• Low volume and mixed has been Chicago grain trade this morning. The initial rally was based on short covering in Chicago wheat ahead of first notice day on Friday. However, wheat has turned lower as the squeeze relative to spot futures appears to have eased.

• The US winter wheat harvest will gather steam next week with merchandisers reporting that they are expecting enlarged cash sales. Questions abound on US SRW and HRW crop quality relative to weeks of above normal rains, but the harvest weather looks warm/dry/promising which should help cash wheat movement. Storing and paying commercial wheat storage rates does not appear to make much economic sense.

• Corn and soybean futures are weaker amid the improved Central US weather forecast. Midwest producers report that recent days of sunny/warm weather are allowing crops to recover from their ragged appearance due to late seeding dates and excessive rain. NASS condition ratings should improve on Monday.

• We look for weaker Chicago prices into the close as the bulls bank profits ahead of the NASS Stocks/Seeding Report and trade developments in Japan.

• Chicago brokers estimate that funds have sold 3,100 contracts of corn, 2,600 contracts of soybeans and 1,100 contracts of Chicago wheat. In soy products, funds have sold 800 contracts of soyoil while being flat in soymeal.

• For the week ending June 20, the US sold 22.5 million bu of wheat, 11.6 million bu of corn and 6.2 million bu of soybeans. New crop corn sales were 4.3 million bu with soybean sales at 11.7 million bu. US corn and soybean sales continue to badly lag prior year averages and the WASDE forecast for 2018/19. China showed up as buying a cargo of US soybeans and shipping out 14.4 million bu. China now has 5.6 million mt (205 million bu) of sales that are open and unshipped. Commercials expect that some 3.0 million mt of this total could be rolled to the new crop year.

• For their respective crop years to date, the US has sold 255 million bu of wheat (up 51 million from last year), 1,919 million bu of corn (down 334 million or 15% from a year ago), and 1,715 million bu of soybeans (down 333 million or 16%). The US corn sales pace argues for an additional 100-150 million bu cut and for a further 25 million bu cut in 2018/19 soybean export estimates. The slowing US corn export pace is due to the abundance of cheap non-US corn offered for export.

• The Plains wheat harvest is gaining speed with hedge selling expected on Friday’s close ahead of the weekend. Yield results are solid and well above last year. Although not all fields are running records, the harvest yields likely to cause NASS to increase their July production estimate. Protein levels are so far down ranging from 10.8-11.4%.

• A drier weather forecast is offered for SD/WI/IA/in (down 0.35-1.50″) and slightly wetter for MO/IL/in (up 0.25-0.75″). A ridge of high pressure will hold across the Central US for the next 8-9 days. This ridge will promote near to above normal temperatures and near to below normal rain. The forecast models are moving bands of heavier rains either north or south as they try to bullseye their exact location. These rains were further north in the EU model, but further south in the latest GFS run. Most of the GFS rains fall as afternoon thunderstorms. Any soaking rain will be localised allowing waterlogged crops to slowly improve into mid-July. A more zonal flow is offered in the 11-15-day period with near normal temperatures.

• The bulls are taking profits ahead of the USDA report and concern that with improved weather, that if the report is not bullish, a steeper correction could unfold on fund liquidation. At least through mid-July, we see no real weather threat in terms of new rounds of excessive rain or extreme heat. Bulls need to be fed every day and although a bullish surprise could come on Friday, the market’s focus thereafter will be on improved Central US weather.

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LIFFE Closes wc 21 June 19

• Low volume and mixed has been the morning with Chicago wheat rallying on tight deliverable stocks ahead of a delayed new crop harvest. Corn, KC wheat and soybeans are weaker amid improved Central US weather and the likelihood of improving US corn and soybean crop conditions.

• The USDA June Seeding & Stocks report looms for Friday along with the G20 meeting in Japan. The Trump Administration is raising expectations that the US and China could restart talks with a deal 90% completed (according to US Treasury Sec Mnuchin). The uncertainty surrounding US/China trade and US final seeded acres are likely to prevent rallies or breaks from carrying through. However, a bullish NASS Stocks/Seeding report is needed for the bulls to feel any real comfort heading into mid-July. After Friday’s report, the market will be looking past seedings, and acutely focusing on yield. It is US and world weather that will drive Chicago price direction until the August USDA Crop Report. FSA data on Prevent Plant becomes available in mid-August/September.

