** Volatile and sharply mixed has been the CBOT with the grains trading either side of unchanged, while soy futures hold in the green. The AM volume of trade has been sizable as market participant’s debate Central US weather forecasts.
Weather forecasters are non-committal the long range Central US weather pattern beyond the next 10 days. Thus, it’s not the straight forward hot/dry forecast that the bulls desire. As such, traders are looking to US crop condition ratings to help define yields. Today, crop ratings are expected to be little changed from last week, but decline next week.
Also the bullish stalwart, Minneapolis wheat, has traded in a wide $.94/Bu range this morning and forged a bearish reversal. The volatility of US wheat futures is increasing which is helping to fuel some caution in corn.
There should be two stages of the US Hi Pro wheat bull market; 1/ A supply shock rally followed by, 2/ A demand led rationing phase. ARC doubts that HRS prices have reached levels that are causing anyone to alter their wheat flour mix. However, US wheat futures had become extremely overbought and subject to a profit taking. ARC doubts that Hi Pro wheat values have reached their annual highs. That should occur in mid to late autumn as end users reach for supply.
** CBOT brokers estimate that funds have been net buyers of; 6,000 contracts of corn and 5,000 contracts of soybeans while selling 1,000 contracts of wheat. Funds were also buyers of 3,000 contracts of soymeal while being flat in soyoil. Meal/oil spreading has been active this AM.
** The EPA announced the RVO at 15 Bil gallons of ethanol with 4.24 Bil gallons being advanced. Such rates are unchanged from 2017. The total renewable fuel standard would be 19.24 Bil gallons for 2018, down 400 Mil gallons from 2017. The announcement will trim biodiesel consumption based on the constant rumors that US mandates cannot be met with domestic vegoil production if import duties are placed on Argentine B100 and Palmoil biodiesel. Selling of soyoil futures pulled soybean futures near unchanged, but the break was not lasting. 400 Mil gallons of potential lost biodiesel demand is modest. The key for soyoil biodiesel demand going forward is the anti-dumping duty amounts and implementation against Argentine and Indonesian biodiesel.
** There is no fundamental information to spur the break in Minn wheat futures this AM. The market declined a hefty $.94/Bu in a matter of minutes on less than 9,000 contracts of total volume in September futures. US wheat futures had become technically overbought and in need of a correction. Be prepared for Minn wheat margins to be raised as futures are now trading in bid/offer increments of 1-3 cents and market volatility will remain raised in wheat.
** GASC secured a larger than expected 410,000 MTs of wheat with prices that were seen as elevated. The purchase helps validate the world wheat price rally.
** Midday GFS Weather Model Update: The midday GFS is similar to the overnight forecast for the next 10 days. The model expands a high pressure Ridge across the Intermountain West and nudges the mean position of this Ridge into the W Midwest at times. Confidence in the details of the forecast are improving as the GFS is looking more like the warm/dry EU model solution. No meaningful rains are indicated for the Plains and the western half of the W Midwest. A few showers are possible across Wisconsin and the Eastern Midwest, but most amounts will be less than 1.00” with the coverage of rain no better than 50%.
The 11-15 day forecast offers a storm system digging along the US/Canadian border which would produce some rain for the N Plains. Our confidence in this system is low while Midwest rain chances are poor.
** AgResource Market Comment: The Ridging across the Intermountain West looks to maintain warm to hot temps and below normal precip across much of the Western US – including the Plains and the W Midwest. Soil moisture is in fast retreat. Our bet is that the Ridge/Trough pattern lasts into late July. We cannot advise new sales until there is clear indication of a US pattern change.
** GFS Midday Rainfall Forecast and Change from Overnight:
