• Red is the colour at midday with corn, soybeans and wheat enduring fresh selling pressure. Funds are trapped long in corn/wheat (at higher prices) and are deciding to liquidate heading into the end of the month. December corn is trying to hold support at $4.20 while November soybeans tested their July 9 low at $8.90. World wheat prices have not moved in either direction in recent weeks which limits rallies and breaks in Chicago. Cash basis is firm for Chicago SRW as elevators look to profit from selling forward futures and collecting storage.

• Fund managers are not wanting to add to their bull risk in grain and soy with seasonal price trends down into late summer. Unless the August crop report holds a bullish surprise, old crop cash and fund longs could keep pressure on Chicago heading into the end of summer. It is key that December corn futures close above $4.20 and November soybeans above $8.90 going home.

• The US and China will hold another day of meetings overnight before USTR Lighthizer and Sec Treasury Mnuchin head back home. The USTR will be holding a meeting with Japan’s economic minister to end the week which will hopefully produce a break through that lowers Japan tariffs for US ag  US ag goods. Rabobank is forecasting that China has lost 40% of its pig herd to ASF with losses to reach 50% by year end. If true, this would have a major impact on China’s demand for imported soybeans and feedgrains. A cut in China’s pig herd of 50% would imply that China’s 2019/20 import of soybeans could be 10-14 million mt lower than WASDE forecast at 73-77 million mt. Such a reduction on China’s total annual soybean imports would be a significant drag on world soybean values. Note that China’s ag minister forecast that China’s pig herd was down 26% from a year ago, which is sizeable. The point is that China has been lost as a bullish demand driver in world soybean trade for some years to come. Monthly Chinese soybean import data will become important to gauge import losses.

• Brazilian farmers report that they are planning on ramping up first crop corn production based on existing prices and margins. S American farmers are likely to ramp up soybean seedings also, but first crop corn shows more appeal today. Note that winter corn yields have been record large as farmers are wrapping up their harvest of a 100 million mt crop. Brazilian corn export commitments are record large and rapidly growing. US corn export demand is being lost amid steep export competition from S America and Ukraine.

• The midday Central US GFS weather forecast is slightly wetter across the Midwest and Delta than the overnight run. The major weather models continue to struggle with passing short waves through the Midwest and a potential tropical system that pulls along the Eastern US. Portions of E IA and NC IL remain too dry with some additional crop stress likely. However, there is no heat indicated for the Central US into mid-August which will favour corn pollination. The 10-15 day forecast offers better rain chances across the Central US which would be timely for blooming and podding soybeans. Some 20-25% of the Midwest is too dry and in need of immediate rain.

• The demand bears received help from Trump tweets this morning that US/China trade talks were struggling. Yet, some 20-25% of the Midwest remains too dry, but temperature are cool which is aiding corn pollination.  Chicago seasonal price trends are down during August and corn fund longs are losing patience. December corn is holding support at $4.20, but a bullish August crop report is needed to alter softening price trends.  Without a bullish August USDA report, seasonal lows are likely to be formed in late August or early September.

• Chicago is holding in the green heading into the midday hour with Chicago wheat the upside leader. The rally in Chicago wheat does not appear to be based on any fresh fundamental news, but rather technical considerations as wheat rallies through the 20-day moving average with Chicago futures forming an outside day up. The chart-based aspect of wheat is underpinning corn and soybeans at midday. The volume of Chicago trade since the reopen is pitiful with few wanting to add to risk ahead of first notice day in August futures and the end of the month.

• The USDA August Crop Report looms in just 10 trading sessions and fund managers are growing impatient with long corn futures. We look for a firm close without much bullish conviction.

• Chicago brokers estimate that funds have bought 3,200 contracts of wheat, 3,500 contracts of corn, and 2,400 contracts of soybeans. In soy products, funds have bought 1,200 contracts of soymeal and 2,100 contracts of soyoil.

• US export inspections for the week ending July 25 were; 25.4 million bu of corn, 37.9 million bu of soybeans, and 14.3 million bu of wheat.  For their respective crop years to date, the US has shipped out 1,742 million bu of corn (down 284 million or 14%), 1,481 million bu of soybeans (down 447 million or 23%), and 139 million bu of wheat (up 27 million). The US wheat crop year is just starting, but US exports are expected to slow amid high prices vs other origins. Research argues for another 50-100 million bu decline in US 2018/19 corn exports and a 15-25 million bu decline in soybeans.

