• Rumours that biofuel mandates could be lowered for 2020/2021/2022 had soyoil falling to near limit losses on Friday. RIN values are also in retreat. But it is worth noting that renewable diesel demand is not likely to be affected by changes to the federal mandate. This demand appears to be almost insatiable. Yet, after the close EPA indicated that 2022 biofuel mandates would be higher and that reductions for 2020/2021 were based on reduced fuel consumption due to the pandemic. The 2020 and 8 months of 2021 biofuel blending has already occurred. This means that only 4 months might be impacted. The real impact is on the cost that refiners would have to pay in terms of past RIN purchases. The impact on biodiesel blending is negligible. In our opinion Chicago was too bearish on the newswire flash.

• Pro Farmer released its soybean yield estimate from the week’s Crop Tour. The national soybean yield was pegged at 51.2 bushels/acre, with a crop of 4,436 million bu. The yield was 1.2 bushels/acre larger than the August NASS yield. Based on the Tour’s yield estimate, the September NASS yield can be expected at 51.7 bushels/acre, +/- 0.9. November soybeans fell back below $13.00, where we expect scale down Chinese buying. Our longer-term outlook calls for higher prices into early 2022.

• Dec Chicago corn fell to initial chart-based support at $5.30-5.40 amid negative demand input. The EPA is unlikely to mandate ethanol consumption growth beyond 2022, though actual ethanol production and use will be subject to gasoline consumption. We do not view any change in the RFS as significant to spot and future domestic corn consumption.

• Pro Farmer estimates US corn yield at 177 bushels/acre and production at 15.1 billion bu. If realised, this would add 365 million bu to 2021/20 US supply. We note that NASS’s Sep yield has a slight tendency to be above Pro Farmer, but NASS’s final yield correlates poorly with the Tour’s estimate. Note also that this year’s Tour yield is 0.5 bushels/acre below last year. If we used the Tour’s state by state Midwest yields and included NASS August yields for other states, the yield that is arrived at is 173.9 bushels/acre. Pro Farmer adjusts the US corn yield based on other assumptions.

• The lack of a US yield disaster keeps the normal seasonal price trend intact. Lows are normally set in late August with a demand-driven recovery unfolding thereafter. The timing and intensity of this recovery will hinge upon US export demand. US Gulf corn is the world’s cheapest feedgrain.

• US wheat futures ended 4-14 cents lower led by Dec Chicago, amid ongoing macro-based selling and weakness in corn and soy markets. We maintain that wheat will remain the bullish leader of the ag space into winter. Current prices should be used to scale into end user supply coverage.

• Spot Paris milling wheat again found fresh seasonal highs at €273/mt ($8.70 per bushel) as end users in Europe scramble to guarantee high quality milling supplies. And Russia’s interior wheat market rallied another $10-15/mt. Spot wheat in Russia’s southern region has rallied $40/mt in 30 days. Current prices indicate that exporters can only make money at FOB prices above $300-310/mt. Russian exporters total cost burden will rise further as the calculated export tax increases. Taxes will start going up next week.

• It is only August and already the world has a major milling wheat supply issue. Highs are not expected until late winter. Newer price highs lie in the offing, with $8.50 still targeted in Dec-January in KC December futures.

• Any weakness is a buying opportunity.

• HEADLINES: Funds pound corn/soy as 50/100 day moving averages breached; China buys additional US soybeans on the break; Sept Paris wheat inverse.

• Chicago futures are lower at midday as “risk of” is the theme as Wednesday’s minutes of the US Central Bank indicated that it is moving away from its highly accommodative monetary policy. The first step in slowing its accommodation is the end of its purchasing of US bonds, which is called tapering.

• The risk off mentality based on the US unemployment rate falling below 5% with the US inflation target of 2% being reached for consecutive months. The risk off selling pushed corn/soybean futures below their key 50-100 day moving averages which triggered a host of technical sell stops. It is this technical selling which is pushing Chicago futures sharply lower. Soybean have endured the most selling with November futures pushing below $13.20 while December corn is in position to test $5.40 chart support.

• Chicago brokers estimate that funds have sold 6,000 contracts of wheat, 14,000 contracts of corn, and 12,000 contracts of soybeans. In soy products, funds have sold 4,300 contracts of soymeal and 4,000 contracts of soyoil. The initial commercial pricing in corn/wheat was overrun by technical selling. We note that Paris September wheat has rallied above €260 euros/mt. The EU and Black Sea cash markets are not following Chicago lower.

• China booked another 263,000 mt of US soybeans and Mexico 148,500 mt in the new crop year as reported in the daily sales report. We understand that China has booked another 6-8 cargoes of US soybeans this morning. China is consistent in booking US soybeans daily as they are well behind in their purchase pace. The decline in Chicago aids Chinese demand.