• Chicago traders estimate that funds have sold 4,200 contracts of corn and 3,600 contracts of soybeans, while buying 3,100 contracts of Chicago wheat.

• Early Russian wheat harvest data shows yield that is equal to or slightly above last year. The data suggests that although Russian wheat was adversely impacted by hot/dry weather over the past three weeks, the quantity loss is not substantial with the heat/dryness helping to boost protein/gluten content. This could be a big help for Russia in finally being able to sell into the Saudi and Algerian wheat markets. Both are looking at Russian wheat from this harvest, and this year’s high-quality crop could allow the Russia to make commercial sales. The EU has looked upon both markets are being their mainstay, so a Russian intrusion would be bearish to EU/Matif wheat prices.

• Stats Canada released their 2019 seeded acres report this morning. Canadian farmers indicated that they will seed 25.6 million acres of wheat (down 100,000 acres from last year), 20.9 million acres of canola (down 1.9 million acres), and 3.3 million acres of oats (up 250,000 acres). The wheat seedings decline was all durum with seeded acres down 1.2 million acres at 5.0 million. This means that Canada will remain an aggressive exporter of spring wheat through the 2019/20 crop year. The report showed farmers reacting to the politics of China/Canadian canola import dispute and seeding more grains. Note that Canadian farmers seeded 7.4 million acres of barley, an increase of nearly 1 million from last year. With normal summer weather, Canadian barley is likely to work as a feedgrain into the US to supplant our reduced corn production.

• Last week, Ukraine, Brazil and Argentina each exported more corn than the US. We think this is a first in terms of non-US corn exports vs. the US.

• A drier weather forecast is offered for IA/WI (down 0.75-1.50″) and slightly wetter for IL/IN/OH (0.25-0.75″) over the next 10 days. The midday GFS forecast has a history of being the wettest model of the day, but the model has no better than normal totals into July 5. We note that a ridge of high pressure will hold across the Central US for the next 2 weeks. The best weather for immature Midwest crops is abundant sunshine, warm temperatures and soft rains. This appears to be in the offing into mid-July. Also notice the big improvement in Canadian weather also. The bulls are disappointed by early Chicago price action. A gap-and-go day did not develop following the drop in weekly conditions as Chicago consolidates recent gains amid a favourable Central US weather. Chicago corn values have digested more than 2 billion plus bu of losses due to cool/wet spring weather. Above $4.70 December there has to be a fear of even larger losses due to adverse weather. World wheat supplies are huge.

• Fear is what causes peaks in supply driven grain bull markets. There is no doubt that Friday’s NASS Seeding & Stocks report could rekindle fear of running out of corn if US corn seeding falls well below trade expectations. However, if Friday’s NASS report does not produce a bullish surprise, the market will quickly turn its attention to weather, as it does in every crop year. Summer weather is always the big variable for yield. July Midwest weather looks to be favourable with warmth and less rain to help water damaged corn/soy crops.

• Overnight strength from Monday’s crop progress report was washed out through the day, with soybean futures trading back below unchanged shortly after the open and continuing to weaken into late in the day. At the close, old and new crop soybean prices were down 5-6 cents on a warmer/drier weather forecast. While new crop acreage and yield are likely to be a hot topic through the summer, record large stocks will not. June 1 stocks estimates from 25 analysts shows an average of a 53% year on year increase in June 1 supplies. The most optimistic numbers call for a 40% increase and the most bearish for a 60% plus increase in stocks. Either way, the US market will be very well supplied heading into the start of the 2019/20 season, amid slow exports to China. The potential for US new crop is unknown, while record large old crop stocks are certain. Once the market has a better grasp of the production potential, we expect that a major price correction gets underway.

