• It has been a session of red across world raw material space as markets remain concerned over weak economic growth and a potential favourable pattern change in the US climate. Spot soyoil is flat, but otherwise commodity markets are weaker. EU milling wheat and corn futures look to end €0.25-1.25/mt lower. Spot gasoline futures are down $.04/gallon. The Dow is trading 20 points lower.

• Tropical Storm Barry continues to work across the Delta and Mid-South regions. Flooding rains have largely missed key corn/soy producing areas of LA, AR and MS. Instead, rainfall of 0.50-2.00” fell across areas immediately surrounding the MS River.  Barry also looks to inch into the southern half of IL, IN and much of OH in the next 48 hours. Following recent dryness in the Eastern Midwest, coming precipitation will be welcomed. However, the market will continue to pay close attention to long range forecasts in NW MO, S IA and W IL. Dryness there has become a new threat to row crop yield potential. Steep declines in soil moisture will occur across much of the Central Plains and far W Corn Belt. The major forecasting models continue to hint at a favourable, and rather timely, pattern shift in late July, but it is very important this shift occurs.

• NOPA-member crush in June totalled 149 million bu, vs. 155 million in May. This is the lowest crush rate since Sep of 2017 and was 4-5 million bu below trade expectations.

• Mexican President Lopez Obrador has announced a policy initiative aimed at reducing Mexico’s reliance on sizeable corn and wheat imports to meet domestic consumption. Mexico now aims to reduce import tonnages of wheat and corn by 80% in the next 6 years using guaranteed minimum corn/wheat prices. Any policy change won’t affect 2019 demand, but a longer term global grain demand driver remains absent.

• Weekly US export inspections included 26.6 million bu of corn, vs. 28.4 million the prior week. A pace of 34 million bu of corn per week is needed to hit the USDA’s target. US wheat export inspections totalled 11.6 million bu, vs. 22.6 million the prior week. Soy inspections were a decent 31.4 million bu, vs. 28 million the previous week. 17 million bu of soy was loaded for Chinese shipments as China continues to ship its prior sales.

• For their respective crop years to date, the US has shipped 1,699 million bu of corn, down 11% from last year, 1,423 million of beans, down 24%, and 107 million bu of wheat, up 31% from this week a year ago. Pace analysis suggests USDA’s soy export forecast is now closer to accurate. Corn exports may be lowered another 25-50 million bu.

• Chinese GDP growth in the second quarter was 6.2%. This roughly matched trade expectations but also reflects the lowest quarterly growth since 1992. The CRB index has failed to post meaningful new highs since last June.

• The midday Central US GFS weather forecast is wetter in northern IA next Mon-Tues as cooler Canadian air moves farther southward than previously indicated. Otherwise, expansive high pressure ridging will keep precipitation confined to the N Plains and N and E Midwest. Areas of concern are declining, though rainfall will be needed in KS, NW MO, S IA and W IL by late month. The 11-15 day forecast includes light but widespread showers and much cooler temperatures, but it is key that this shift is pulled into the nearby outlook later this week.

• Price breaks and rallies will struggle to attract momentum prior to early August, when a bulk of Midwest corn will be pollinating. Direction thereafter will hinge upon whether climate forecast calling for cooler and wetter August weather verify.

• The USDA crop report is being described as mixed. The data is slightly bearish corn, and supportive to wheat and soybeans. The decline in the Russian wheat crop to 74.2 million mt (from 78 million) raised US wheat export potential. Yet, the world still has record stocks of wheat while world soybean stocks at 104 million mt being historically large. This mutes some of the market’s reaction to the data. As previously suggested, now that the report is past, it is all about Central US weather (yield) heading into the much more important August 12 USDA report.

• The USDA raised 2019/20 US corn end stocks by 142 million bu to 2,340 million bu. The increase was based on a 100 million bu cut in 2018/19 corn exports to 2,100 million and a 25 million bu drop in feed/residual to 5,275 million bu with the remainder coming from industrial use. US old crop corn stocks are now the largest since 1987 when US corn stocks were over 4,000 million bu. We anticipate another 25-50 million bu cut in 2018/19 US corn exports and based on high domestic corn prices/abundant feeding of HRW wheat, US corn feed/residual could fall another 25-50 million bu which would hike 2018/19 US corn stocks to 2,400 million bu or more. Large old crop corn stocks reflect the massive US farm holding that is ongoing.