• US export sales for the week ending August 12 were 11.3 million bu of wheat, 28.6 million bu of corn (8.5 million old and 20.1 million new crop), and 82.2 million bu of soybeans (2.5 million of old and 78.7 million of new crop). New crop US corn sales are a record large at 732 million bu with new crop soybean sales growing rapidly to 509.4 million bu. The big purchases by China in soybeans has persisted for 11 consecutive days. US soybean export sales in the middle of August are now in line with the USDA Annual export forecast.

• EU wheat traders bemoan tightening supplies of milling wheat for export. Note that Paris September wheat futures is now above €260/mt with September wheat trading at a €16/mt premium to December. Exporters having difficulty finding milling wheat are buying Paris September futures to assure supply. And as Russian export taxes will keep rising each week (calculated based on a moving average), the outlook for their exports is in sharp decline. US wheat will be needed by the world to fill the supply gaps left by the Russian/Canadian/European milling wheat shortfall. We calculate that with normal Argentine weather, some 20-22 million mt will go to non-traditional suppliers. US and world wheat prices are in a bullish trend amid a dire supply shortfall.

• The midday GFS weather forecast is consistent with the overnight run. Another 48 hours of warm/dry weather prevails before rain starts to fall across the N Plains. Most of the remainder of the Midwest/Plains stays dry into Monday. The weekend rain targets include the Dakotas, W Minnesota, and NW Iowa. Totals are estimated in a range of 0.25-1.50″ across the Dakota while totals further south range from 0.2-1.25″. Coverage of the Central US rain through next Friday is 65-70%. Targeted is Iowa and Minnesota.

• The forecast is changeable due to the development of Hurricane Grace in the Gulf of Mexico. The hurricane targets the Yucatan Peninsula with inundating rainfall this weekend. Warm/dry weather returns to the Plains/W Midwest during the 10–15-day period.

• Fund and technical selling is pounding Chicago values as key moving average support is breached. China is expected to boost its soybean import program on the decline. By far, wheat is the most bullish Chicago grain followed by corn/soybeans. The downside price targets for December corn futures are $5.4 and $13.00 for November soybeans. End users should be building their forward coverage. We remain bullish with lows due in late August.

• HEADLINES: Chicago mixed in slow volume on a lack of passion; China loading out US old crop soybeans; Egypt’s GASC wheat purchase at 6-year high.

• Chicago futures are mixed at midday. Soy futures are lower on the weakness in other vegoil futures, and the rain forecast for the Northern Plains and W Midwest on Friday and the weekend. The forecast calls for 0.25-1.25″ of rain for key crop areas that have been in a dire drought since May. Corn/wheat futures are firm due to a 180,000 mt purchase of wheat by Egypt’s GASC at the highest FOB price in over 6 years. There were just 6 offers of wheat from E Europe and Russia. If freight costs are included, the CIF Egyptian GASC wheat purchase is the highest looking back to 2011/12 (recall the dire US drought at that time). World wheat prices keep rising sharply with buyers chasing the market upwards. We look for a mixed Chicago close with the grains staying firm heading home, while key support should underpin November soybeans below $13.50.

• Paris wheat futures are up €5.25 at $248.00 amid strong demand and tightening milling wheat supplies. The fundamentals of world wheat are bullish on limited exporter supplies and concern that arid weather could damage Argentine hard wheat without needed rain into the middle of September. The Argentine weather forecast does not offer much rain into September 3, so traders are starting to sit up in their chairs and pay close attention. The world cannot afford the loss of any Southern Hemisphere wheat, either in Argentina or Australia.

• China booked another 131,000 mt of US soybeans in a new crop position. We see that China is actively loading out old crop soybeans from the Gulf with vessels going under spout and another 3 boats waiting. We look for China to export 500-600,000 mt of US soybeans during August.

• Chicago brokers estimate that funds have sold 3,200 contracts of soybeans, while buying 3,000 contracts of corn and 2,500 contracts of Chicago wheat. In soy products, funds have bought 900 contracts of soymeal while selling 3,100 soyoil. The fund selling in soybeans is falling into commercial pricing.

• US farmers are widely discussing the soaring price of fertilisers for the 2022 crops. Midwest farmers are considering backing down fertilisation programs, but the real nearby impact is that pulling in new marginal farmland into production in the Plains/Delta looks unlikely. US/corn seeded acres may be capped around 180 million acres in 2022. US farmers will choose wheat/soybeans vs corn via the high price/outlay for nitrogen, potash, and phosphates to plant corn. This is a reason why December 2022 corn futures continues to rise on the need for additional acres.