• Chicago corn ended steady amid ongoing competing inputs. Funds were buyers initially following Monday’s decline in crop rating and ahead of excessive heat in W Europe this week. However, EU heat won’t be lasting and a more favourable pattern of light rain and cooler temperatures evolves in Ukraine moving forward. The debate over US acreage loss rages on. We look for final US corn seedings of 86 million acres, down another 3.8 million from the USDA’s June forecast. We also highlight that June 1 US corn stocks are projected at the third highest on record at 5,330 million bu. If realised, Jun-Aug disappearance needs to match last year despite the substantial loss of export demand. The point is that the market into late summer will be a combination of falling demand and yield risk. We believe that rallies above $4.70, Dec, will struggle amid improved US weather between now and July 15. An acreage number below 86 million is needed on Friday for the next bullish spark. Corn appears trapped in a trading range of $4.20-4.70 Dec prior to pollination.

• September Chicago wheat ended 2 cents lower. European contracts fell €1.00/mt as exceptional heat in W Europe fades after 4-5 days. A pattern of dryness will be evolving across most N Hemisphere wheat areas over the next two weeks. The world wheat supply pipeline will be increasingly be filled. Early reports from the Southern Plains reflect massive yields and better than expected quality in TX/OK. Protein content will improve as harvest expands northward. There is a decent trend for big HRW crops to get bigger in subsequent months. Also note that Chicago’s premium to KC above $.60/bu, basis Sept is rich. Recall that HRW can be delivered against CME contracts. EU and Black Sea cash fob markets will likely find equilibrium at $200-210/mt. This is comparable to $4.30-4.40 Sept KC and $4.70-4.90 Sep Chicago. Wheat follows corn nearby, but our concern is longer term bearish wheat fundamentals and a noticeable decline in US wheat export demand. US wheat feed use is not bullish.

• Chicago markets are mostly higher in diminished volume. The morning Chicago rally effort has lacked heart, but few want to sell the market ahead of the NASS Weekly Crop Progress/Condition Report due out later today.

• Traders are adjusting their risk profile lower ahead of the political and report shocks that are due later this week (Trump/Xi meeting and USDA Stocks/Seeding Report). The 4th of July holiday is seasonally important for corn pollination, but due to historically slow 2019 US seeding progress, that “importance” will be pushed back by 3-4 weeks. The big weekend for US corn pollination is now late July and early August.

• This is how we see Chicago: Amid Central US weather forecasts that are more favourable, there is no reason for a big rally with crop uncertainty underpinning breaks. The rationing of demand via a smaller crop can either happen as an acute price spike or at a less high price over a long period of time. Our considered opinion is that due to the loss of 2-2.5 billion bu of US corn production in 2019; rationing is a process, not an event.

• Chicago traders estimate that funds have bought 2,400 contracts of wheat, 3,200 contracts of corn, and 2,800 contracts of soybeans. In soy products, funds have bought 1,200 contracts of soymeal while being flat in soyoil.

• US export inspections for the week ending June 20 were; 24.3 million bu of corn, 25.0 million bu of soybeans, and 14.9 million bu of wheat. US corn exports were less than expected, while wheat/soybeans were in line with trade expectations.

• For their respective crop years to date, the US has exported 1,632 million bu of corn (down 109 million or 6.2%) 1,335 million bu of soybeans (down 459 million or 26.5%), and wheat at 45.0 million bu (up 2.5 million or 6%). We look for US 2018/19 US soybean exports to decline by another 25-50 million bu and corn by another 100-150 million bu by the end of August. It is too early to make any comment on US wheat export prospects in 2019/20 depending on world crop production.

• Extreme heat for portions of the EU is causing concern for winter and summer grain crops. Although French and S German wheat is starting to change colour as it pushes to maturity. The heat will increase crop quality, but it could modestly trim production. At this time we doubt that the heat will have a sizeable impact on 2019 EU wheat production with their crop so advanced in maturity.

• SW Russian wheat will finally enjoy cooler temperatures/rain with a pattern change to occur this weekend. Most see the pattern change as keeping Russian all wheat production in a range of 78-80.0 million mt for 2019/20.