• WASDE forecast 2019/20 US corn stocks at 2,010 million bu, a 336 million increase from June. The USDA decided to hold yield at 166 bushels/acre and raised harvested US corn acres to 83.6 million (1.2 million bu increase from June). WASDE forecast that a historically large 8.1 million acres of US corn would NOT be harvested vs last year’s 7.4 million acres in compensation to weather and latent seeding dates.

• WASDE dropped their farmgate corn price to $3.70/bu which is below December corn futures at $4.38/bu. The US futures market is carrying a considerable premium for yield and potential loss via additional Prevent Plant acres.

• Note that WASDE forecast US 2019/29 feed/residual at 5,175 million bu, just 100 million less than the current crop year with 2019/20 exports at 2,150 million bu. Research argues for further 50-150 million bu cut in the feed/residual use with new crop corn exports at 1,900 million bu, 250 million less amid record large S American and Black Sea corn supplies.

• 2019/20 world corn stocks were raised to 299 million mt, up 9 million from June based on the more abundant US corn supplies and stocks. However, such world corn stocks are still down 30 million mt from 2018/19. China corn stocks were held at a large 192 million mt while the 2019 EU corn production is forecast at 64.2 million mt. This cut EU 2019/20 corn import pace to 20 million mt, down 3 million.

• The 2019 US soybean crop was forecast at 3,845 million bu, a 699 million bu reduction from last year on a sharp decline in seedings of 9.2 million acres and a 3.1 bushels/acre drop in yield. Total US 2019 soybean supplies were forecast at 4,915 million bu. 2018/19 US soybean end stocks were raised to 1,050 million bu with exports being cut to 1,700 million bu. We would argue for a further addition of 5 million bu with 2018/19 US soybean end stocks forecast at 1,055 million bu. 2019/20 US soybean end stocks were forecast at 795 million bu assuming harvested acres of 79.3 million acres with a yield of 48.5 bushels/acre. WASDE forecast 2019/20 US soybean exports at 1,875 million bu which appears too high if the US/ China trade war persists. The US 2019/20 soy crush rate is forecast at a record large 2,115 million bu. The average farmgate cash price was raised by $0.15 to $8.40/bu. We would argue that NASS will raise 2019 US soybean seedings by 1-1.5 million acres in the August report amid farmers seeding for MFP (Market Facilitation Program) trade payment.

• US 2019 all wheat production was forecast at 1,921 million bu, an increase of 18 million with US all wheat yield rising to 50 bushels/acre. WASDE reduced US 2019 harvested wheat acres to 38.4 million acres. Total US wheat supplies at 3,133 million bu is close to last year and more than adequate for existing demand. US 2019/20 wheat end stocks were lowered to 1,000 million bu, down 72 million from June as US exports were raised 50 million to 950 million bu with feed use raised 10 million to 150 million bu. The US farmgate price was raised $0.10 to $5.20

• Adverse Central US weather is needed to rally Chicago corn, soy or wheat to new highs. The increase in old crop corn helps cushion any future decline in new crop supplies via seeding/yield. The world is still awash in wheat/soy.

• Midday Chicago values are mixed as traders position into the July USDA Crop Report. The volume of morning trade has been limited with few wanting to take on additional risk amid report uncertainty. For those that are positioning, it is been mostly one of reducing net short soybean and long corn positions. Hence the rally in soybeans and modest fall in corn. We note that traders are looking for USDA to produce a modest increase in 2019/20 corn, soybean and wheat stocks. The surprise may be the reduction in 2018/19 US corn and soybean exports that raises old crop end stocks. Most traders are not thinking about reduced old crop corn/soy exports. We look for mixed close in Chicago with Central US weather and world crop production directing values following the report. As previously suggested, we doubt that prices can sustain a bearish price trend until there is more certainty regarding US summer row crop planted/harvested acres and yield.

• It is the US supply uncertainty and abundance of world grain supply that is causing Chicago to trade in a broad range. New adverse weather concern must arise for fund managers to pile additional market length. Fear needs to come forward again in terms of US supply if there is to be a new leg upwards.

• Chicago brokers estimate that funds have sold 2,300 contracts of wheat and 3,500 contracts of corn, while buying 4,400 contracts of soybeans. In soymeal, the funds have bought 1,900 contracts while being flat in soyoil.