• US cash ethanol prices have fallen sharply during July with losses of $0.14-0.16/gallon. The ethanol price decline follows the drop-in energy values amid the soaring cost of corn. US ethanol producers are being pinched by high corn costs and are cutting run rates on margin. This fact along with the largest US corn stocks since the mid 1980’s has caused the collapse of the September–December corn spread to a 10-cent discount.

• We look for steady/1% decline in good/excellent crop ratings for the week ending Sunday for US corn and soybean condition ratings. Areas that missed the rain last week are likely to see condition rating declines with 50-55% of the US corn crop pollinating. Early August is like early July in terms of US corn pollination importance and the current rain and this week’s much cooler temperature s will aid the crop. It appears that there is some very good corn in the N and W Midwest which helps aid some of the dire crop woes of IL/IN.

• The US$ keeps rising with a test of the spring highs likely in the coming weeks. The US$ strength looks to persist.

• The midday Central US GFS weather forecast is drier across the W Plains/Delta, and slightly wetter across the Midwest. The major weather models continue to struggle with passing short waves through the Midwest and a potential tropical system that pulls along the Eastern US. Our thoughts remains that better rains will drop across the Midwest and the good news is that no real heat is foreseen (next 2 weeks) in a broad ridge/trough pattern.

• It is the same story of the supply bulls vs the demand bears. Non US feedgrain and wheat supplies are abundant. But, the Aug 12 USDA Crop Report is just 2 weeks away and the bulls hope for a sharp drop in US corn/soy seeded acres. No one will believe August US corn/soy yields with the crop so immature and satellite information lacking a historical precedence. The bears will sell an August rally while the bulls will secure a post report break. A sustained price trend will be lacking until the September Report.

• Chicago corn and wheat futures continue to drift lower, while soybeans remain supported on yield concerns and hope for nearby Chinese demand. We would note that another day has passed without any new export sales reported by FAS. As the GFS weather forecast began its midday run, moderate rainfall was added to the drier areas of NE and KS. Bullish input remains lacking, and while yield/acreage uncertainty remains, coming rainfall and the absence of threatening heat have allayed fears of shortages.

• The US$ has soared to an 8-week high as macro market further digest the lack of economic growth and need for stimulus in Europe. Commodity indexes look to end the week slightly lower, and our belief is that rallies in raw material markets will struggle unless the US$ falls sharply from current levels.

• China has approved imports of wheat from Central Russia and also soybean imports from the whole of Russia. Russian has been slowly growing its soybean production capacity after 2012 bull markets. Russian soybean production in 2018 totalled 1.7 million mt. Production in 2019 is estimated at 4.3 million mt. Russia’s exportable soybean supply in 2019 is pegged at just 900,000 tm, and so any exports to China in the near term will not be substantial. However, the structure of world soybean flows has changed following the advent of the US-China trade war. Goodwill purchases of US soybean are likely, but China moving forward will look to further diversify its sources of food and feed products.

• US interior corn basis continues to show signs of weakness. We doubt any lasting price break can occur until late August but there has been some measure of farmer selling following the surge in cash corn prices across the E Midwest. Spot CIF Gulf soy basis today is down 10 cents. CIF Gulf corn and wheat down 5.

• It is estimated that managed funds on Tuesday were long 145,000 contracts of corn, vs. 187,000 the prior week, were net long 1,200 contracts of Chicago wheat, vs. 19,000 the prior week, and short an estimated 52,000 contracts of soy, vs 39,000 the prior week.

• Other news is lacking. Key over the weekend will be whether the major forecasting models maintains needed Midwest rainfall in the Aug 3-10 period. It should be noted that the world ag trade will go home amid generally favourable N Hemisphere weather forecasts. Normal/above normal rainfall is offered to the whole of Europe and Black Sea into August 10. It remains that the market lacks fear of supply rationing.

• The midday Central US GFS weather forecast is drier in the Eastern Corn Belt in early August but wetter across the Central Plains and Western Midwest. The GFS forecast keeps strong high pressure ridging confined to the far Western US. Meaningful precipitation will favour the Northern Corn Belt as well as a narrow belt enveloping the far Eastern Plains. The GFS forecast also maintains the potential for soaking Central US precipitation beyond early August as a more zonally flowing jet stream develops. Soaking totals worth 1-3” are offered to KS, MO, IA and IL Aug 5-10. This forecast needs to verify, but the models since Thursday have been consistent in advertising a wetter pattern next month.

