nor is it known if such tariffs are enacted, whether China will retaliate against Indonesia palmoil imports with their own duties. The rally in world vegoil prices was initially ignited by Indonesian rumours of proposed duties on Chinese goods.

• US weekly grain export sales for the week ending June 27 were 29.6 million bu of wheat, 26.4 million bu of corn (14.1 million of old and 12.3 of new crop), and 13.9 million bu of soybeans (8.4 million of old and 5.5 of new crop). For their respective crop years, the US has sold 253.5 million bu of wheat (up 84 million or up 49% from last year), 2,115 million bu of corn (up 579 million or 37%), and 1,646 million bu of soybeans (down 281 million or 14.5%).

• The midday GFS weather forecast is wetter across the South-Central US with soaking rain for the Delta and Gulf States from the remains of hurricane Beryl. Rainfall totals are estimated in a range of 1.50-6.00” and locally heaver. This area has been dry, and the rain will assist crop yields. A high-pressure ridge holds across the Intermountain West in the 10-15 day period which will produce extreme heat across the Plains and the western section of the Midwest. A dip in the jet stream allows for rain across the E Midwest from July 15-18. The forecast is warm with limited rainfall across the Northern Plains and the North Central Midwest into July 20. The yield risk is based on the developing heat.

• China has not yet booked new crop US soybeans as of late June. Unknown sales of US soybeans could be to China, but the lack of visible China demand is a concern. Heat is coming to the Plains and the far Western Midwest which will cause rapid drops in soil moisture. US corn/soy crop ratings on Monday are expected to be steady to 2% higher amid cool temperatures and rain this week.