11 August 2020

Posted on August 11, 2020 by simon

• Chicago futures are slightly higher at midday with corn, soybeans and wheat firmer on short covering/positioning ahead of the USDA August Crop Report that is due out Wednesday. Fund managers have been the best buyers of corn/meal on short covering with the oil/meal spread being unwound on the formation of a seasonal high in the tropical oil values. Spread unwinding remains a key feature for price.

• Chicago has a heavy feel at midday with traders discussing that a year ago, NASS estimated the 2019 US corn yield at a shocking 169.5 bushels/acre. Traders are betting that NASS should not have much trouble beating that yield by at least 10 bushels/acre based on vegetation maps and producer yield reports.

• Big yields and big crops are expected on Wednesday with the Midwest harvest starting in just 4-5 weeks. We look for a mixed close with producer selling of old crop corn noted on any rally to take advantage of stout cash basis bids. Traders may try to secure a bearish break post report but buying the markets ahead of a harvest does is seasonally incorrect. A better time to look for a seasonal low would be between September 15-October 15th, after key monthly crop reports when we all know how big is big. A US 2020 corn yield above 181 bushels/acre or above 53 bushels/acre in soybeans mutes recent Chinese buying.

• Chicago brokers estimate that funds have bought 2,200 contacts of corn, 2,100 contracts of wheat and 3,600 contracts of soybeans. In soy products, funds have bought 3,100 contracts of soymeal while selling 2,000 contracts of soyoil.

• Midwest farmers report straight line winds in excess of 100 miles per hour that produced damage to storage bins/crops on Monday from a storm that ripped through IA/IL/WI and IN. The rain was needed, but the winds were not. Pictures of flattened corn fields are circulating. Greensnap produces a 100% yield loss but bent over fields will be able to recover. It is impossible to balance the positive aspect of the rain against Mother Nature’s steamrolled corn fields.

• The hardest hit area is from NC IA were corn fields appear that they were steamrolled. Yet, in gauging the where the strongest winds occurred and potential damage, some estimate that 35-85 million bu of US corn production could have been lost. For producers impacted, the loss is devastating. Yet, on a national basis, the loss will not alter the US corn balance sheet when you consider that rain also helped corn acres that were not toppled. Looking backwards, a sustained bull market in corn has never occurred on straight line winds (or hail) since it is difficult for such acute weather to impact a broad area of the Central US.

• Egypt’s GASC secured 2 cargoes of Russian wheat at $219.60/mt basis C&F, down $8.89 from their last tender just last week. Only Russian and Ukraine wheat was offered with the freight cost being $14.10/mt. GASC used 180-day credit financing which implies that the real fob value for Russian wheat is $4-5/mt lower at $200.50-201.50/mt. The odds are high that Russian wheat prices will slide to test support against $194-196/mt, the spring lows.

• China is rumoured to have secured another 3-6 cargoes of US soybeans this morning for new crop delivery. FAS confirmed the sale of 132,000 mt this morning.

• The midday GFS is drier across the Central Midwest with better rains for OH and the Delta. The GFS weather forecast has been erratic as of late and is not performing up to prior standards. The best rainfall looks to drop across the E Dakotas/MN and through the OH Valley. Temperatures will be seasonally cool ranging from the 70′s to the mid 80′s. Corn/soy crops need another 1-2 good rains to finish out the 2020 growing season. The lack of heat will help fill pods and ears. The overall Central US weather forecast is helpful to US yields, but a wetter pattern is desired.

• Wednesday will start the statistical process of determining how big is big in terms of 2020 US corn/soy yields. If trade guesses of 180 bushels/acre on corn and 51 bushels/acre are near correct, traders will add back yield before the September estimate. A US soybean yield of 53-55 bushels/acre is not impossible this year which would swamp existing Chinese demand. Research (and the industry) expects that the US/China will repledge to work together on Phase One in their meetings this weekend.

6 August 2020

Posted on August 6, 2020 by simon

• Chicago values at mixed at midday with spread unwinding/position squaring featured ahead of next Wednesday’s USDA Crop Report. Corn has been underpinned by the liquidation of long soybean/short corn spreads, while the same is occurring in wheat following record large private estimates of 2020 Canadian production. Traders are discussing how big-is-big in terms of US corn/soy yields, but the bears would like to see a soaking rain across IA before they lean into a larger net short corn position.