• The Aug WASDE may provide bullish supply shock, but amid improving US weather, ongoing favourable weather in the Black Sea and a lack of export demand will likely curtail bullishness.

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Weekend summary 26 July 2019

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Fund positions disaggregated data

• Chicago futures remain strong but price movement during the morning session has been limited. Neither the bulls nor the bears desire to add to already-held positions amid Central US weather uncertainty during half of August. Chart-based support holds, but the duration of Midwest dryness needs to be extended into mid-August to turn outright bullish at current prices.

• Wheat has led today’s rally as early July frost damage in Southern Brazil is being better assessed. World tender prices are moving slowly higher, with Tunisia offered soft wheat at $213/mt. Tunisia in early July paid $205/mt for soft wheat.

• Newswires report that China has approved tariff waivers on up to 3 million mt of US soybeans. This is seen as a goodwill gesture as talks resume next week in Shanghai. There are also reports that China could extend waivers to another tranche US soybean imports if talks next week and beyond show progress. Any new crop export demand for beans is welcomed but recall new crop US soybean export commitments sit at 103 million bu, the lowest level since 2005. A structural change, via the rebuilding of China’s hog herd or a finalised trade deal, is needed to boost total world soybean consumption.

• Macro markets are providing a modest headwind. WTI crude has failed to react to another sharp drop in US stocks. US crude stocks as of last Friday totalled 445 million barrels, down 11 million on the week and the smallest since late March. The Dow is down 130 points at midday. Concern over global economic growth remains present, with interest rate cuts in the US and Europe likely in the next 1-2 months.

• US ethanol production through last Friday totalled 305 million gallons. This was down 8 million on the prior week and down 3% from the same week in 2018. Margins are being squeezed. And despite the drop in production, US ethanol stock last week were up another 14 million gallons to 995 million. Ethanol stocks have risen a sizeable 89 million gallons since the latter part of June. Current stock levels are by far record large for July.

• US weekly export sales on Thursday will again be lacklustre. Corn sales are estimated in a range of 12-20 million bu, old and new crop combined. Wheat sales are pegged at 10-15 million bu, with bean sales estimated at 15-20 million.

• Searing heat abates in Western Europe abates by late week as high pressure aloft is pushed south into North Africa. The GFS advertises needed soaking rain across France and Western Germany on the weekend.

• EU corn and rapeseed futures have rallied sharply this week, but our view is that seasonal highs are formed there by early August.

• The midday Central US GFS weather forecast is much wetter than the early morning release. The GFS forecast advertises a more prolonged NW upper air flow. The jet stream Sun-Thurs will flow directly across the Central and Eastern Midwest and will bring decent moisture along with it. IA, IL, IN, OH and KY are forecast to see totals next week upward of 0.75-1.50”. Confidence in forecast details is low as all models have performed poorly in July. However, our view is that periods of wet Midwest weather do lie ahead into mid/late August. The EU model’s afternoon release will be watched closely.

• The bulls and bears are looking for fresh input. Weather-wise, the next 2-4 weeks are critical, and we doubt a lasting trend can be sustained. Severe Midwest dryness is present but regional.

• Chicago futures at midday are steady but little changed. There is talk circulating that RMA indemnity payment data suggests total Prevent Plant for all crops will reach 15-20 million acres. Extended range forecasts in IA and IL need close watching as dryness lingers there. There is also talk that US and Chinese negotiators will meet face-to-face in late June.

• Do not forget that RMA and FSA keep separate data series. RMA data is not easily interpreted, and we cannot chase down what number the trade is using to quantify such Prevent Plant estimates. There is no doubt Prevent Plant acres will be record large this year, but we doubt precise numbers can be determined by weekly RMA data. Note also that there is only a modest correlation between FSA prevent plant acres and changes in NASS acres from June to Final. Work suggests corn Prevent Plant acres of 8 million would equate to a NASS reduction of 3.5-4.0 million. Rather, the strongest correlation between NASS and FSA data is total planted and failed acres.

• Another day has passed without any new Chinese soybean purchases. There are still expectations that China comes to the market for its bean needs in late 2019. Today, President Trump offered to give “timely license decisions” to allow US tech companies to sell services to Huawei. China has responded with enquiries into US ag products if tariff waivers can be granted. However, US Congress’s concern over Huawei and security issues hasn’t been resolved. There are still issues the US and China are far apart on. Also, Chinese crush margins remain deeply in the red amid recent weakness in soymeal values there. The structure of world oilseed markets remains weighed down by Chinese demand contraction.