• The US ethanol industry produced 286 million gallons of ethanol vs 290 million gallons last week. The US now needs to produce 300 million gallons/week to reach the USDA 2020/21 forecast.

• The midday GFS weather forecast is consistent with the overnight run. Another 48 hours of warm/dry weather will prevail before rain starts to fall across the N Plains and Minnesota. Most of the remainder of the Midwest/Plains stay dry into Monday. Highs are in the 80′s and low 90′s before a slow moving cold front pushes southward. Weekend rains are estimated in a range of 0.25-1.50″ across the Dakotas/Minnesota while totals further south range from 0.2-1.00″. Coverage of the Central US rain through next Friday is 65-70%. However, the forecast is changeable due to the likely development of Hurricane Grace in the Gulf of Mexico. The hurricane targets the Yucatan Peninsula with inundating rainfall. Warm/dry weather returns to the Plains/W Midwest during the 10–15-day period.

• Low volume and low interest is producing mixed Chicago values at midday. The Pro Farmer Tour is not finding much to argue about in relation to crop size. Soy pod counts could be better, but heat is quickly pushing corn to the finish line. China is expected to remain a buyer of US soybeans while world wheat prices rise on tightening exportable supplies. A Chicago price bottoming process is underway as the market awaits elevated import demand for the new crop.

• UPDATE:

• Today, Egypt’s GASC purchased 180,000 mt of wheat from Romania and Ukraine for shipment in Oct 05-15. The average FOB price paid was $296.65 mt. That is up $35.16 mt from the average price paid at the tender held two weeks ago. For the second time in a row, there were only 5 offers. The lowest Russian offer was $21 mt above the lowest Romanian offer. The average CIF price paid in today’s tender was $331.58 mt. That is up $37.84 mt from the last tender price. Ocean freight rose $2.68 mt to $34.93. Freight is believed to be a record. GASC will pay for the grain within 180 days. Payment in 180 days is estimated to add $4-5 mt to the cost of the wheat. This is the 6th tender in a row that non-Russian origins captured most or all of the business. The average FOB price paid in this tender was $35.16 mt above the last tender. It is also nearly $87 mt more that the average price paid at a tender held a year ago.

• Spot Paris milling wheat has recovered all of Tuesday’s break. Non-US cash wheat markets are being driven by the abrupt decline in Russian production and a real lack of high protein milling supply in Western Europe. European milling wheat premiums have added further value to wheat. Spot milling wheat cash basis in Northern Germany has recovered swiftly from harvest lows in mid-July. Like futures, the seasonal trend in EU wheat basis is positive until new crop production is known. That cash markets are keeping pace with futures is important given it is only August and new Northern Hemisphere wheat production isn’t due for another 11 months. We also note that the surge in Black Sea feed wheat (and barley) will work to shift demand back to corn beginning in early autumn. The US corn market in particular stands to benefit from this shift.

• HEADLINES: Chicago decline deepens on macro financial sell off; China securing US soybeans with another 4-6 cargoes sold today; Midday GFS weather forecast consistent.

• Chicago futures are mixed at midday. Chicago continues to measure US yield while also seeking a price that builds demand for US corn/wheat. US corn purchases by importers have not ramped up, while US wheat is the most expensive in the world. This has produced a Chicago correction of last week’s USDA Crop Report gains. Price is looking for a level that sparks enlarged consumption.

• We see price support below $5.60 in December corn and below $13.50 in November soybeans while Dec KC wheat should hold support at $7.10-7.20. Paris wheat futures are sharply lower which is causing the weakness in US futures. Paris and Black Sea wheat were the upside leaders on the $1.30/bu world wheat rally. Black Sea wheat is holding much better than Paris which suggests that the break is largely corrective and technical.

• We forecast that Chicago corn, wheat, and soybean futures will form a secondary seasonal bottom before the end of August. This is the wrong time of the year to turn bearish as August weather has been less than favourable. A couple of good finishing rains are required, but crop scouts report firing of lower corn leaves and that soybeans need a good drink. As witnessed last year, August and early September Midwest weather have an important impact on yield.

• Chicago brokers estimate that funds have sold 6,400 contracts of wheat, 6,500 contracts of corn, and 3,500 contracts of soybeans. In soybean products, funds have sold 1,500 contracts of soymeal and 2,000 contracts of soyoil. The fund selling is ongoing at midday on corn taking out yesterday’s low while soybeans were unable to rise above yesterday’s high.