• The midday GFS weather forecast is little changed from the overnight run with a more normal summer weather pattern ahead. A ridge of high pressure will push northward later this week which produces near to above normal temperatures and near to below normal rainfall.

• The sunshine/warmer temperatures will be welcomed by crops. The drier forecast will accelerate winter wheat harvest in the Plains and help corn/soybean crops mend from their waterlogged spring. The best weather for Central US crops going forward is abundant sunshine, slightly warmer than normal temperatures and soft regular rains. We would note that the old cold/wet weather pattern does NOT look to return into the middle of July.

• Once the news of the week in terms of US/China trade and NASS Stocks/Seeding is released, it all comes down to Central US weather for the next 4-6 weeks. With the Central US weather looking improved and more normal for mid-summer, it will be difficult to sustain a Chicago rally. How does one become comfortable buying Dec corn at $4.60-4.70 without a new weather fear. Our advice is to pay very close attention to summer Central US weather.

• Managed funds through the week ending Tuesday were net buyers in corn, wheat and soybeans of 89,000 contracts . Managed fund net length now sits at 179,000 contracts, vs. a net short position of 28,000 contracts in mid-June a year ago. Additional buying occurs if coming NASS data reveals higher than expected US corn/soy acreage loss. Otherwise, the theme into mid-July is volatility.

• End of week selling related to a drier weather forecast and July options expiration put Chicago soybean prices 8-10 cents lower at the close on Friday. On a weekly closing basis, July soybeans finished at a ten-week high and November marked the best close in 13 weeks, but both contracts were nearer to the lows of the week. The Commitment of Traders report showed that for the week ending June 18, funds had covered another 39,000 contracts but were still net short 55,000. Hedgers, on the other hand, have remained slow sellers on this rally and sold 55,400 contracts, for the first net short position since April, of 45,000 contracts. The 2019 planting season has come to an end with most producers having either planted a crop or made their prevent plant decisions. Chicago has added premium for yield risks due to late planting, and the next directional move will hinge on the trade’s confidence in new crop acreage and the growing season weather/yield.

• Chicago corn futures settled 7-8 cents lower. The latest run of the EU weather model is consistent with prior releases as well as the midday GFS forecast. Unwanted rains are due across the Eastern Corn Belt, but thereafter a more normal US summer climate will be established. Most important is that GDD (growing degree days) accumulation will accelerate beginning early/ mid-next week. Managed funds as of Tuesday were long a net 144,000 contracts, vs. 111,000 a week ago. There is room for buying but following the massive transfer in ownership a new catalyst is needed. There is much unknown about crop potential, and how much domestic use needs to be trimmed. However, S American and Black Sea basis hasn’t moved at all following the rally, and despite massive world demand shifting from the US to elsewhere. For now, other world feedgrain markets are content to absorb elevated consumption. Elevated volatility is expected next week ahead of numerous USDA data points. And the battle between production and demand will be ongoing throughout summer

• Chicago wheat futures followed corn lower into the close. Breaking news is absent, but the US market remains overvalued relative to competing origins. Funds as of Tuesday were net long 23,000 contracts in Chicago. Part of this has been liquidated since Monday as the world cash market has failed to follow. Northern Hemisphere harvesting will roll along smoothly. Drier and warmer weather lies in the offing for much of Europe and the US Plains. A major pattern change is also offered to Ukraine and Russia beginning this weekend. Excessive heat ends and will be replaced by temperatures some 4-8 degrees cooler than normal into early July. This will aid later developing winter wheat fields in the Black Sea. And favourable weather will continue across Russia’s spring wheat belt. Wheat rallies will be tied to corn and the coming shift in feed use across the US Plains. However, rallies will be capped as more of the N Hemisphere crop is harvested. Interior Russian prices are beginning to retreat.

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Weekend summary 21 June 2019

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Fund positions disaggregated data

• Forgive the pun, Chicago appears to be caught in the mud, with neither rallies or breaks being able to follow through. Such was the case again this morning with lower overnight values unable to be sustained with new speculative buying showing up on the Chicago reopen.

• Nearby wet weather and long lead forecasts calling for continued cool/wet Midwest weather through summer prompted the early buying. Normally, 30 and 90 day forecasts don’t draw much trade attention based on their inaccuracies, but since everyone is worried about getting corn and soybeans to progress in their development stages, the prospect of continued cool/wet weather was alarming to the bears. Weather is the key Chicago focus as the growing season gets underway. July this year will be like June (in normal years) via seeding dates that are 20-30 days behind normal. What Midwest crops desire going forward is warmer than normal temperatures and soft regular rains that are least normal. That is the recipe for a recovery in weekly crop conditions and yield prospects. And by the way, lots of sunshine through September would be additional big help in yields.

• Chicago brokers estimate that funds have bought 11,000 contracts of corn, 8,000 contracts of soybeans and 4,200 contracts of wheat since the reopen. In soy products, funds have bought 4,000 contracts of meal and 2,100 contracts of soyoil. Funds are covering the remainder of their net short soybean position.

• The US weekly export sales report showed that for the week ending June 13 the US sold; 6.9 million bu of wheat, 1.5 million bu of old crop corn and 14.2 million bu of new crop, and 21.0 million bu of old crop soybeans and 7.3 million bu of new crop. The US made no new sales of US pork to China last week. If China has a big need for imported meat, they are not buying in the US market.

• For their respective crop years to date, the US has sold 233 million bu of wheat (up 50 million or 27%), 1,907 million bu of corn (down 313 million or 1.4%) and 1,746 million bu of soybeans (down 325 million or 16%). China shipped out 9.25 million bu of soybeans on the week with known open sales on the books of 6.0 million mt or 163 million bu. Research argues for a 100-125 million bu reduction in 2018/19 US corn and a 25-35 million bu drop in soybean exports. The slower exports will flow directly to stocks with US 2018/19 corn stocks pegged at a 2,300 million bu.

• There are private reports that Russia and France have recently sold wheat into Mexico. The sales are not a surprise with CIF offers from both countries well below US rail offers. Yet the sales of non-US wheat into Mexico reflect how overpriced US wheat is since the US has a huge freight cost advantage. One could import Russian wheat into the US for a profit, if it were permitted.

• Traders are debating 2019/20 US wheat feeding amid the US corn shortfall. A record amount of US wheat was fed in 1983/84 at 411 million bu. And as recently as 2012, the US fed 388 million bu of wheat. In the flood year of 1993, the US fed 278 million bu of wheat. The US will likely feed some 250-350 million bu of wheat in 2019/20 compared to the June WASDE forecast of 140 million bu offered last week.

• The midday GFS weather forecast is drier for IL/IN and OH that what was offered overnight. The midday model subtracted some 0.5-2.00″ of water from the E Midwest in the coming week. The heaviest rain now looks to fall across MN/IA and far W and SIL with totals of 1.50-3.00″ through Wednesday. A ridge of high pressure then builds from the SW US into the N Plains which will fan sunshine and warming temperatures. Afternoon thunderstorms are likely, but heavy rains will be diminished.

• Chicago is caught in a trading range demanding data to decide if additional domestic rationing is needed. The world is awash in grain, and US export demand rationing is already occurring. It is sunshine that crops demand during July.

• Traders and Chicago are struggling amid a lack of fresh news (bulls need to eat every day) and the realisation that there is much to be known on US summer row crop production.

• Chicago corn prices have rallied nearly $1.20/bu while July soybeans have rallied $1.30/bu based on sharp fall in US supplies. Wheat has followed, even though US production expectations are well above recent years. It has been a supply driven bull market with the market guessing a 2-2.25 billion bu corn loss.

• Yet, it is tough to buy December corn above $4.60 without greater supply loss confirmation. There is much that the market does not know; How many acres will US farmers enroll in the Prevent Plant option, and what will the final US 2019 corn and soybean yield be. And will US crops make it to full maturity in October/November. It is nearly impossible to produce a US 2019/20 corn or soybean balance sheet that can be trusted. Accordingly, Chicago is consolidating awaiting fresh supply news. US corn yield forecasts as low as 135 bushels/acre from an IA State economist have been supportive, but the point is no one really knows.

• Amid a Central US weather forecast that shows improvement, Chicago needs fresh US supply loss confirmation to accelerate its rally. Remember that Ukraine, Brazil and Argentine corn production in their last harvest cycle was up 1.9 billion bu (on the prior year) which helps to partially offset the forecast US corn crop loss of 2-2.25 billion bu. This does not help US corn end users, which means that any demand rationing effort (rally) is a domestic effort.

• This effort can include substitution/import of other grains such as wheat or barley. Corn bulls are frustrated on the nonperformance of recent days, but the market is at four year high and needs additional US supply loss confirmation.

• Funds are net buyers of; 3,200 contracts of beans, 3,000 contracts of corn while selling 3,400 contracts of wheat. In soy products, funds have bought 2,800 contracts of soyoil while selling 1,200 contracts of soymeal.

• US weekly ethanol production slipped 1.5% last week to 318 million gallons, down 4 million gallons from the prior week. US ethanol stocks fell 9 million gallons to 907 million, which is equal to last year. US blender profitability is now at its lowest level since December at just $0.01/gallon. There is no economic incentive for Brazil or others to seek/buy US ethanol for import.

• US HRW OK/TX/S KS wheat yields are strong and, in most cases, record large. The cool/wet May and June weather has really favoured kernel size/weight and disease pressure has been less than expected. The wheat is finding buyers with feedlots seeing the discounted (vs corn) HRW wheat as a feedgrain opportunity. The midday GFS weather forecast is sharply drier for than the overnight run for IN/OH with rain totals reduced by 1-2.50″. This is similar and in line with the EU model overnight. Rainfall for the next 5 days is forecast to range from 0.75-2.00″ across 65% of the Midwest.

• However, note that compared to forecasts, recent heavy rain totals have been less widespread which correlates with the arrival of summertime and afternoon thunderstorms. One must be careful in that heavy rainfall totals will be localised and not as widespread as suggested. A SW US ridge of high pressure is forecast to lift the jet stream northward mid next week as it forms over the Plains and the Intermountain West. The ridge will produce more normal Midwest rainfall with above normal temperatures.

• A correction is underway in Chicago amid a lack of fresh news and a market that is laden with longs. Traders need fresh news to push a further supply bull case. There is much we don’t know regarding US seedings and yield. The market will trade day-to-day weather until there is more clarity. Bull traders are concerned that the June Seeding report will not catch all the US seeding losses.

• Chicago prices are recovering at midday following news that US President Trump called Chinese President Xi had a good talk this morning to confirm a face to face meeting at the G20 meeting next week. The Chinese media have confirmed the meeting. No one expects that the US/China can reach a trade pact next week, but there is hope that both sides will restart talks that avert a new round of $300 billion of US tariffs on China. Soybean futures rallied on the news amid additional fund short covering that dragged the grains off their lows. Another week of wet Central US weather is also in the background along with the number of US acres that will be enrolled in the Prevent Plant Program. Most private estimates on corn PP range from 7-9 million acres with soybeans at 2-3 million acres. Note that these are “best guesses” with next week’s USDA Final Seeding report expected to help narrow some of the PP estimates.

• We look for a mixed Chicago close with wheat to be the drag on rallies while soybeans try to hold on additional fund short covering. Since the Chicago reopen, funds are net buyers of; 7,200 contracts of beans, 6,000 contracts of corn and 3,000 contracts of wheat. In soy products, funds have bought 3,600 contracts of soyoil and 2,500 contracts of soymeal. We estimate that funds have reduced their soybean short to 21,000 contracts.

• Soyoil is catching a bid on the news that a biodiesel tax credit is going to be put up for Congressional consideration. Several Midwest Senators have pushed for the biodiesel blender’s credit to be renewed and retroactive to 2018. The news of a new congressional vote has underpinned soyoil futures this morning on the potential of adding fresh blending incentive.

• Midwest Prevent Plant enrollment guesstimates have grown amid the wet weather of last week and a forecast that stays wet for the next 5-7 days. It is unfortunate for farmers in the E Midwest that are saturated. We have raised our PP corn estimate to 7-8 million acres with 1.2-2.4 million acres of soybeans. The market normally knows seeding progress at this date, this year it really has no idea. It is the combination of yield and harvested acre risk which is likely to maintain a high level of market volatility. And final US FSA PP data will not be available until August or September. US balance sheet analysis is difficult, traders do not want to get caught buying rallies or selling breaks.

• There are two years that US soybean seeding was slower than this year, 1995 and 1996. The final yield vs trend was down 3% in 1995 and up 2% in 1996. The point is that it is too early to subtract yield basis seeding dates.

• The midday GFS weather forecast is drier than the overnight run over the next 7-8 days. Still, an abundance of rain will drop across the Midwest with 10-day totals of 2-4.00″. The rains will renew flooding across the E Midwest amid saturated soils. The heaviest rainfall looks to occur early next week with additional rain totals of 1-2.50″. A ridge of high pressure is forecast to lift the jet stream northward mid next week as it forms over the Plains and the lntermountain West. This ridge will fan upper 80′s to mid 90′s. The heat/dryness is just what Plains wheat demands as the harvest starts to gain momentum. The ridge is forecast to slowly push eastward, but it is doubtful that the ridge will lock into place.

• Chicago needed a correction, but it is too wet for any sustained break with US Prevent Plant acres unknown. US wheat is overvalued in the world marketplace and this grain holds the most downside risk ahead of an advancing harvest. Our considered view is that Chicago remains in a wide and volatile trading range. Few traders believe that the US/China will reach a trade deal, they will just keep talking.

• Chicago prices are recovering at midday following news that US President Trump called Chinese President Xi had a good talk this morning to confirm a face to face meeting at the G20 meeting next week. The Chinese media have confirmed the meeting. No one expects that the US/China can reach a trade pact next week, but there is hope that both sides will restart talks that avert a new round of $300 billion of US tariffs on China. Soybean futures rallied on the news amid additional fund short covering that dragged the grains off their lows. Another week of wet Central US weather is also in the background along with the number of US acres that will be enrolled in the Prevent Plant Program. Most private estimates on corn PP range from 7-9 million acres with soybeans at 2-3 million acres. Note that these are “best guesses” with next week’s USDA Final Seeding report expected to help narrow some of the PP estimates.

• We look for a mixed Chicago close with wheat to be the drag on rallies while soybeans try to hold on additional fund short covering. Since the Chicago reopen, funds are net buyers of; 7,200 contracts of beans, 6,000 contracts of corn and 3,000 contracts of wheat. In soy products, funds have bought 3,600 contracts of soyoil and 2,500 contracts of soymeal. We estimate that funds have reduced their soybean short to 21,000 contracts.

• Soyoil is catching a bid on the news that a biodiesel tax credit is going to be put up for Congressional consideration. Several Midwest Senators have pushed for the biodiesel blender’s credit to be renewed and retroactive to 2018. The news of a new congressional vote has underpinned soyoil futures this morning on the potential of adding fresh blending incentive.

• Midwest Prevent Plant enrollment guesstimates have grown amid the wet weather of last week and a forecast that stays wet for the next 5-7 days. It is unfortunate for farmers in the E Midwest that are saturated. We have raised our PP corn estimate to 7-8 million acres with 1.2-2.4 million acres of soybeans. The market normally knows seeding progress at this date, this year it really has no idea. It is the combination of yield and harvested acre risk which is likely to maintain a high level of market volatility. And final US FSA PP data will not be available until August or September. US balance sheet analysis is difficult, traders do not want to get caught buying rallies or selling breaks.

• There are two years that US soybean seeding was slower than this year, 1995 and 1996. The final yield vs trend was down 3% in 1995 and up 2% in 1996. The point is that it is too early to subtract yield basis seeding dates.