• Funds are modest longs in wheat while continuing their exodus of long soybean futures. The market has a heavy tone with favourable Central US weather and upside surprises on world crops (Russia wheat/Ukraine corn/Canadian wheat) keeping the bulls on the sidelines. It would be historically rare for the US corn market to forge a bottom in early August prior to the USDA August crop report. Late August to mid-September is a better timeframe for corn/soybean futures to start carving out a bottom.

• Chicago brokers estimate that funds have bought 3,900 contracts of corn, while selling 4,200 contracts of soybeans and 3,200 contracts of wheat. Funds have sold 2,800 contracts meal and bought 2,700 contracts of soyoil.

• For the week ending July 30, FAS reported that the sold 22.2 million bu of wheat, 106 million bu of corn (both crop years combined), and 64.3 million bu of soybeans. The wheat sale was larger than expected, while corn/soybean sales were right at trade expectations.

• For their respective crop years to date, the US has sold 376 million bu of wheat (up 32 million or 9%), 1,724 million bu of corn (down 242 million or 12%), and 1,725 million bu of soybeans (down 67 million or 4%). We anticipate the USDA trimming its 2019/20 US corn and soybean export estimates by 25 million bu next Wednesday. WASDE is unlikely to adjust is new crop estimates based on the mid July surge of Chinese demand for US corn and soybeans. FAS reported that China booked 2 cargoes of US soybeans (126,000 mt) for new crop delivery. China continues to book US soybeans, but at a pace far less than late July. No other daily grain/soybean sales were announced.

• Brazilian farmers are happy with a +50% profit margin on planting new crop soybeans due to the cheap Real. Farmers are looking to plant soy wall-to-wall according to S American sources. Brazilian soybean seeding can start on Sept 15 and a yearly seeding gain of 4-6% is being discussed. The Brazilian Real is priced at 5.35:1 US$ today. A year ago, the Real was trading at 3.92:1 with Brazilian soybean profit margins just 15-20%. The 35% annual fall in the Real is providing a massive economic incentive to farmers

• The midday GFS’s weather forecast details are slightly drier in NW IA, but wetter for the E Midwest/Missouri over the next 10 days. Rainfall deficit pockets will exist in W IA, but positive moisture anomalies stay intact elsewhere. The forecast features mild temperatures into the weekend with a warmer/wetter pattern to follow next week. Daily rain chances will help N Plains and Midwest crops from Aug 16-24. The forecast leans positive for Midwest corn/soybean yield potential into mid-August. No extreme heat is offered across the Midwest for at least the next 2 weeks.

• Outside of a dry pocket in IA, the US corn/soy yield potential will likely further increase. 2020/21 US corn and soybean stocks will be on the largest in years. We doubt that the cash market has yet come to grips with the abundance of grain. Also, Canada has a big wheat/canola crop in the making which will produce record large North American supplies. Research maintains a market stance of selling any rallies of substance. Sept Chicago corn should test key support at $3.00 while Nov soybeans drop to $8.65-8.75.

5 August 2020

Posted on August 5, 2020 by simon

• Chicago values are mixed at midday with soybean futures sagging while the grain markets bounce. The volume of trade is diminished from recent days with spreading the key morning feature. Traders have been unwinding long soybean vs corn and long soybean vs wheat spreads. We anticipate a mixed Chicago close with December corn trying to hold $3.20 support while funds are watching to see if Nov soybeans close below $8.83 50-day moving average. Chicago price trends are down amid the pending large US crops and the coming harvest. The market has a soft tone at midday with selling likely to return at the close.

• Chicago brokers estimate that funds have bought 2,100 contracts of wheat and 1,900 contracts of corn, while selling 3,200 contracts of soybeans. In soy products, funds have sold 1,800 contracts meal and 2,500 contracts of soyoil. The fund long liquidation is expected to increase if Nov soybeans close be low $8.80, last week’s low.

• FAS announced 192,000 mt of soybeans to China for 2020/21. This was the first US sale to China in the past 5 business days. There was an unknown sale on Monday that likely was made to an EU buyer.