• Brazil’s safrinha corn harvest continues to roll along well ahead of recent years. As of last week, harvest was 62% complete, vs. 45% on average, and estimates are that safrinha harvesting will reach 67-70% complete this week. We also note that Argentina still some 17.5 million mt of corn left to harvest. The sheer size of S America’s crop will keep fob premiums there low into the latter part of August.

• Egypt secured a sizeable 300,000 mt of wheat for late Aug/early Sep arrival from Russia, Ukraine and Romania. Egypt paid an average fob price of $202/mt. Last week Egypt paid a fob price of $201/mt. Egyptian purchase prices do move slightly higher beyond mid-summer, but we expect only a modest rise between now and early autumn as exportable wheat supplies are abundant.

• The midday Central US GFS weather forecast is drier in IA and northern IL, but is drier across the Midwest thereafter. The best chance for meaningful Midwest precipitation in the next two occurs Sun-Wed. Totals of 0.10-0.50” will be widespread. Totals of 0.50-2.00” are projected to favour IA, N IL, S WI and MI. This will be helpful but additional rain is needed across the Plains, MO and IL in the first half of August. The GFS forecast features the return of expansive high pressure ridging to the Corn Belt Aug 1-7. Fortunately, temperatures are forecast to be near normal, but a close eye will be paid to the length of dryness in August.

• Demand bears have held leverage since mid-July. However, we doubt breaks can be sustained in the next two weeks as the Aug crop report looms and as the models have done a poor job at forecasting weather beyond 5-7 days. More expansive rain is needed in early August.

• Chicago markets have extended overnight losses in weak volume on better than expected rainfall in southern IL and IN and as midday GFS weather forecasts maintain scattered showers this week across the E Midwest and cooler than normal temperatures. The US corn crop this week will reach 35-40% silking. The lack of excessive heat is timely.

• There are more questions than answers with respect to China demand for US ag good in the near term. Chinese crushers are enquiring about US imports and looking to obtain tariff waivers. However, private companies in China indicate that future purchases will still largely hinge upon US and S American price relationships (no real surprise there!). Without tariff waivers, S American origin soybeans make economic sense. The question longer term is just how much will China buy without the elimination of some US tariffs. New face-to-face meetings are desired to boost market confidence in US-China trade progress.

• Weekly US export inspections through July 18 were neutral soy and wheat but bearish corn. Weekly corn inspections totalled just 17 million bu, vs. 27 million the prior week. A pace of just over 36 million bu/week is needed to meet the USDA’s old crop corn export forecast. USDA is expected to lower its 2018/19 US corn export forecast another 50-75 million bu in its August WASDE. Weekly wheat export inspections totalled 16 million bu, vs. 13 million the prior week. Bean inspections totalled 21 million bu, vs. 31 million the prior week. China loaded 12 million bu of US beans last week, mostly from the PNW. For their respective crop years to date, the US has shipped 1,717 million bu of corn, down 13% from last year, 1,443 million bu of soybeans, down 24%, and 125 million bu of wheat, up 28% on this week in 2018.

• Otherwise, the market is just more of the same. The demand bears continue to hold more leverage following recent rainfall and cooler temperatures into the opening days of August. There is talk that ethanol production will slow moving forward as margins sink. We calculate that plants across the W Midwest are barely meeting variable costs given current cash corn and ethanol values. Whether the recent slowing of demand has come too early will be determined by August weather and NASS’s August and September yield forecasts.

• Note that in addition to NASS’s re-survey of seedings,  NASS in August will use satellite-based data as well as some FSA acreage certification data when updating acreage.

• The midday Central US GFS weather forecast is broadly wetter across the Plains and Midwest in the next 12 days. Coolish, dry weather lies ahead into the coming weekend. Thereafter the GFS forecast projects a more zonally flowing jet stream, with more regular rain chances due July 29-Aug 3. Neither the EU nor the GFS forecast has been overly precise with long term details, but the GFS features widespread rainfall of 0.50-2.00” across a bulk of the Corn Belt next Tuesday to the following Saturday. Temperatures warm slightly next week but excessive heat is absent. Supply-driven bull markets tend to peak in mid-summer, with a long tail to follow. So far, this is occurring. New highs require somewhat bullish August acreage figures amid regional boosts in US soil moisture and adequate supplies in non-US exporting countries.