• The midday GFS weather forecast is drier than the overnight run over the next 7-8 days. Still, an abundance of rain will drop across the Midwest with 10-day totals of 2-4.00″. The rains will renew flooding across the E Midwest amid saturated soils. The heaviest rainfall looks to occur early next week with additional rain totals of 1-2.50″. A ridge of high pressure is forecast to lift the jet stream northward mid next week as it forms over the Plains and the lntermountain West. This ridge will fan upper 80′s to mid 90′s. The heat/dryness is just what Plains wheat demands as the harvest starts to gain momentum. The ridge is forecast to slowly push eastward, but it is doubtful that the ridge will lock into place.

• Chicago needed a correction, but it is too wet for any sustained break with US Prevent Plant acres unknown. US wheat is overvalued in the world marketplace and this grain holds the most downside risk ahead of an advancing harvest. Our considered view is that Chicago remains in a wide and volatile trading range. Few traders believe that the US/China will reach a trade deal, they will just keep talking.

• There have only been a few times since 1975 when spot HRW KC wheat futures have traded below Chicago corn. The last time was in 2012 amid the dire Central US drought. It is possible that spot corn could trade below KC wheat, but US wheat futures have rally substantially or US livestock feeders will increasingly feed wheat – not corn in the July-October period. The world is awash in wheat and raising corn prices will be a significant boost in US feeding and world feed wheat trade. Wheat makes rationing corn use easier.

• Chicago soybeans gapped higher on the Sunday open and extended gains into the close on Monday. July and November soybeans were each above their respective 200-day moving averages at the close, the first time for July soybeans since February. After the close, NASS reported that 77% of the US soybean crop had been planted through Sunday, up 17% on a national basis. The states of IL, IN, MN, MO, OH, and SD were all more than 20% behind the 5-year averages, with OH 48% behind the 5-year average at just 46% complete. IL is 25% behind its 5-year average and IN was 30% behind. Moreover, just 55% of the national crop is emerged versus the 5-year average of 84%. NASS reported that initial soybean crop conditions would be reported next week. Near term, the soy market is finding support from fund short covering. Our belief is that US farmers will get all of their intended soybean acres planted by early July.

• July corn ended up 2 cents with forward futures gaining 3-5 cents. Debate over acreage/yield potential rages on, but west of the MS river conditions have improved. Recall that funds have established a sizeable net corn long position estimated at 220,000 contacts. Corn planting as of Sunday reached 92% complete. States lagging most include SD, OH, MI and IN. IL is 88% planted. OH is just 68% planted with prevent plant here expected to reach 1 million acres. Assuming NASS’ intentions number, there are 7.4 million acres of corn left unplanted. This roughly matches our expectation for national corn acres enrolled in the Prevent Plant program. Crop ratings were unchanged at 59% good/excellent. Modest improvement lies ahead into early July amid coming warmth and increased days of sunshine. Research maintains that slowing demand will be accomplished at current prices. There is talk that Brazil’s final crop size this year will reach 103-104 million mt vs. USDA’s 101. The Safrinha harvest in Brazil is just 10% complete. Until the market is past the June Stocks/Seeding report, corn prices we believe will trade in a wide range of $4.10-4.70 basis July futures.

• Chicago wheat futures ended a cent higher; KC ended a cent lower. Widespread soaking rain will further delay winter wheat harvest, which is already behind schedule due to slow maturation. However, a pattern shift next week will funnel fresh rain into the Canadian Prairies and warmer/drier weather into the Plains. Wheat fundamentals remain bearish relative to current price levels. The 2019 US winter wheat harvest progress through Sunday reached 8%. This compares to 25% a year ago and 20% on average. KS’s harvest is just 1% completed as the crop slowly matures without heat/dryness. We would note that the Plains will be drier beyond the next 48 hours. An acceleration in harvest lies ahead. And early HRW yields are impressive at 75-90 bushels/acre in TX and OK. Spring wheat crop ratings fell slightly to 78% good/excellent, vs. 81% last week and 71% on average. Spring wheat weather is favourable into late June. SRW’s premium to EU origin has widened to $32/mt ($0.87/bu). Russian cash fob prices are unchanged. Wheat appears to lack a demand driver and as such is overvalued. Northern Hemisphere harvest pressure is due in the next two weeks.