• IHS Markit (lnforma) estimated the US 2020 corn yield at 179.0 bushels/acre and the soybean yield at 52.5 bushels/acre for a US soybean crop of 4,355 million bu. The US all wheat yield was forecast at 50.2 bushels/acre, up slightly from the NASS estimate of July. The US all wheat crop was forecast at 1,843 million bu. We would remind that HIS is trying to forecast what the USDA will report next week, not what the final US yield will be (like StoneX). We also argue that the NASS farmer survey will be more conservative that yesterday’s StoneX estimate.

• US weekly ethanol production amounted to 274 million gallons, below the 285 million gallon weekly average needed to reach the USDA annual forecast of 4,850 million bu. Research maintains that WASDE will cut its US 2019/20 corn grind estimate by 25 million bu next Wednesday. It is likely that a further reduction of 10-15 million bu may be required by the final count by the end of August. US ethanol stocks are historically low, but the seasonal driving season is ending.

• The midday GFS’s forecast details are slightly drier in SE IA, but wetter for the E Midwest and Missouri over the next 10 days. Should the forecast verify, moisture deficits will persist in IA while positive moisture anomalies stay intact elsewhere. Overall, the Central US pattern will feature mild temperatures into the weekend. A warmer/wetter pattern follows. Weak high-pressure ridging will reach into the S Plains with a broad trough/ridge pattern forecast thereafter into Aug 18. Daily rain chances will impact the N Plains and Midwest Aug 10-25. Cumulative totals in excess of 1″ will favour SD, WI, MO, IL and IN. Temperatures warm beyond the weekend.

• The grains are bouncing on long soybean/short grain spread unwinding. Chicago downtrends remain intact. We doubt that funds will ease up on soy/corn selling heading into next week’s USDA Crop report. Some 10-15% of the Midwest is dry, but other areas are well watered/improving which is more than making up for any yield loss in C IA. Some rain dropped across W IA overnight, but much more is needed. The forecast models have trouble in forecasting convective rain totals into mid-August. Starting Friday, the Midwest has a daily chance of rain into August 16 which should help crop ratings.

4 August 2020

Posted on August 4, 2020 by simon

• Chicago values are sharply lower at midday on rising US corn/soybean crop discussions prompted by strong NASS US crop ratings and initial estimates from StoneX (formerly INTL FCStone) on US final corn and soybean yields. The market is fearing a big crop with widening talk of record large US corn and soybean yields from producers and traders. Whether it is the Russian wheat crop, or the Ukrainian corn, and now US corn and soybeans, the world appears to be overproducing grain amid a world economic outlook that is darkening on rising Covid-19 infections.

• Chicago has a heavy feel with December corn contract low noted at $3.22 while soybean futures are testing last week’s low. September corn has already scored new contract lows with the weekly chart showing support at the late spring low at $3.00. Funds are long of soybeans which is adding to the downside price risk. Chinese demand for US soybeans is modest and most Asian traders are turning bearish of Chicago beans on crop size.

• Chicago brokers estimate that funds have sold 3,400 contracts of Chicago wheat, 7,700 contracts of corn, and 9,200 contracts of soybeans. In soy products, funds have sold 3,600 contracts soymeal and 2,700 contracts of soyoil. The fund long liquidation is expected to increase if November soybeans fall below $8.80.

• Cash-connected traders report that farm selling of old crop corn has quickened this morning with many just giving up on stored corn prices rising. Farmers are willing to accept a better basis bid today than what will likely be offered during harvest. Record large US corn and soybean yields would produce a combined summer row crop that would strain storage availability this autumn. Producers are better off selling any remaining stored grain now. The only hope for a sustained rally is an historically early frost/freeze during the first half of September.

• FAS did not announce any new US soybean, corn or wheat sales this morning. If Monday’s sale of US soybeans to unknown was not China, then it has been a week since China purchased US soybeans. The lack of demand is worrisome to traders with China continuing to import record soybean tonnages from Brazil.

• The USDA/NASS/WASDE will release their August Crop Report next Wednesday. The report is a farm survey only. The NASS estimate is based on farmer reports on their yield expectations as of August 1. NASS will send their crop enumerators to the fields in early September for a more definitive yield assessment. Following the USDA August estimate, a slew of private crop tours will be offered, including the Pro Farmer Crop Tour that starts on August 17. The market will have many assessments on “how big is big” heading into the end of August, which will likely cap Chicago rallies. Therefore, we doubt that seasonal Chicago lows won’t be formed until mid-September or mid-October.

• The midday GFS’s weather forecast details are drier in southern IA but wetter in SD and MO over the next 10 days. Should the forecast verify, moisture deficits will persist in IA while positive moisture anomalies stay intact elsewhere. Overall, the Central US pattern will feature mild/dry weather into the weekend. A warmer/wetter pattern follows. Weak high-pressure ridging will reach into the Central Plains and Midwest, with a broad trough/ridge pattern forecast thereafter into Aug 18. Light but daily rain will impact the N Plains and Midwest Aug 10-25. Cumulative totals in excess of 1″ will favour SD, WI, MO, IL and IN. Temperatures warm beyond the weekend.

• The lack of meaningful supply issues has allowed negative seasonal trends to take hold. Longer term, markets need to boost consumption, which will be a more difficult task in this era of Covid.

30 July 2020

Posted on July 30, 2020 by simon

• Chicago markets are mixed at midday with soybean/corn and wheat/corn spreads being unwound. The volume of trade has been limited with a 2 million mt sale of US corn to China not sparking any excitement. Traders appear to be unwinding long anything vs corn and there is a weak under-tow to midday valuations. We look for a steady to slightly lower Chicago close with large pending supplies acting to cap rallies as seasonal price trends are bearish into the end of August, and the arrival of deliveries against September futures.

• Chicago floor brokers estimate that funds have bought 6,200 contracts of corn, a net 900 contracts of wheat and 7,800 contracts of soybeans. In soy products, funds have sold 1,100 contracts of soymeal while buying 2,700 contracts of soyoil. Funds are at the sell side of Chicago at midday in lite volume.

• FAS confirmed that the US sold 1.937 million mt of US corn to China and 130,000 mt to an unknown destination. Commercials suggest the buyer and seller is COFCO, which introduces some mistrust, except that COFCO often acts as agent for private Chinese companies. The sales are for 2020/21 with known China corn commitments rising to 6 million mt of US corn (or 236 million bu).

• No US soybean sales to China were announced, which would have been more important with commercial traders suggesting that the China corn purchase occurred weeks ago. This is now the third consecutive day that China has not secured US soybeans. We noted earlier this week that China booked a few US cargoes, but that the tonnage levels may not have exceeded 100,000 mt from each seller which would trigger a daily sales announcement. China needs to be booking 1.5-1.7 million mt of US soybeans weekly to have any chance of reaching its Phase One ag obligation.

• US Weekly Export Sales for the week ending July 23 were; 24.9 million bu of wheat, -1.2 million bu of old crop corn and 25.1 million bu of new crop, and 9.5 million bu of old crop soybeans and 122.9 million bu of new crop. The huge new crop sales of soybeans were well telegraphed by the daily sales announcements. Nonetheless, any week that that US can say that sell 135 million bu of soybeans is a solid week of demand.

• For their respective crop years to date; the US has sold 353 million bu of wheat (up 27 million or 8%), 1,718 million bu of corn (down 244 million or 12.5%), and 1,719 million bu of soybeans (down 71 million or 4%). We look for US 2019/20 soybean exports to be cut another 25-40 million bu while WASDE holds US corn/wheat exports steady in the August report.

• Midwest farmers are showing considerable interest in seeding SRW wheat this autumn based on current wheat/corn and wheat/soybean price relationships. August Chicago prices will determine the winter wheat revenue insurance price in mid-September. But based on Dec 2021 corn futures at $3.62, the interest in SRW is high. And Southern US farmers are looking at double crop wheat with beans.

• The midday GFS weather forecast is consistent with the overnight run with soaking rainfall for the southern 2/3′s of the Midwest, Delta and the SE US. The forecast is drier across the NW Midwest where rain totals of 0.15-0.85″ are offered. The 10-15 day period offers improved rain for the NW Midwest, but temperatures will be seasonally cool ranging from the 7O’s into the mid 80′s. The midday GFS forecast keeps any high-pressure ridging located across the SW corner of the US into mid-August. There is no evidence of any extreme Midwest heat.

• The demand bulls are disappointed by Chicago corn market performance with values only slightly higher at midday. Key for soybean prices will be if FAS/USDA confirms new Chinese purchases on Friday. Otherwise, this week’s China demand is disappointing. Demand bulls must be fed every day and amid record large US corn/soy yields, such demand becomes more important into harvest. Chinese corn import demand is not based on market relationships, but Government policy.