• China keeps pecking away at US soybean purchases, but at a pace that is well below last year. China purchased 198,000 mt of US soybeans with another 132,000 mt sold to an unknown buyer. China has purchased 5.0 million mt of US soybeans on a known basis with another 3-3.5 million likely held in an unknown destination category, a total of 8-8.5 million mt. A year ago, China had purchased around 12 million mt of US soybeans. China is behind on its purchase pace. It has cut back on US soybean purchases amid a larger S American import program. China is still seeking offers for Brazilian soybeans for late September and October, so our bet is that it is related to the bigger S American soybean imports. Yet, China has as much as 30 million mt of US soybeans to purchase in the months ahead which should provide support below $13.50 basis spot soybean futures. China will likely scale into additional purchases on Chicago breaks.

• The Twitter feed from the Pro Farmer Tour is reflecting solid or near record corn yields in Indiana. We would expect that as the tour gets into some of the areas that endured water damage from the late June excessive rain, yield will tail off slightly. Otherwise, another round of strong corn yield data is expected with soy pod counts down from expectations when participants walk into a field.

• The midday GFS weather forecast is consistent with the overnight run in that rains start to arrive in the N Plains on the weekend and push south and east early next week. Temperatures sag with more seasonal 70′s and 80′s arriving for daily highs. The mean position of the jet stream will allow for better rain chances across the drier regions of Canada and the Northern US beyond the weekend. However, there will be patches of the Midwest that will be missed and the extended range 10–15-day forecast is warmer/drier. We maintain that crop condition ratings will slide again next Monday and that traders/producers will be discussing a decline in yield in September from the initial NASS August estimate.

• The DOW is down 450 plus points as the US$ rallies and it is a risk off macro day. We doubt that the US or world economic outlook will darken dramatically due to the Delta variant of Covid. Seasonal Chicago lows are likely already in place during July. China is forecast to be a sizeable scale down buyer of US soybean futures as margins turn green. Wheat prices may retreat as Russian CPT (carriage paid to) wheat values reached levels that triggered farmer selling. A deeper 10-20 cent break would produce a new buying opportunity.

• HEADLINES: Chicago mixed at midday; NOPA crush disappoints; Better rain due in Dakotas next week.

• Chicago futures are mixed at midday in modest volume. Neither the bulls or the bears have been able to build any momentum with values chopping back and forth. Paris wheat futures have declined from last week’s high to a lower closer. Algeria’s tender is likely to occur at a higher price than their purchase 2 weeks ago amid the tightness of quality French wheat supplies. The Pro Farmer Tour is uncovering strong yield potential in Ohio and portions of S Dakota. Amid lacklustre demand, the results of the Tour could cause Chicago selling into the coming weekend with rain in the forecast for the N Plains and W Midwest. A choppy/mixed trade is forecast with China underpinning the soy market on breaks due to pricing. China is short bought and has a considerable tonnage of US soybeans yet to price. Most of the US demand will be coming off the PNW due to soaring world freight rates. We forecast a mixed Chicago close ahead of the NASS weekly Crop Condition and Progress Report.

• Chicago brokers estimate that funds have bought 2,300 contracts of soybeans and 1,900 contracts of wheat, while selling 3,600 contracts of soybeans. In soy products, funds have sold a net 1,900 soyoil while buying 2,300 soymeal. The corn market has a heavy feel amid the new fund selling.

• USDA weekly export inspections were 29.7 million bu of corn, 16.2 million bu of wheat, and 10.2 million bu of soybeans. The soybean exports were larger than expected while corn and wheat were slightly less.

• For their respective crop years to date, the US has shipped out 2,533 million bu of corn (up 936 million), 2,155 million bu of soybeans (up 614 million), and 179.5 million bu of wheat (down 29 million). China was the big exporter of US soybeans taking 5.3 million bu. We reported last week that China was loading 2 boats and is expected to continue loading out US soybeans into September.

• The July NOPA soybean crush rate fell behind expectations at 155.1 million bu. This was down 17 million bu from last year. This was the second smallest US soybean crush rate since September 2019 and reflects that USDA’s 2020/21 soybean end stock total may still be 5-10 million bu too low. The trade was looking for the July soybean crush rate at 159 million bu with soyoil stocks at 1,500 million bu. The smaller crush rate yielded a soyoil stocks total that was well above expectations at 1,617 million pounds. This total reflected smaller than expected domestic demand and that price was rationing supplies. The NOPA Crush Report was deemed as bearish with high US soybean/soyoil prices producing rationing.

• The Canadian harvest accelerated across the Northern Prairies with disappointing results. Yields for wheat/canola were often in the single digits in terms of bushels/acre, which has private analysts further cutting their wheat/canola/oat crop estimates. Extreme heat is being blamed as the cause.