• The demand bears came out in force this morning with corn posting double digit losses amid poor US weekly export sales and a new round of rain for WI/N IL and N IN. In bits and pieces, the Central US is getting water, but more will be needed and there remains some key areas that are being missed. Midwest rain chances exist into early next week which will be important to monitor. However, the area of acute concern is in decline and corn will enjoy the cooler temperatures as pollination starts in force in the last week of July and first week of August. The next chart-based support rests at $4.20 basis December, the early July lows. It will be key that corn holds this support.

• Chicago wheat futures have posted fresh July lows with this morning’s fall. The 50-day moving day average crossed at $5.06 basis Sep Chicago wheat with the next support being at the 100-day moving average at $4.86.

• Soybeans have not seen as much fund selling with the US and China holding trade talks today. The bears are concerned of positive headlines which could cause a quick bout of short covering. If China were to make new US ag purchases, they likely would be centred on US soybeans.  We look for a weaker close amid the improved weather forecast for next week.

• The FAS reported that for the week ending July 11 the US sold 12.8 million bu of wheat, 13.1 million bu of corn (both crop years combined), and 12.0 million bu of soybeans (both crop years combined). The sales totals were shockingly low with combined sales of US corn, soybeans and wheat just 37.9 million bu or 1 million mt. This compares to 2.6 million mt sold last year (for the same week) or 95 million bu. The 60% decline in weekly US export sales (year-over-year) is concerning amid existing US trade disputes and the slowing world economic outlook. For their respective crop years to date, the US has sold 289 million bu of wheat (up 53 million or 22%), 1,953 million bu of corn (down 359 million or 15.5% and 1,787 million bu of soybeans (down 330 million or 15%). WASDE is likely to lower their old crop US corn export estimate another 75-100 million bu and 15-25 million bu of soybeans in the August WASDE report.

• China showed up as shipping out another 453,000 mt or 12.5 million bu of old crop US soybeans. China’s open and known US soybean commitments from the US have fallen to 5.2 million mt or 190 million bu. There were 9,900 mt of Chinese sales and 171,000 mt of unknown sales cancelled. US unknown soybean purchases are 1.68 million mt or 62 million bu. Note that Brazilian soybeans into China are cheaper than the US on a CIF basis through September. This implies there is risk of additional unknown old crop US soy sales cancellations going forward. And US new crop soybean sales are just 103 million bu of soybeans and 132 million bu of corn, some of the lowest levels in years for mid-July.

• The midday Central US GFS weather forecast is wetter across the northern half of IL and drier across IA over the next 10 days. Rains across the E Midwest will be more frequent as a ridge of high pressure builds across the western third of the US with a trough in the east. This allows for cooler Central US temperatures following a few more days of extreme heat.

• Midwest rainfall totals look to range from 0.5-1.50” over the next 10 days with the heaviest totals located across the upper Lake States. The Gulf States will also endure additional heavy rain due to a rich flow of Gulf humidity northward. A more zonal upper air flow evolves during the 11-15 day period that would offer renewed rain chances. The forecast looks for improved weather.

• The struggle of the demand bears and the supply bulls will persist into the August 12 USDA crop report. For farmers that have received rain, they are more willing to part with stored old crop grain. Few want to store into the new harvest. Look for cash basis to weaken amid tepid US export demand. Our long-term grain bias is bearish amid huge world grain supplies and slowing Chinese demand due to ASF.

• Ag futures today are mixed but little changed. Fund selling has taken a pause as the EU and GFS weather models look to end the day in disagreement on near-term precipitation in IA and northern IL this weekend. Dryness there has become a new threat to yield potential, and it is important that some amount of rain occur there prior to late July.

• The other highlight today is market talk centred on Prevent Plant acres. Data gatherers suggest that RMA (Risk Management Agency) insurance policy and indemnity numbers as of July 15 suggest Prevent Plant in corn will be 7-8 million acres, with soybeans reaching upward of 2-3 million. USDA undersecretary Northey previously stated that USDA expects total PP acres to exceed 10 million. These have been long held estimates by the market, and we would note that FSA (Farm Service Agency) determines prevent plant data, while RMA data sets are separate. Clarity will be found via FSA’s initial prevent plant numbers in mid-August, but amid elevated PP claims, a more accurate picture of planted, failed and prevent plant acres won’t be available until October or November. Still, FSA data next month will provide a solid benchmark from which to compare NASS’s forecast. The response to talk of PP acres has been muted by overnight declines in S American corn basis and ongoing aggressive wheat offers out of the Black Sea and Northern Europe.