29 July 2020

Posted on July 29, 2020 by simon

• Chicago markets are mixed this morning with wheat holding in the green while corn/soybeans sag on favourable Central US weather and rising yield potential. USDA/FAS did not announce any new Chinese purchases of US soybeans, for the second day in a row. It appears that China’s buying has slowed since late last week with there being no new interest in US corn/wheat purchases. The volume of Chicago trade has slowed at midday with interest waning. End users already have strong forward coverage in corn/wheat amid summer declines. The end users will have to see even cheaper values to extend their forward coverage into Q1 2021. We anticipate a mixed close wheat gaining on the summer row crops going home.

• There are rumours that Brazil booked 2-3 cargoes of US HRW wheat in the past 24 hours. This along with private analysts cutting their French/EU wheat crop estimates on disappointing yields has helped US/French wheat futures rally. Brazil has been booking Russian wheat, but based on CIF costs, it appears that some of this demand is being pushed back to the Gulf. US wheat remains expensive in the world market, but Mexico and Latin American buying has supported recent price breaks.

• For the second day in a row, China is a “no show” for US soybean buying. FAS announced no new sales of US grain or soybeans under the daily reporting system. China is being a more measured buyer of US soybeans this week with traders estimating the purchase of 2-4 cargoes since Monday. Yet, a few days is not enough to make trend and traders will stay laser focused on China interest as other key world soy/grain importers are being impacted by Covid-19 and a deepening world recession.

• Chicago traders estimate that funds have sold 4,700 contracts of corn and 400 contracts of soybeans, while buying 4,200 contracts of Chicago wheat. In soy products, funds have sold 1,200 contracts of soymeal and bought 2,000 oil.

• The EIA Weekly Biofuel report was supportive with production reaching a post Covid-19 high and getting closer to the weekly level needed to validate WASDE’s 4,850 million bu 2019/20 corn grind. We now estimate 2019/20 US corn ethanol grind at 4,800 million bu based on this week’s data. US ethanol stocks recovered slightly to 852 million gallons, up 20 million on last week, but down 17% from last year. The US summer driving season will be ending by the middle of August, with miles driven normally in decline into September.

• The midday GFS is consistent with the overnight run and further north with rains into W/S IA this weekend. Rainfall totals for parched W IA are estimated in a range of 0.4-1.25″ which would go a long way to stabilising corn/soy crops. Otherwise, the rainfall forecast is little changed from the overnight run with 0.5-3.00″ of rain expected across the Central Plains, the Delta and the southern half of the Midwest. Little rain is expected north of 1-80 into August 8, but soil moisture there is adequate with seasonally cool temperatures. The midday GFS forecast keeps any high-pressure ridging located across the SW corner of the US into mid-August. There is no evidence of any Central US extreme heat into August 13.

• Other than unexpected Chinese demand for US corn or wheat, it is hard to find another fundamental that alters the bearish supply theme. Whatever US corn/soy yields that come out in the Aug 12 NASS report, traders will add to it based on normal/ favourable August weather conditions. This means that seasonal lows could be forged in mid-September or mid-October following updated NASS crop estimates. How big is big is the question that every farmer and grain traders is now pondering on yield.

28 July 2020

Posted on July 29, 2020 by simon

• Much has been made of the decline in the US$ index in recent weeks. The €uro currency has outperformed the US$ as it appears that the EU economy will grow at a faster GDP rate than the US. The EU has combated Covid-19 more effectively and the EU’s $2 trillion stimulus package will kick start growth. However, not all currencies are created equal and the ag commodity currencies have languished. The Brazilian Real has bounced as have the Russian Ruble and Argentine Peso. For a lasting ag rally to unfold requires a 20-30% rally in the ag currencies. US ag commodity trade with the EU is restricted, so a further recovery will not have much Chicago impact.