• The midday GFS weather forecast is wetter in the Central Plains and Iowa this weekend but is drier across the Great Lakes region. Overall, the GFS’s big-picture theme is consistent with prior output and the N American climate trends cooler and wetter beyond the coming weekend. The mean position of the jet stream beginning next week will allow for better rain chances across the drier regions of Canada and the Northern US. 10-day precipitation accumulation is pegged at 1.0-2.5″ across the Dakotas and MN. Totals upward of 0.50-1.50″ impact the mid-South and Southern Midwest amid the lingering remnants of Tropical Storm Fred. Highs across the Plains cool into the 80s in the 6–15-day period.

• The US yield debate has not been put to rest, and next week’s exact precipitation totals and coverage are important to soybean crop health. The ingredients for a demand-led bull are firmly in place as international market rise, but sizeable new buying only occurs when this demand can be seen and felt on a weekly basis. The long-term outlook is bullish, but recent corn /soy price ranges hold into harvest.

• A strong rally in soyoil along with sizeable soybean export sales announcements from the USDA offered late-week support. The USDA reported nearly 12 million bu of soybean sales to an unknown destination. Additionally, there was another 4.6 million bu of new crop soybeans that were sold to China.

• Soybean processor bids have collapsed across the Midwest in the last two weeks. Crushers were able to extend coverage to harvest as both futures and basis rallied in mid-July. With the Midwest harvest less than 60 days out, old crop basis will weaken on Chicago rallies.

• The smaller US soybean yield in the August USDA report were more than offset the larger old crop stocks. The USDA made cuts in domestic, and exports based on pace. US soybean sales are running behind last year and Brazil will fulfil China demand during September.

• August weather will help in determining if the 2021 US soybean yield is 48 bushels/acre or 52 bushels/acre. It is still a wide range of yield outcomes with rain in the last half of August key to yield potential across the N Plains and the W Midwest.

• Chicago corn futures ended flat as post USDA bullish momentum faded. We noted at midday that August FSA acreage enrolment data suggests final corn seedings may be raised 500,000-700,000 acres. Final US sorghum seeding will be raised 500,000-1.0 million acres, which will add to US feed supplies. The outlook stays bullish, but the market must see-and-feel historically tight US stocks/use before large scale buying is sustained.

• Dec corn at $5.40-5.80 is aligned with the USDA’s current 2021/22 US balance sheet. US stocks and stocks/use will tighten steadily into winter, but the market in any given 30-day period has shown since late 2020 it will only trade fair value as determined by USDA. This is typical of demand-led markets, rallies slowly evolve. In the near-term, strong resistance is expected at $5.90-6.00 as harvest lies ahead, while downside below $5.50 is limited. As such, the strategy remains to use weakness to add to supply coverage. $6.00+ only occurs once world feed demand is fully shifted to the US in mid-autumn. Pro Farmer’s tour of the Midwest begins Monday.

• US wheat futures ended 1-10 cents higher on Friday led by spring wheat contracts. Market strength was a function of international markets reacting to record exporter stocks/use with September milling wheat in Paris rallying €9.50/mt. Wheat does have a major milling quality supply problem, and key in the next 30 days is whether importers opt to extend coverage at current prices.

• Disappointing Russian yields and historic Canadian drought have now been digested by the marketplace.

• Spot cash fob offers in Europe and the Black Sea have rallied to $295-310/ mt vs $230 just 45 days ago. Such prices have not been witnessed since the spring of 2013. Our bet is that importers maintain normal buying patterns amid food security issues, but global demand, not supply, is now in focus.

• The long-term outlook is bullish as physical supplies erode and dryness lingers in Argentina. Rallies will be laboured as Northern Hemisphere corn crops are gathered. Upside potential is pegged at $8.50+ during late autumn/winter assuming global consumption remains intact.

• HEADLINES: USDA surprisingly bullish on US corn/soy yield adjustments; East did not make up the difference for west losses; Seasonal lows appear to have been set in July.

• The USDA August Crop Report was bullish with US corn/soy yields falling below trade expectations. NASS pegged the US corn yield at 174.6 bushels/acre, a decline of 4.9 bushels/acre from trend with soybeans at 50.0 bushels/acre, a drop of 0.8 bushels/acre from trend. The smaller yield produced an immediate rally in Chicago futures with December corn back testing $6.00 while November soybeans reaching $13.69. We see selling pressure above $6.00 December corn and $14.00 November soybean futures.

• The big state by state corn yield falls occurred in the Dakotas/Minnesota. The North Dakota corn yield was just 106 bushels/acre, down 23.7 bushels/acre from last year with South Dakota at 133.0 bushels/acre (down 17.9) and Minnesota at 166 bushels/acre off 13.5. The Illinois corn yield was record large at 214 bushels/acre while Ohio was at 193 bushels/acre. The Iowa corn yield was 193 bushels/acre, some 7 bushels/acre below the state trend. The E Midwest did its best to offset the losses in the N Plains and Minnesota but came up short. August weather is more important with the key being another several new rain systems produce across the E Midwest.