• US weekly ethanol production fell 3% last week to 308 million gallons, down 10 million gallons from last week. This was the lowest US production total since May. US ethanol stocks rose 7 million gallons to 966 million, the largest since the first week of May. US ethanol production margins are close to zero and the economic incentive for producers to expand their production is lacking. Via near breakeven margins, ethanol companies are considering taking additional downtime. And at just $0.16/gallon, there is no incentive for Brazilian imports

• Russian wheat harvest yield data is in decline with crop prospects falling. Private and commercial estimates that follow the Russian wheat harvest data (23% completed) argue for a crop of 78 million mt or less. USDA may keep its Russian crop estimate at 78 million, but be aware that future estimates could be lower if the harvest data does not offer a change from trend.

• WASDE does not have to follow NASS, but in the case of the June report, it would be a big break in protocol if they did not use a corn planted area of 91.7 million acres and soybean planted area of 80.0 million acres. Note that the NASS June report confirmed that 10 million acres were left fallow (maybe PP). WASDE could and likely will adjust their corn yield and could lower their soybean yield amid late seeding dates. It is yield not acres, that are the big question mark.

• The midday Central GFS weather forecast is drier across much of the N Plains and the Upper Midwest with a tropical storm system (Barry) being farther east than the EU and overnight GFS models. We suspect that the midday model is too far east with Barry. Note that although the midday is drier across the N Plains and the Upper Midwest, rainfall of 0.5-1.50” is still projected to drop in the next 10 days. The 6-10 day forecast is warmer than the overnight runs with temperatures with lots of 90’s with the mean position of the ridge retracing back westward in the 11-15 day period. This will allow for improved shower chances/cooler temperatures. Yet the noon run is not as cool as the overnight or 6am model run. We do not see a lasting period of heat/dryness that adds stress to corn/soy crops.

• The USDA report looms large on Thursday amid uncertain Central US weather. The GFS forecast just does not do a good job of handling tropical storm systems. Cash basis levels remain strong, but in a world of abundant world grain supplies, Chicago needs another supply fear to push values to new highs. We look for Thursday’s weekly export sales report and the USDA July Crop report to be slightly bearish.

• Futures fell to sharp losses on the opening with funds shedding additional length in wheat/corn with soy futures trading both sides of unchanged. A potentially bearish USDA crop report on Thursday along with sagging world wheat prices left Chicago vulnerable to long liquidation.

• The bulls are tiring waiting for the return of adverse Central US weather and/or the release of the new NASS survey of US corn and soybean seeded acres in mid-August. Moreover, fund managers are aware that seasonal price trends normally turn lower in late June or July and they feel the need for a new fundamental stimulus to buck what is normally a bearish time of year. The N Hemisphere crop production is starting to become “known” by the end of July. However, amid strong US cash corn basis levels amid limited farm selling, Chicago is unlikely to decline much below last week’s low until the US farmer decides to part with more of their stored old crop supply. Strong cash basis will underpin breaks, but rallies fail amid lacklustre demand unless a new supply threat is in the offing. Wait until the 2019 US corn and soybean crops can be better quantified before making fresh, big decisions would be our advice right now.

• Chicago brokers estimate that funds have sold 3,900 contracts of wheat, 6,500 contracts of corn, and 1,100 contracts in soybeans. In soymeal, the funds have bought 2,300 contracts and sold 800 contracts of soyoil.

• This is seasonally the time of year that world importers start securing new crop US corn and soybeans with daily sales announcements becoming commonplace.  Yet, US corn, wheat and soybean fob offers are well above other origins. Argentina is offering corn into the end of the year with values some $0.46-0.51/bu cheaper than the US Gulf! And new crop Ukraine corn is offered at $0.30 over vs the US Gulf at $0.69 over for November or a difference of $0.30. And Brazil also has a record line up to load out winter corn through August.

• Our point is that US Gulf corn is offered at $200-202/mt through year end which appears expensive with every other world corn exporter $10-20/mt cheaper. And US corn is also expensive against wheat with the Black Sea offering 12% wheat at $192-196/mt, $4-8/mt cheaper. The US will only be able to sell corn and wheat to traditional and captive grain importers.

• It is one year into the US/China trade war and Chinese crushers have learned to adjust. The spread for Brazilian/US Gulf soybeans stands at just $12/mt or $0.33/bu for August. This fob vs fob spread is much more acceptable than last year’s $2.80/bu Brazilian premium. And based on the slow pace of Brazilian soybean exports, they are willingly offering China soybeans through November, leaving a modest window for any US soybeans to China in December/January. The price of the trade war for Chinese crushers has been modest during 2019.

• The Central US midday GFS weather forecast is wetter across the Delta as it allows a developing tropical storm to make landfall in LA with its motion then to the north/northeast. This will soak the LA, the Delta and provide needed showers to the E Midwest. Otherwise, the forecast is little different from the overnight run with a broad and flat ridge across the southern two thirds of the US on day 10 with showers forming along its northern edge in a “ring of fire” pattern. This produces rain for the N Midwest. Temperatures will range from the 80’s to the lower 90’s. The forecast is favourable into July 20 with more regular rains needed thereafter. There are hints that the last week of July could produce near to slightly below normal temperatures and near to slightly above normal rainfall.

• There is not enough of a threat in the midday forecast to engender bulls to chase a rally ahead of USDA Crop Report that likely will be slightly bearish. We doubt that a lasting Chicago trend can evolve until more is known about 2019 US planted summer row crop acres and yield. We see Chicago caught in a broad trading range. Ukraine and Romanian wheat will dominate future GASC tenders leaving pressure on Russia to lower prices on hi pro wheat.

• The extended range 6Z (6am GMT) GFS weather forecast model offered a cooler/wetter forecast in the 9-15 day range which produced early Chicago selling pressure. The market dropped from resistance at $4.50 December corn futures while November soybeans failed to rise above $9.00. The morning selling was not on heavy volume, but the change in the forecast indicated the sensitivity of the market to Central US weather. It is the extended range forecast that is the tail that will wag Chicago heading into Thursday’s USDA Crop report. US producers argue that this week’s heat/dryness is helpful to Midwest crops, but only if the rain chances increase next week. NASS crop condition ratings this afternoon will provide direction for Tuesday. Traders are leaning to modest condition rating increases (1-2% good/excellent) in corn/soy, but many made the same assumption last week and were disappointed. Steady ratings will be viewed as bullish. NASS crop enumerators/reporters likely are looking at the small size and delayed maturity of the crop in their US condition rating determination. Whether knee high corn on July 8 will make a good or bad yield will be determined by weather this summer and into autumn.

• Chicago brokers estimate that funds have sold 2,900 contracts of wheat, 3,100 contracts of corn, and 2,000 contracts in soybeans. In soymeal, funds are flat while buying 2,000 contracts of soyoil.

• US Weekly Export inspections for the week ending July 4 were; 27.7 million bu, 27.8 million bu of soybeans, and 22.4 million bu of wheat. For their respective crop years to date; the US has shipped out 1,671 million bu of corn (down 189 million or 10%), 1,391 million bu of soybeans (down 458 million or down 25%), and 95.2 million bu of wheat (up 31 million or 32%). China shipped out 8.9 million bu of old crop soybeans last week accounting for 32% of the weekly total. We look for WASDE to cut their 2018/19 US corn exports by 100 million bu and soybeans by 25 million bu.

• Key Russian crop watchers are reducing their wheat crop estimate based on less than perfect Russian weather and a fall in winter wheat yields. Russian wheat crop estimates range from 76.6-78.5 million mt. This compares to 78.0 million from WASDE in June. We look for WASDE to hold their Russian wheat crop estimate steady in July with annual exports at 36-37 million mt. The line up to load out Russian wheat is only half of last year, which is raising questions on world wheat demand in general.

• We doubt that WASDE will call NASS liars just two weeks after their release of the June Seeding Report and use differing seeding estimates for US corn and soybeans. Rather WASDE could lower yield, but we see a limited chance that WASDE won’t adopt the NASS June Seeding data for Thursday’s report.

• The midday Central US GFS weather forecast is broadly wetter across MN and the N Plains. Otherwise, the forecast is little different from the overnight run as the model maintains that higher heights aloft. The GFS keeps any tropical development over the Gulf and SE US. A broad ridge of high pressure will hold across the Central US and then retrograde westward to the Intermountain West in the 6-11 day period. This will allow for showers/storms to develop over the top of the ridge, sort of a “ring of fire” pattern.

• Temperatures will range from the 80’s to the lower 90’s. The forecast is favourable into July 20 with rain needed thereafter. It is worth noting that the midday forecast had more high pressure ridging over the Central US that what was offered in the 6z run.

• Looking out of the window and judging crops is a long-established and popular pastime, particularly amongst grain traders and consumers. This year’s US corn crop has been monitored particularly closely and the conclusion from pretty much all corners it that it is a highly variable crop that demands an extended growing season. Prior to 2012, this window crop estimating exercise generally produced the right gauge for Chicago and world corn prices. Yet all of that has changed in the past decade with Argentina, Brazil and Ukraine (ABU countries) now accounting for a combined 60-65% of world corn trade. In other words, the US corn crop has lost measurable importance in the world marketplace. The big production expanse by non-US corn producers helps explain why this year’s US spring weather problems have not produced a bigger rally effort.