• A sharp rise in US good/excellent soybean ratings sent Chicago futures lower. November soybeans finished down 12 cents. The USDA did not announce any new soybean sales to China, though there were rumours that China was in the market for 2-5 cargos of US soybeans. Chinese crush demand remains strong, with estimated processing rates totalling a record large 20 million mt in the last 10 weeks. A year ago, the crush rate was 16.6 million mt during the same time. Meal demand remains elevated with year to date disappearance from inner coastal crush facilities estimated at 57.5 million mt versus 55 million last year. The cumulative disappearance is now above the previous record that was set in 2017. Meals stocks peaked 4 weeks ago at just over 1 million mt and are in decline. China’s crush/import demand have been surprisingly strong in recent months. The July WASDE put total soybean imports at 96 million mt versus the August 2019 WASDE estimate that pegged imports at 87 million. Ultimately, it will be the record-large US soybean yield and expanding S American acres that drive Chicago prices. We remain bearish on rallies. It is possible that a seasonal high was formed on Monday based on favourable Midwest weather.

• Chicago corn futures fell 4-5 cents on Tuesday. Fund selling resumed following Monday’s larger than expected boost in US crop ratings. With Central US weather predicted to be favourable into mid August, the market’s goal is now to find all potential demand to prevent US end stocks from reaching well above 3.0 billion bu. Wednesday’s EIA report is expected to feature flat week-over-week ethanol production and gasoline consumption. RBOB gas futures have been unmoved for 4 weeks. Mobility data suggests there has not been a major trend change in US miles driven since June. The futures-based ethanol production has improved amid declining corn values, but work continues to suggest that sub-$3.35 spot corn is needed to provide ethanol plants incentive to produce. Rallies in crude/gasoline markets will be hard-fought with OPEC production rising by 2 million barrels/day on Aug 1. Improving Chinese weather and sizeable boost in Brazilian supplies in the next 30 days will weigh on global feed markets. Rallies will likely be limited to 4-6 cents with late summer lows forecast at $2.90-3.00 basis September futures.

• US wheat futures ended weaker amid negative seasonal trends as Black Sea exporters remain aggressive. Weakness in the Ruble along with rising Russian winter wheat yields has caused exporters to search for demand. Work suggests that world wheat trade in July will be the weakest since 2012. Covid-based demand destruction is a growing concern. Egypt’s GASC purchased a sizable 470,000 mt of Russian and Ukrainian origin. Egypt paid an average fob price reported at $217/mt. This compares to $211/mt last week. World fob offers have declined slightly. Spot Russian and German wheat sit at $208-211/mt vs. $210-216 last week and vs. Gulf HRW at $215. Chicago futures have digested tight SRW stocks. A new demand spark is needed to sustain fund buying. Rising N American spring wheat yield potential and weak importer demand suggests rallies could well be selling opportunities. We look for a weakening wheat price trend into a September seasonal low.

27 July 2020

Posted on July 27, 2020 by simon

• Chicago grain markets are mixed at midday. The grains (wheat/corn) are lower while the soybean market tries to hang in the green and measure Chinese interest. IKAR, a respected Russian ag consultancy, raised seeded/harvested wheat area while there is no indication that China is showing interest for US/world corn. USDA did announce the purchase of 2 cargoes of US soybeans, but US commercials expect that Chinese demand/interest will wane in coming weeks. The Chicago market focus is shifting back to looming record large US corn/soybean yields and an abundance of world wheat in a time of rising Covid-19 infections with US farmers sitting on a large supply of old crop corn stocks. We look for a mixed to slightly lower Chicago close today.

• Chicago brokers estimate that funds have bought 2,900 contracts of soybeans while selling a net 1,20 contracts of corn and 3,500 contracts of wheat. In soy products, funds have sold 3,300 contracts of soyoil and 1,900 contracts of meal. The tone of the market is heavy with midday volume in decline.

• The USDA announced that China secured 132,000 mt while Mexico took 250,371 mt of 2020/21 soybeans. No new corn, wheat/soy product sales were confirmed.

• Chicago brokers/traders have spent considerable emotional energy on trying to understand the relationship between record high Dalian corn futures and China’s feedgrain imports. History shows that China corn prices and purchases are based on policy, not margin or price. After the last recession in 2008/09, Chinese corn prices rallied sharply on speculative fervour only to collapse amid the coming harvest. USDA data on estimated 2020/21 Chinese wheat, rice and corn stocks does not suggest a grain shortage. In fact, there is abundance. China holds enough wheat/rice stores for a year of use while corn stocks are at 2/3′s of a year use. The point is that China is not facing a dire shortage of grain. If they were, they would drop their countervailing duties against DDG’s, the cheapest source of feed grains today. China is likely keeping corn prices high to aid their farmers who have been suffering amid reduced profit margins for several years. With a new corn harvest just weeks away, China is unlikely to make large/new US corn purchase orders.

