** Mixed in modest volume has been the CBOT at midday. Corn and soy futures continue to sag while the wheat market firms on declining US and world production and the cancellation of deliverable receipts.
Traders continue to debate the July Central US weather pattern and whether the dry trend of June will persist and whether heat will return? All ARC would offer to the discussion is that in late May, every trader was concerned by the continuation of cool/wet weather and June ended up to be one of the warmest/driest months since 2012. The point is that everyone should keep an open mind to weather and that this year’s erratic pattern to date is likely to continue? Our feeling is that additional Central US weather scares lie ahead.
** July options expire at the close and there was selling of July futures early in the day as corn neared $3.60 and $9.00 in soybeans.
** CBOT floor brokers report that funds have bought 1,800 contracts of wheat while selling 5,000 contracts of corn and 4,600 contracts of soybeans. In soy products, funds are flat in soyoil and soymeal.
** Deliverable Minn/KC wheat receipts have been canceled this week as end users reach for protein. Another 50 HRS contracts were canceled out of Duluth.
** ARC lowered their EU wheat crop estimate this week to 138-139 MMTs, down 12- 13 MMTs from the USDA June forecast as hot/dry weather really takes a toll on the crop during the reproductive stage. And now hot/dry weather is starting to hit their corn production. ARC notes that this week’s heat has been record setting. The EU corn crop was seeded early by 9-14 days, so the heat is coming at a time when the corn plant is determining cob size. It’s still early, but EU and Ukraine corn demand more than a few showers late next week that add up to .5-1.25”. Lasting drought reversal rains are not offered and in the case of Ukraine, some real heat is expected next week with highs in the 90’s to lower 100’s.
** US corn and soybean crop condition ratings are expected to gain on Monday with increases of 2-3% in GD/EX category. US HRS wheat should continue to see steady or a 2% fall in GD/EX ratings amid another week of mostly dry weather. The good news is that any heat was limited. There remain some dry pockets in the Midwest, but they are outweighed by the rains that fell. Continued improvement in soil moisture levels is expected.
** HRW wheat yield and protein levels are highly variable in W Kansas, but for the most part, its tough to make protein levels greater than 11%. This has millers reaching for high pro old crop wheat in an old crop position. Yields are all over the board ranging from the single digits to the 60’s BPA.
** Midday GFS Weather Model Update: The midday forecast was drier for the Midwest and wetter for the N Plains/Delta over the next 2 weeks. Limited rainfall will be offered until late Wednesday when a storm system forms in the N Plains and pulls eastward. This system slows its forward progress and produces 1-2” of rain across the dry N Plains. The system then splits and weakens as it crosses IL/IL/OH leaving some farmers here as wanting more rain.
ARC’s confidence in that the N Plains will see the soaking rains is low, but we note that a storm system will either be in S Canada or the far NW Midwest during late next week, which raises the prospect of rain. A front sags southward early in the week following producing additonal showers/storms.
ARC notes that like the EU model overnight, a high pressure Ridge does push northward during the 6-10 day period that will elevate temps and reduce rainfall potential.
** AgResource Market Comment: This is no place to turn bearish with world crops in decline and the US July weather pattern far from certain. Our work shows that like wheat this spring, the potential to the downside is limited and we advise against new sales.