• Chart related selling and slow weekly/monthly exports had Chicago soybeans under pressure to end the week. The soybean export pace is slipping further behind what is needed to reach the USDA’s annual forecast, which will further add to the US old crop stockpile. The weekly export sales report picked up last week’s sales announcement to China, which put weekly sales at the largest since late March. However, it is the large outstanding old crop sales and slow new crop sales that are discouraging. Outstanding sales are record large at just under 11 million mt, with 5.8 million to China and 2.2 million to unknown destinations. New crop sales of 2.5 million mt are the slowest in 14 years. Our view stays bearish on any strong Chicago rallies. China’s demand still appears in retreat, and much of their needs are being filled with S American supply. At the same time, the US old crop stockpile looks to be increasing as the US export rate falls short of what is needed to reach the USDA forecast.

• Chicago corn futures were narrowly unchanged in noticeably low volume. Neither the bulls nor the bears wanted to press their case ahead of the weekend. It seems that rallies will struggle amid favourable Central US weather and ahead of next week’s potentially bearish WASDE report. Using NASS acreage data, new crop US corn end stocks will be raised to 1.85-1.90 billion bu. The Commitment of Traders report is delayed until Monday because of the US holiday this week. Old crop export sales continue to disappoint. Sales through the week ending June 27 totalled 7 million bu. A pace of 29 million per week is needed to meet the USDA’s target. World demand is being sent to S America amid discounted fob offers there. Note also that the Brazilian safrinha harvest is 36% complete, vs. 20% on average. Strong resistance is pegged at $4.40, basis spot, and we doubt that corn can trade at a premium to KC wheat for any length of time. KC wheat’s task is to find better export demand. Abundant world wheat supplies are a negative as it is a cheap alternative for corn

• US wheat futures ended unchanged amid a lack of fresh input. However, it should be noted that Black Sea cash prices fell $2/mt this week as the market looks for summer demand. The world market is beginning to debate the true health of world wheat demand. Recall that world trade declined in 2017 and 2018. The USDA is calling for a 9 million mt increase in 2019/20. The pace of world trade in the next two months will therefore be watched closely. Major importer currencies remain weak, which is an obstacle. Mostly dry weather across the Central US this weekend will allow for substantial harvest progress. Harvesting will also accelerate across Europe and S Russia over the next 10 days. Interior HRW cash basis is beginning to weaken. Rallies in wheat still struggle during harvest and as major exporter production rebounds. Even conditions in Australia are far better than a year ago.

• Ag markets at midday are higher on renewed fund buying in Chicago corn. Sep corn is up 12 cents on strong basis levels in the Eastern Midwest. Producers there remain unwilling sellers amid massive production uncertainty. There are also news reports suggesting China will buy some measure of US ag products as a goodwill gesture following last week’s G20 summit. We can find no evidence of China buying US products today, but as US/China talks resume, politics are back in play.

• Following the recent Chicago break, we estimate that managed funds this morning long net 110,000 contracts of corn, vs 188,000 contracts last Tuesday. Funds were long a net 9,000 contracts of Chicago wheat, vs. 32,000 last Tuesday, and were short a net 60,000 contracts of beans, vs. 34,000 contracts a week ago. A pause in selling was due.

• This week’s EIA report features another massive weekly ethanol grind, but also a surge in US ethanol stocks. Through the week ending last Friday, US plants produced 318 million gallons of ethanol, up 3 million on the prior week and by far record large for late June.

• Strong early summer ethanol production has accelerated the rally in E Corn Belt basis with plants there willing buyers even at current cash prices. However, unlike recent weeks, US ethanol stocks on June 28 were 959 million gallons, up 53 million on the prior week, 4% above last year and also record high for late June. Spot futures-based ethanol production margins are in retreat amid today’s rally in corn.

• Otherwise, holiday-reduced volume is noted and debates over prevent plant and yield potential will rage on. WASDE is not mandated to use NASS’s June acreage data, but never before has WASDE deviated from NASS. Next week’s supply and demand tables will be dismissed by the trade, but new crop US corn stocks are expected in a range of 1.7-1.8 billion bu.

• We also mention that, on a dollar basis, Census Ag imports in May exceeded exports by $252 million. This follows a negative trade balance in April of $865 million. The last time the US posted two consecutive months in which the value of Ag imports exceeded the value of ag exports was Apr-May 2016.