• US weekly export inspections for the week ending July 23, the US exported 31.4 million bu of corn, 17.4 million bu of soybeans, and 20 million bu of wheat. All were on the low side of expectations. China did ship out 3.7 million bu of US soybeans and 2.5 million bu (one cargo) of US corn.

• With just over 5 weeks left in the US corn/soybean old crop years, the US needs to average around 45 million bu/week on soybeans and little over 60 million bu on corn to reach the annual WASDE forecast. We maintain that WASDE is 25-40 million bu too high in soybeans and 50 million bu too high on 2019/20 corn export estimates.

• Better yields and an expansion in harvest area has private Russian crop watchers talking a wheat crop of 77-78 million mt according to Russia’s IKAR. Such crop would allow Russia to export 36-37 million mt of wheat. World wheat demand is tepid on Covid-19 and amid the spring stockpiling. World wheat importers will be patient to wait for lower prices into early September.

• The midday GFS weather forecast is wetter across the W Midwest with rain chances returning to the dry areas of W IA/SD early next week. Otherwise, the S and E Midwest has chance of 1-4.00” of rain which will be ideal for filling corn and reproducing soybeans. Midwest high temperatures range from the mid 70′s to mid 80s. No extreme heat is foreseen. The rain and seasonally mild temperatures bodes favourably for US corn/soybean yield potential.

• Record large US corn/soy yields are in the making and China’s Government is unlikely to see the rise in Dalian corn futures as a reason to secure US corn beyond the latest demand under TRQ’s. Russian wheat production estimates are rising and a story for US wheat export demand is being shelved. China may secure additional US soybeans, but we doubt in the quantities of recent weeks. We remain generally bearish and would caution against chase rallies at this time.

23 July 2020

Posted on July 23, 2020 by simon

• Chicago values have posted a modest midday recovery and “shaken off” the rising political tensions between the US/China. Short covering in corn/wheat has fuelled the upside recovery from recent day lashings, but a trend reversal does not appear to be in the offing amid improved Central US weather. We view today’s Chicago recovery as nothing more than a bounce, with prices to fall into a price pattern of declines early and late week with a recovery in the middle. We anticipate a mixed Chicago close today.

• Chicago brokers estimate the funds have bought 3,300 contracts of wheat and 4,100 contracts of corn, while being early sellers and midday buyers of soybeans (net flat on the day). Funds have been sellers of 2,900 contracts of soyoil and buyers of 1,900 contracts of soymeal. July soybean still has an open chart gap at $300/ton which should act as strong resistance.

• The Chinese Government is said to be ready to announce that it will be releasing old/stale wheat/rice stocks to become livestock feed. China has more than one wheat crop in storage (150 million mt total) with some of the Government stored supply more than fiver years old. The stale wheat/rice stocks will be fed to livestock.

• The Chinese Government did not announce tonnages of reserve wheat/rice that would be released, but this could be an outlet for large foodgrain supplies that are not long fit for human consumption. Feeding this wheat/rice to livestock makes perfect sense to quell rising domestic corn prices.

• We also hear that Ukraine new crop corn is being offered by a seller with Chinese documents back into their market today. So far, bids have been scarce. China in early July secured 40-60 cargoes of Ukraine corn for new crop delivery by COFCO. It is possible that COFCO could be trading out of the position and willing to accept a profit.

• FAS announced this morning that China booked 453,000 mt of US soybeans for 2020/21 shipment. We are told that China is still seeking US soybeans with a few cargoes sold this morning, but cannot confirm any Chinese interest in US grain.

• US ethanol production and gasoline consumption declined last week for the first time since April. The decline is related to rising US Covid-19 cases with regional economic slowdown. Note that the US ethanol production is falling below the level needed to reach the annual WASDE estimate while this week’s pace would forecast an annual 4,850 million bu demand pace for 2020/21.