US Stocks (million bu)

                    Jul        Aug

            2020/21    2021/22    2021/22

Corn            1,082        1,432        1,432

Soybeans        135        155        155

Wheat            844        665        665

US Yield

Corn            172.0        179.5        174.6

Soybeans        50.2        50.8        50.0

•  US 2021/22 corn end stocks were forecast at 1,242 million bu, down 200 million bu from July with the average farmgate price raised $0.15 to $5.75/bu. The surprise was the dropping of 2021/2 2 US corn exports by 100 million bu to 2,400 million bu. Research would argue for a 2021/22 total of 2,800-2,900 million bu due to Brazilian crop losses and the coming demand from Canada for US corn/feed. We would also statistically argue that the USDA is too low with its US 2021/22 ethanol demand forecast by 100 million bu. The net result is that US 2021/22 corn end stocks will decline with time. Yet, the nearby focus will be on US corn yield confirmation and weather. We doubt that December corn can rally too far above $6.00 without confirmation of better US corn exports/ethanol demand.

• US 2021 soybean production was estimated at 2,339 million bu with a yield of 50 bushels/acre. The yield came in on the low end of trade expectations. The North Dakota soybean yield was 24.0 bushels/acre with Minnesota at 43 bushels/acre, and South Dakota at 39 bushels/acre. Such yields were down 28.4, 12.2 and 14.3 bushels/acre from last year. Illinois, Indiana, and Ohio soybean yields were record large at 64, 60 and 58 bushels/acre respectively. The east did not make up for the west.

• US soybean end stocks were increased in old crop to 160 million bu with new crop holding steady at 155 million. The USDA cut 2021/22 soybean exports by 20 million bu to 2,055 million bu and crush to 2,205 million bu. We would argue that both are too low with US 2021/22 soybean end stocks to fall below 100 million bu, which rallies Nov to $14-14.25.

• USDA wheat is the most bullish of the major ag markets, with exporter production lowered 17 million mt, far more than expected, and exporter wheat stocks pegged at a record low 12.5%. Combined Russian and Canadian production was lowered 20 million mt(!) with Kazakhstan’s crop down 0.5 million. EU plus UK production was raised by only 600,000 mt, and the burden of production/export growth now rests solely on Australia. Even assuming an Aussie crop this year of 30 million mt (which requires ideal weather there), exporter stocks will total just 52 million mt, vs. 59 last year and vs. 62 million mt in 2019. Wheat’s supply issue will be growing as importer demand increases during the autumn months.

• US wheat production was lowered another 49 million bushels, but not due to reduced spring production. US winter wheat yield was cut 1.8 bushels/acre amid reduced harvests across the PNW. Additional cuts to US production lie ahead as NASS left spring wheat abandonment unchanged at 3%, which is much too lower in our opinion. We expect US spring wheat production to be lowered another 20-30 million bu. 2021/22 US wheat feed use was lowered 10 million bu but consumption was otherwise left untouched. Stocks were lowered to 627 million bu, vs. 665 million in July. US wheat end stocks in 2022/23 will fall to 530-550 million unless sizeable acreage expansion occurs this autumn and next spring.

• NASS’s pro-active cuts to US corn/soy yields have changed the market’s perception on 2021/22 stocks/use rather quickly. Our biggest concern for end users is that the USDA is not yet accounting for the rapid return in corn and soy export demand, and even enlarged US wheat exports are likely in winter as supplies dwindle elsewhere. The outlook stays bullish.

• HEADLINES: Corn, soy firm at midday; US ethanol production slows; GFS weather forecast trends drier again.

• Chicago ag markets are mixed, with row crops firm and wheat slightly lower on profit taking. US and European wheat futures markets are perched at overbought levels, but weakness in wheat between now and winter will be mostly be confined to periodic long liquidation. Spot Paris milling wheat at midday is up €1.75 per ton ($.06 per bushel). Rapeseed futures are up sharply. Brazilian corn futures are up slightly, with the Nov contract sitting at $8.06 per bushel. December Black Sea wheat has rallied to $303 per ton. The bulls lack leverage ahead of NASS’s August yield data, but the bears too lack momentum as international markets rise and new crop corn and soy export demand begins to surface.

• US exporters this morning sold 132,000 tons of soybeans to China. Another 4-6 cargoes should be announced Thursday as we hear of new activity at both the PNW and Gulf. Interestingly, there are two vessels scheduled to arrive and load soybeans at the Gulf this week, which aligns with talk of China seeking old crop US soy. The market awaits Chinese buying to begin in earnest (1.5+ million mt per week), but it is clear China is there under the market and recent large Brazilian imports will only last so long.