• European grain markets have followed the US higher, but only slightly. EU wheat looks to settle €1.00/mt ($.03/bu) higher, with EU corn up fractionally. The world wheat and corn markets have been content to maintain large discounts to US origin.

• Yet, Chicago corn’s recovery from chart-based support is noticeable. Next resistance in Dec corn lies at $4.48. We maintain that a broad range between $4.05-4.50, Dec 19, is probable into early August.

• The midday Central US GFS weather forecast is drier in the Midwest but wetter in Kansas through the next 10 days. The GFS features the return of moderate but expansive high pressure ridging in the 6-10-day period. Confidence in the GFS’s solution is low, but the return of the ridge will keep Central US temperatures at or slightly above normal into July 15. Moderate rainfall will be widespread into Sun/Mon. A drier pattern will be established next week.

• Near to normal Central US precipitation and temperatures are all that can be asked for following a challenging spring.

• Midday values are mixed as wheat values continue to push to lower lows as the US needs to compete in world trade amid a reduced demand for feedstuffs (due to the larger US corn seedings). Soybeans and corn initially followed the wheat decline with December corn futures back testing the $4.20 chart gap. Corn has bounced from key support on bottoming picking. However, Chicago corn and soybean values are capped by favourable Central US weather and the perception that US summer row crops are getting larger. We continue to hear reports that US farmers are still planting soybeans, and replanting wet spots in some E Midwest corn fields. We look for a mixed Chicago close with sagging world wheat prices likely to tug US futures lower. The veracity that corn can bounce from chart-based support will be a help in determining long term market health.

• Chicago brokers report that funds have sold 3,500 contracts of wheat and 2,900 contracts of soybeans, while buying 2,500 contracts of corn. In soy products, funds have sold 2,100 contracts of soymeal and 1,200 contracts of soyoil.

• Egypt booked one cargo of Romanian wheat for August at $196.96. Romanian wheat was the cheapest offer to Egypt’s GASC in an overnight tender. The second lowest offer was also Romanian with Ukraine in third at $198.37/mt. Speculation is rife that GASC sees weaker world wheat prices or has adequate domestic supplies nearby.

• World wheat supplies are abundant in 2019/20 with time running out for a crop shortfall as harvest operations ramp up across S Russia, the S US Plains and S Europe. Northern Hemisphere spring wheat crops still have another 2-6 weeks of key weather, but the point is that with the EU wheat crop some 14-16 million mt above last year’s drought reduced harvest and Russia looking to cut a total wheat crop of 79-82 million mt, world wheat export competition will be acute as the crop year pushes forward.

• US wheat will struggle to uncover any export demand beyond non-traditional sources. The Russian line up to export wheat during July is less than half that of last year. Either world wheat demand is starting soft, or buyers are pushing their demand backwards to Aug/September. Research does not see a US or world wheat story going forward amid record large world supplies.

• Brazilian exports of soybeans are really starting to slow which is causing exporters to become more aggressive with offers. ASF in China has harmed feed demand and China Government reserve stocks are filled. Research argues that WASDE needs to cut its 2018/19 China import estimate to 82-83 million mt against a WASDE forecast of 85.0 million to account for ASF swine demand losses.

• The midday Central US GFS weather forecast is more like the overnight EU model and much drier across the N Plains and the northern half of the Midwest. Afternoon showers/storms will be more plentiful heading into the weekend with totals of 0.25-1.00″. The rains will start across the E Midwest and shift westward on Friday and the weekend. Regular rains are expected into the middle of July. Temperatures will be above normal for the next 2 days before a cooling trend develops across the N Plains and the NW Midwest. Highs will range from the 80′s to the lower 90′s across the E Midwest for the next 10 days. There is no evidence of any extreme heat over the next 2 weeks.

• Corn is bouncing as fund liquidation slows with Dec targeting $4.30-4.40 for a short-term trading top. Unless Central US weather turns adverse, limited US export demand and the abundance of world wheat looks to keep corn range bound. The outlook for US wheat is bearish amid large supplies. Soy futures hinge on Chinese import demand with support at $8.60 November.

• Midday values are lower on fund selling and more aggressive cash selling of stored supply by farmers. The downside Chicago price leader has been wheat as the Plains harvest advances with big yields being reported. Corn had been the only bullish stalwart for the Chicago since May, and although US soybean seedings fell 4.5 million acres, the new crop shortfall is cushioned by record large US old crop supplies. The Chicago lacks a bull leader following USDA’s June Stocks and Seeding Report.