• The weather forecast is highly favourable for US summer row crops with cooling temperatures with regular rainfall. Below normal temperatures will be a big help for ear filling corn while soybeans see organised rain across the SW Midwest/Delta. The forecast even holds the prospect for moisture across W IA on the weekend (a crop area where light showers have fallen), but more rain is needed. Any warmth will be confined to the next 5-6 days before the mean position of the high pressure ridge shifts west and holds across the Inter-mountain West. This allows a favourable NW upper air flow through the Central US, with near to below normal temperatures and frequent rain episodes. Weather during the first half of August favours US corn/soy yields.

• Amid improving Central US weather and cheaper price offers for corn/wheat from other non US exporters, it is going to be difficult for Chicago grains to sustain rallies. Consumers will likely not chase the rally amid the the high costs of elevation for export. Gulf soybean and corn fob basis is at or above $1/bu which makes US corn/soy/wheat expensive. US farmers don’t want to sell the break, but US ethanol demand looks to retreat on slowing US gasoline demand. We doubt that December corn can rise much above $3.38 and November soybeans above $9.05 without adverse Central US weather. The forecast looks to be a favourable cool/wet.

22 July 2020

Posted on July 22, 2020 by simon

• Chicago values have posted a modest midday recovery and “shaken off” the rising political tensions between the US/China. Short covering in corn/wheat has fuelled the upside recovery from recent day lashings, but a trend reversal does not appear to be in the offing amid improved Central US weather. We look at today’s Chicago recovery as nothing more than a bounce, with prices to fall into a price pattern of declines early and late week with a recovery in the middle. We anticipate a mixed Chicago close today.

• Chicago brokers estimate the funds have bought 3,300 contracts of wheat and 4,100 contracts of corn, while being early sellers and midday buyers of soybeans (net flat on the day). Funds have been sellers of 2,900 contracts of soyoil and buyers of 1,900 contracts of soymeal. July soybean still has an open chart gap at $300/ton which should act as strong resistance.

• The Chinese Government is said to be ready to announce that it will be releasing old/stale wheat/rice stocks to become livestock feed. China has more than one wheat crop in storage (150 million mt total) with some of the Government stored supply more than five years old. The stale wheat/rice stocks will be fed to livestock. The Chinese Government did not announce tonnages of reserve wheat/rice that would be released, but this could be an outlet for large foodgrain supplies that are not long fit for human consumption. Feeding this wheat/rice to livestock makes perfect sense to quell rising domestic corn prices.

• We hear that Ukraine new crop corn is being offered by a seller with Chinese documents back into their market today. So far, bids have been scarce. China in early July secured 40-60 cargoes of Ukraine corn for new crop delivery by COFCO. It is possible that COFCO could be trading out of the position and willing to accept a profit.

• FAS announced this morning that China booked 453,000 mt of US soybeans for 2020/21 shipment. We hear that China is still seeking US soybeans with a few cargoes sold this morning . We cannot confirm any Chinese interest in US grain.

• US ethanol production and gasoline consumption declined last week for the first time since April. The decline is related to rising US Covid-19 cases with regional economic slowdown. Note that the US ethanol production is falling below the level needed to reach the annual WASDE estimate while this week’s pace would forecast an annual 4,850 million bu demand pace for 2020/21.

• The weather forecast is highly favourable for US summer row crops with cooling temperatures with regular rainfall. Below normal temperatures will be a big help for ear filling corn while soybeans see organised rain across the SW Midwest/Delta. The forecast even holds the prospect for moisture across W IA on the weekend (a crop area where light showers have fallen), but more rain is needed. Any warmth will be confined to the next 5-6 days before the mean position of the high pressure ridge shifts west and holds across the Inter-mountain West. This allows a favourable NW upper air flow through the Central US, with near to below normal temperatures and frequent rain episodes. Weather during the first half of August favours US corn/soy yields.

• Amid improving Central US weather and cheaper price offers for corn/wheat from other non US exporters, it is going to be difficult for Chicago grains to sustain rallies. Consumers won’t chase the rally amid the the high costs of elevation for export. Gulf soybean and corn fob basis is at or above $1/bu which makes US corn/soy/wheat expensive. US farmers don’t want to sell the break, but US ethanol demand looks to retreat on slowing US gasoline demand. We doubt that December corn can rise much above $3.38 and November soybeans above $9.05 without adverse Central US weather. The forecast looks to be a favourable cool/wet.