** CBOT corn, soybean and wheat futures are mixed at midday in rather good volume. Much of the volume is related to the rolling of July futures forward ahead of 1st notice day on Friday. The real market story continues to be in Minneapolis wheat and the ongoing loss of hi pro spring wheat supply. Yield estimates continue to be trimmed with current expectations falling to 34-35 BPA as below normal rainfall and heat further threatens US HRS production.
And the market is concerned that Canadian producers have seeded more canola that spring wheat and that their uneven growing conditions won’t be enough to fill demand. Spot July Chi Minn wheat reached ARC’s 1st upside price target at $7.00 (high this AM was $7.13). However, as stated yesterday, we are doubtful that this price is causing any demand rationing by end users.
ARC’s bet is for a continued CBOT sideways trend until there is greater clarity on Central US weather and the market is past the June Stocks and Seeding report. Due up Thursday AM is final Canadian Seeding estimates.
** CBOT brokers report that funds are net sellers of 2,100 contracts of corn, and buyers of 3,400 contracts of wheat and 3,000 contracts of soybeans. In soy products, funds have bought 1,200 contracts of soymeal and are flat in soyoil. The big activity for the AM continues to be the rolling and liquidation of July contracts of corn, soybeans and soy products.
** Everyone wants to talk about HRS wheat and that prices are now up nearly $2.00 from their late winter lows – and that bull spreads are finally working. ARC notes It’s tough to secure hi pro cash wheat and the premiums just keep rising. This supply driven rally should peak by the last half July and it will then be followed by a correction. The more important rally will follow into late autumn tied to the need of domestic demand rationing to prevent HRS wheat stocks from falling below 75 Mil Bu. ARC maintains that HRS wheat demand is difficult to ration (inelastic) and more HRS acres are needed in 2018.
** Early Russian wheat yields are being reported as being below last year, but its far too early to establish any kind of trend. Most cash related wheat watchers remain convinced of another large Russian wheat crop and that yields will recover to levels equal to last year. The current heat/dryness could actually help crop quality and boost protein levels. Traders are more concerned by the heat/dryness that is being applied to summer row crops. Its something to monitor with Russia now being a modest world corn exporter of 3-4 MMTs.
** The Brazilian real has settled down and is trading around 3.30:1 USD this AM with the court to decide on the fate of President Temer in early July. Between the JBS scandal and the potential impeachment of Temer, a slow and further weakening of the Brazilian currency is expected into late summer.
**ARC forecasts US weekly export sales in a range of; 450-550,000 MTs of wheat, 500-600,000 MTs of US corn, and 250-350,000 MTs of soybeans.
** Midday GFS Weather Model Update: The forecast is slightly drier in the east and slightly wetter in the west as the mean position of a high pressure Ridge is farther west in the extended range. This opens the door for better rains across IA, MO and E NE next week as a front slows its forward progress. The midday GFS model is in better agreement with the EU forecast overnight.
The mean location of the Ridge is located across CO in the 8-12 day period and then it progrresses slowly east. Limited rains are expected across the N Plains for the next 10 days with building heat. Rainfall totals decline and high temps reach the 90’s. It is still very difficult to asses the duration of any heat/dryness after July 12th. The midday GFS progressed the mean position of the Ridge to the SE corner of the US in the 12-15 day timeframe which is likely in error. Stay tuned.
** AgResource Market Comment: The wait continues. Fund managers want to reduce their risk ahead of the USDA report and the end of the quarter. World wheat prices keep rising with HRS in the spot light. Our concern remains one of July following June and being warmer/drier than normal. Very warm temps at night will be the worry for US corn yields.