• December corn has found technical support at an open chart gap at $4.20. Lower prices nearby will depend on US crop condition ratings and Midwest weather. Supply bull markets are driven by fear and following the NASS corn seeding estimate, the acreage fear has abated. A new fear needs to be created by either additional flooding or hot/dry weather that adds new yield concern. For now, the acreage debate has shifted to the US yield debate.

• Chicago brokers report that funds have sold 11,000 contracts of corn, 6,500 contracts of wheat, and 4,500 contracts of soybeans. In soy products, funds have sold 3,400 contracts of soymeal and 2,100 contracts of soyoil. The funds are reducing their market exposure to Chicago amid improved US weather.

• US grain exports for the week ending June 27 were; 10.7 million bu of corn, 26.4 million bu of soybeans, and 22.4 million bu of wheat. US corn exports were well below trade expectations while soybeans and wheat were both in line.

• For their respective crop years to date, the US has exported 1,643 million bu of corn (down 158 million or 9%), 1,363 million bu of soybeans (down 462 million or 25%), and 69.6 million bu of wheat (up 15.2 million). The USDA is expected to reduce their 2019 US corn export estimate by 100-150 million bu and 25 million bu in the June WASDE. It is too early in the crop year to make any comments on US wheat exports with just 4 weeks completed.

• US SRW wheat is some $35/mt higher than Russian wheat FOB wheat offers for July/August. The steep US premium was initially justified by rising US corn values and the potential to feed more wheat. That need evaporated on Friday as US corn seeding did not fall as much as expected. The function of US wheat has shifted from trying to work back into US feed rations to trying to recapture lost export demand. The weakness of US wheat values will also weigh on corn.

• The initial Russian wheat harvest is showing surprisingly good protein levels with most above 13%. In fact, the spread between Russian 12.5% and 13.5% wheat keeps narrowing amid the abundance of Russian hi pro wheat. Some exporters expect that the spread will go to near zero in coming weeks.

• There is no evidence of fresh Chinese demand according to US exporters. US exporters are doubtful that China will show up for any sizeable US ag commodities nearby. Most argue that China will have to see progress on a US/ China trade deal for any fresh buying. US President Trump offered two concessions to China in promising not to raise tariffs and the relaxation of the Huawei telecommunications ban in the US for the trade talks to restart.

• The midday GFS weather forecast is slightly wetter than the overnight run for the E Midwest. The chances of rain are light and limited to afternoon thunderstorms into the weekend with most totals ranging from 0.25-1.00″. Heavier rains return next week across the S and E Midwest with rains of 0.5-1.50″.

• There is no evidence of any hot/dry weather and 10 days rainfall of 0.5-2.00″ is ideal now that crops are largely planted and established. Temperatures are cooler for next week which is a worry regarding reaching the finish line in maturity.

• It is weather, weather and weather that will be driving Chicago prices into the mid-August WASDE report. The forecast is favourable and funds are liquidating. The US/China will hang onto a trade war at least to year-end. A sinking Chicago that closely watches weather is expected.

• Funds continued to pile into new ag length with a gain of nearly 50,000 contracts in the past week. Since mid-May, funds have been poured into new ag length with the CFTC estimating their net long net ag position just under 200,000 contracts. This is the largest net long fund ag position since May of 2018, the same time that the Trump Administration started the trade dispute with China. We would be nervous of new net long positions in Chicago grains or soybeans with Central US weather improving. Seasonal tops appear to have formed in Chicago.

• The June Acreage report shocked Chicago traders with corn acreage coming in 5 million acres over expectations while the soybean figure was 4.4 million acres under expectations. Chicago markets responded accordingly, while the USDA announced their plan to resurvey the entire Cornbelt for corn and soybean acres. This looks to leave markets in a statistical limbo for another month. While the corn/soy mix of acres offered a big surprise for the market, perhaps the largest surprise from a statistical point was the record drop in total farmed acres. Total acreage across 13 principle crop and CRP (Conservation Reserve Program) fell by 11 million acres. Most of that (9 million acres), was due to a sharp drop in planted soybean acres.

• It is worth noting that final cropped acreage has often been below the June figure since 1996. But with the USDA set to resurvey the Corn Belt for corn/soybeans, confidence in today’s seeding figures is lower than normal. And yet it is the best that the market has to work with, and often, resurveys have not led to big changes from the initial June estimate .