• This week’s EIA energy report is mixed. US ethanol production through the week ending last Friday totalled 313 million gallons, vs. 308 million the prior week and unchanged from mid-July a year ago. The summer ethanol grind has been better than previously expected. However, ethanol stocks last week were up 14 million gallons to 981 million, by far a record for July. US ethanol stocks have increased a sizeable 75 million gallons in the last three weeks. There is no shortage of near-term ethanol supply. We suspect ethanol export demand continues to fall behind year-ago levels. Enlarged supplies of ethanol will weigh on price as well as spot production margins. US motor gasoline stocks were up 3.6 million barrels on the week to a 4-week high. The build in gasoline stocks has weighed on energy markets at midday.

• Egypt’s GASC bought just one cargo of Russian wheat at $201/mt, basis fob, despite cheaper offers out of Ukraine. GASC was offered 765,000 mt of wheat between $199-210/mt, basis fob. Gulf HRW is quoted at $210-212.

• Corn basis in Central IL on Tuesday weakened, and we hear that elevators across the Eastern Midwest are beginning to reduce bids. A close eye will be kept on the direction of E Midwest basis in the next few days.

• The midday Central US GFS weather forecast is wetter in eastern IA and maintains widespread precipitation across IA, MN, WI and northern IL through the coming weekend. The primary theme remains a westward shift in the mean position of higher pressure ridging. The jet stream beginning next week will flow across the N Plains and into the Great Lakes. This will allow cooler/wetter air to move across the heart of the Corn Belt July 22-31. Excessive heat is still indicated across the whole of the Central US into Saturday.

• The supply-driven rally began 10 weeks ago. Another shock is needed to form new seasonal highs. This may come in the form of NASS’s August crop report, but the market has been disappointed in the lack of follow-through in world grain markets. A more favourable US weather pattern lies ahead.

• World ag markets continue lower on expanding Northern Hemisphere wheat harvest and concern that US-Chinese trade talks are not making much progress. The Chinese trade team today has taken a harder stance on potential concessions, with reports suggesting talks are moving backward, not forward. Ocean freight indexes are rising but cash grain basis levels in S America and the Black Sea are signalling weak global consumptive interest.

• Note that spot corn basis in the Eastern Midwest remains strong. Basis in in Central OH has climbed another $0.10/bu to $0.60 over Sep Chicago. Basis in IL is firm at $0.15 over, vs. $0.15 under in May and $0.23 under in mid-July a year ago. Farmer selling has evaporated amid this year’s enlarged yield and production risks. Yet the futures market is more closely eyeing late July/early August weather, and the near term boost in soil moisture scheduled across Northern Plains, Upper Midwest and IN/OH over the next 3-5 days.

• The midday GFS weather forecast is much wetter in IA and northern IL this week as projected rain will drop further south than previously indicated. The EU model this afternoon needs to confirm this wetter outlook, but the market is somewhat sensitive to improved weather forecasts amid the slowdown in US export demand.

• Argentine corn is offered at $0.53-0.65/bu below US Gulf corn well into autumn. The USDA has Argentine corn ending stocks in 2018/19 rising to 4.6 million mt, with 2019/20 Argentine corn stocks rising to 6.1 million mt. At the right price Argentina can export a record 35-36 million mt in 2019/20, vs. USDA’s projected 33.5 million.

• Russian winter wheat yields continue to decline and now sit slightly below a year ago. However, Ukrainian yields are performing much better and so far validate the USDA’s projected 10% boost in wheat yield. It is just tough to find a major crop problem outside of the US Corn Belt.

• The GFS weather forecast is also much wetter in France in the 6-10 day period. This reflects an abrupt change from the morning run and the EU model’s morning output. The Western European corn crop in recent weeks has been plagued by dryness and record/near record heat. Rainfall in late July will stabilise corn yield potential. World wheat prices have moved lower along with the US, and so Gulf wheat remains expensive.

• The midday Central US GFS weather forecast projects soaking rainfall across IA, WI and northern IL. Confidence in such a shift is low, but other model forecasts will be followed closely this afternoon and overnight. The theme of the midday forecast is that a more pronounced NW upper air pattern will be established early next week. As high pressure moves westward, cooler/wetter air will flow across the Principle Corn Belt on the weekend. Drier weather resumes next week, but a lasting period of normal/below normal Midwest temperatures is forecast July 21-30.

• Falling US corn and soybean production potential have been the bullish linchpins of world ag markets this spring and summer. Much uncertainty/risk remains. But bullish markets need constant fuel, and outside of a wetter midday US forecast fresh news is absent.