• Brazilian fob soybeans for September shipment are offered $15/ton above US origin. Brazilian beans are not offered beyond October.

• US ethanol production through the week ending August 6 totalled 290 million gallons, down 8 million from the prior week and the lowest since early May. Ethanol stocks did contract by 15 million gallons as export disappearance remains elevated. But US gasoline use last week was just 9.43 million barrels/day, down 4% from previous week. Gasoline use has failed to reach and stay above 2019 levels. Last week’s ethanol grind matched the pace needed to hit the USDA’s industrial corn use forecast. Yet, it is tough to be bearish of energy values as US crude stocks erode seasonally. Spot WTI crude has uncovered new buying and is up $0.10/barrel at midday.

• The S American weather forecast has extended dryness across 40% of Argentina’s wheat belt into August 26. A pattern change is needed immediately thereafter if trend wheat yields are to be realised. This is a new threat to exporter wheat production and stocks as Argentine weather has been worryingly identical to last year, when wheat yield fell 7% year on year.

• The midday GFS weather forecast has again eliminated rain from the Central and Northern Plains in the 6-10 day period. Tropical Storm Fred makes landfall in FL on the weekend but its impact on the North American upper air pattern will be minimal. Expansive high pressure ridging stays anchored aloft the Plains and Midwest into August 20, which keeps meaningful precipitation confined to the Delta/Southeast and eastern Midwest. The midday GFS has also trended warmer across the Plains over the next 5-7 days as soil moisture there erodes. Max temperatures in the 90s remain common into late next week.

• A demand driven market looms as non-US exportable surpluses decline. The rate and intensity of this forthcoming recovery will be determined by US crop size, specifically NASS Sep yield forecasts. We continue to maintain our recommended strategy to get ahead of global importers by adding to coverage on near-term weakness.

• HEADLINES: Chicago recovers with wheat/soybeans the upside leader; CONAB cuts Brazilian corn crop to 86.6 million mt, down 6.5 million from July.

• The morning Chicago trade has been mixed with soybeans/wheat rallying while the spreading of wheat/corn and soybean/corn has kept corn under pressure. The volume of Chicago trade is picking up from recent days as traders’ position for Thursday’s August USDA report. Few are willing to add to risk, but end users are hopeful for a bearish USDA report as they want (need) to book forward amid tightening world grain supplies. The USDA report will likely offer bullish world grain data (Brazilian corn/Russian wheat/Canadian drought) with the big unknown being US corn/soybean yields. The whisper estimate today is that US corn/soy yields are not too far from trend. Traders are betting that US farmers like their corn/soybean yield prospect outside of the Dakotas and Minnesota.

• Chicago brokers estimate that managed money has bought 5,300 contracts of wheat, 2,900 contracts of soybeans, while selling 1,400 contracts of corn. In soy products, funds have bought 3,200 contracts of soyoil while selling 1,200 contracts of soymeal.

• CONAB lowered their estimate of the 2021 total Brazilian corn crop of 86.6 million mt, down 6.75 million from their forecast of July. Private Brazilian analytical firms gauge the 2021 total Brazilian corn crop at 81-83 million mt, with one firm as low as 77 million. USDA has been following CONAB estimates closely since April, and a cut of 7 million mt of Brazilian corn production would be important for 2021/22 US corn exports. It is October when the USDA should be close with the final 2021 Brazilian corn corp. CONAB forecast the 2021 Brazilian soybean crop at 135.9 million mt.

• CONAB estimated Brazilian 2021/22 corn exports at 23.0 million mt with imports at 2.3 million. It is forecast by some that Brazil will export just 19.0 million mt of corn with import surpassing 3.5 million. The net result is that US 2021/22 corn exports are understated by at least 250-400 million bu.

• The Business Standard is reporting that India will soon announce that the Government will allow the import 1.2-1.5 million mt of soymeal to battle surging feed costs for poultry firms. Argentine meal offers beyond October are difficult to find, but commercials wonder if China coastal crushers could export soymeal to India, while the soyoil would be used domestically. China is positioned to be a meal exporter amid the high cost of ocean freight and need for China to boost crush margins. India’s meal import program would take 6-9 months to complete. Not long ago, India was a world soymeal exporter, so the switch to being a large importer is important to world meal trade patterns.

• The Russian wheat harvest is 54% completed with yield to date forecasting a 75 million mt crop. Black Sea wheat offers keep rising amid limited farmer holding. We guestimate the final Russian wheat crop in a range of 73-76.5 million mt, which is well below the July USDA forecast of 85.0 million. The USDA will likely cut their Russian 2021 wheat crop estimate to 79-80 million on Thursday. Russian fob wheat prices pushed up to $277-279/mt at the close.