• June 1 US corn stocks totalled 5,202 million bu. This was 100 million below last year and 100 million below trade expectations. Mar-May feed/residual use was a sizeable 1,111 million bu, up 168 million from last year and the highest since 2014.

• Work suggests WASDE in its July report will raise its annual feed/resid estimate slightly. However, WASDE is also likely to lower exports 100 million bu amid a very weak pace of sales and shipments in the last three weeks. The net result will be a modest boost in old crop US corn end stocks. But fortunately, feed use was “found” and so 2018/19 US corn end stocks will not balloon to 2,300-2,400 million bu. The third quarter US corns tocks data was neutral.

• However, today’s Chicago shock was NASS’s updated corn acreage numbers. NASS pegged new crop corn seedings at 91.7 million, vs. WASDE’s 89.8 million in early June.

• NASS in the weeks ahead will resurvey land where crops were unplanted as of mid-June. We will look for another downward adjustment to final US corn seedings. However, since 1990 the maximum decline in corn acres was 2.0 million in 2013. This is a unique year, but have heard that producers across the Western Corn Belt were shifting from beans to corn in June.

• And in the near/medium term, the market will now be left with adequate new crop corn stocks. The US Gulf market is $0.32-0.56/bu above all other corn origins and remains at a hefty premium to feed wheat and barley.

• Our new crop US corn export forecast will stay at 2,000 million bu until its position in the world feedgrain market improves. As of now there appears no need to ration demand. A new weather threat during pollination will be needed to trigger a test of the recent highs. Seasonal harvest lows are projected at $3.80-4.00.

• NASS reported June 1 soybean stocks at 1,790 million bu, a 571 million bu increase from last year, but 66 million bu less than expectations. March 1 stock was revised upwards by 11 million bu. Typically, the quarterly residual is negative, implying “found bushels.” In fact, the last positive quarterly residual was in 2001. And since 1965 there have been just nine other years that Mar-May residual was positive. Based on the missing bushels this year, the USDA is expected to raise their annual residual estimate in the July WASDE, and they could lower the estimate for the 2019 crop in September.

• Based on the June acreage survey, NASS reported US soybean planted acres at 80.04 million acres, down 4.6 million acres from the March intentions, 9.156 million acres less than a year ago, and 5 million acres less than expectations.

• If realised it would also be the lowest US soybean acreage planted since 2013. However, NASS indicated that will resurvey the states of; AR, IL, IN, IA, KS, Ml, MN, NE, NY, ND, OH, SD and WI. The results of the special survey will be made available in the mid-August USDA Crop Report.

• We expect that WASDE will incorporate the figure from the June Acreage report into the July WASDE. For now, WASDE has no reason to argue with NASS and the committees will not want to differ much with NASS until the resurvey is completed.

• Historically, WASDE has accepted the NASS acreage figure for the July report, though they are not obligated to. We look for a modest recovery in 2019 US soy seeding to 81-81.5 million acres in the resurvey.

• Final US wheat ending stocks totalled 1,072 million bu, vs. 1,099 million a year ago. Higher than expected Mar-May feed use was found, but otherwise the wheat data was uneventful. NASS pegged new crop total wheat area at 45.6 million acres, vs: 45.8 million in March. Winter wheat acres were 31.8 million, vs. 31.5 in March. Spring wheat acres were 12.4 million vs. 12.8 million in March. We have adjusted our estimate of total US wheat production to 1,885 million, vs. USDA’s 1,903 million forecast.

• The US Gulf wheat market is priced to limit exports to captive and traditional origins. Unlike a year ago, EU and Black Sea surpluses are more than adequate. Better rains lie ahead for Canada. Even Australia will see near normal rainfall in key areas into mid-July. The theme beyond the US harvest will be steep competition for world export demand which will require lower US prices. Amid larger US corn seeding, the need for wheat feeding is diminished.

• There appears no threat as of now that US wheat end stocks in 2019/20 fall below 1,000 million bu. Using updated acreage numbers, we project combined HRW and HRS production at 1,375 million bu. This is up 130 million from a year ago. This is a concern amid declining export interest and larger than anticipated corn acreage and production. Wheat prices need to work a bit harder to maintain feed demand. Gulf HRW only competes with EU origin below $4.60 basis Sept KC. Gulf SRW is one of the world’s most expensive milling origins of wheat.

• SRW quality remains a concern. But sustained rallies in Chicago wheat futures require a demand catalyst, which is lacking today.

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

Weekend summary 28 June 2019

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

Fund positions disaggregated data