• The midday weather forecast is vastly drier across the SE US and Florida as a tropical storm is further east across E Florida and the Atlantic. Dry weather deepens the drought across the Dakotas while Iowa/Illinois are slightly wetter (0.10-0.50″). The big concern is Minnesota and through the Plains where rain totals will be less than 0.50″ through August 20. Nebraska/Kansas must be closely followed amid falling soil moisture.

• High temperatures will range from the upper 80′s to the lower 100′s into the weekend. The coming heat will add to crop stress. The GFS weather forecast has subtracted rain from the Dakotas (like the EU model solution).

• December corn has been straddling $5.50 for 11 consecutive days as traders await US yield definition following a summer of weather differences. Will good crops in the E Midwest be enough to offset losses in the N Plains, N Iowa, and Minnesota. World stock/use ratios of corn, wheat, and soy are bullish. It is the tightness of world grain that is raising Chicago corn/soybean harvest lows.

• HEADLINES: Chicago slides at midday on macro financial market weakness; Midday GFS weather forecast adds rain in the 10-15 day period; Choppy trade ahead of the USDA report.

• Red is the colour of Chicago midday trade with corn, soybeans and wheat retreating from Friday’s rally. Green blobs on the Central US radar and the sharp fall in US energy/metal prices has produced a risk off trading mentality. The US$ is firm with gold values down $35/oz as the US will be able to better manage through the Delta Covid outbreak with 71% of its population vaccinated.

• Questions as to when the US Central Bank will begin to taper their bond buying program has added to the selling pressure. The US economy is strengthening amid a heated labour market. The US CPI will be released midweek which will likely show a strengthening of inflation. The rising cost of freight is a growing concern for shippers and end users with few new vessels being built in replacement. Ocean freight costs will stay elevated for months to come.

• China has interest in US soybeans/corn while Black Sea wheat values continue to gain. December Black Sea wheat futures at $295/mt is getting close to $300/mt on limited Russian selling. The rise in Black Sea wheat/grain values is based on tight farmer holding and the diminished harvest. The USDA announced that 2 cargoes of US soybeans were sold to an unknown destination.

• Chicago brokers report that funds have sold 3,400 contracts of corn, 1,900 contracts of wheat and 5,400 contracts of soyoil. Funds have bought 1,400 contracts of soybeans and 3,800 contracts of soymeal. It is the second day of the Goldman Roll as fund managers roll out of September futures and into December. Dec ’21 vs Dec ’22 corn spread has narrowed into 35 cent December 21 premium. The Dec/Dec spread below 30 cents will be an opportunity to bull spread corn for the coming demand led bull market.

• For the week ending August 5, the US exported 26.6 million bu of corn, 4.2 million bu of soybeans and 22.2 million bu of wheat. Last week’s US corn and soybean export pace was disappointing. For their respective crop years to date, the US has exported 2,500 million bu of corn, 2,145 million bu of soybeans, and 161.6 million bu of US wheat. Census corn exports are running 213 million bu ahead of inspections, so it is premature to cut US corn exports in the August USDA report.

• US producers report that they expect crop condition ratings to soften by 1-2% in the good/excellent category this afternoon for corn/soybeans. Last week’s lack of rain and heat in the Plains/W Midwest impacted yield potential. Pro Farmer will be holding a Crop Tour from August 16-19 to gauge if the USDA August Crop Report is correct. We maintain that it will be the September Crop Report before an actual accurate assessment of US crop size is known. The 2021 US corn and soybean crops will be mature enough for actual ear and pod weights to be determined. The September report is now the all-important measure of the 2021 US corn and soybean crop size.

• The midday forecast is wetter in the final 12 hours of the 10-day run with rains for North and South Dakota. The extended range model is adding rain in the 11-15 day period amid the tropical activity that will impact Florida and the SE US. Until August 19, the forecast for the Plains/W Midwest is arid. We look for 40% of the E Midwest to receive 0.25-1.00″ of rain in the next 36 hours. The lack of rain is taking a toll on Plain’s/NW Midwest corn/soybean crops. High temperatures this week will range from the upper 80′s to the lower 100′s into the weekend. The rains following August 20 will be closely followed to see if it verifies and if temperatures subside.

• Minnesota corn and soybean yields have the most to lose during August following the second driest July on record.

• Chicago corn, soybean and wheat futures are correcting Friday’s rally as price action is choppy. The trade can dispute US corn and soybean yields in the weeks ahead. What cannot be disputed is the crop losses for Canadian crops, Brazilian corn, and Russian wheat/corn crops. The world shortfall is expected to produce a demand led Chicago rally from September onward. Early August crop sales do not correlate with final US totals. Wheat will be the upside leader.