AgResource Daily Farm Marketing Advice for Tuesday: 1/ Corn Producers: Sell the first 15% of estimated 2019 corn production at $4.24 basis Dec 19 futures.
The markets at midday have sustained overnight gains, but have been more subdued since the traditional opening. Some pressure is also noted as the GFS midday release expanded nearby precip to include Eastern IA, but one should remain skeptical of this model’s output. The Canadian model, which runs simultaneously, did not include this change. Spot crude and gasoline futures have maintained strength so far, and EU milling wheat futures look to close unchanged in spite of a new 12-month high in the euro. It’s still all about daily US weather forecasts!
Note that US producers have been fairly active in selling/pricing in recent weeks, and so new sales may be harder to find – particularly as crop conditions deteriorate.
Egypt tendered overnight for optional origin milling wheat for late August delivery. Results have not been released, but the lowest offer made to GASC is a cargo of Russian wheat at $203/MT, basis fob. This compares to Egypt’s average purchase price in early July of $204/MT. Once official results are released, ARC anticipates an average fob price slightly higher than Egypt’s last deal. World milling wheat cash prices have been well supported.
Australia’s interior cash wheat market continues to surge as drought intensifies across the Western and South Australia. High quality wheat is quoted at $260/MT, which is well above all other origins, and we mention some in the trade have put Australia’s crop potential at or just below 20 MMTs. This compares to a record 35 MMTs last year.
Otherwise, there’s a dearth of fresh news. Wednesday’s EIA report is expected to include weekly US ethanol production at 290-295 Mil Gal, down slightly from the prior week. More interesting will be whether US energy stocks continue to retreat? Recall ethanol stocks as of last Friday were down from the previous year, as were total motor gasoline inventories. US ethanol exports are ongoing despite falling Brazilian prices. Ethanol margins have done very little in recent weeks, but there’s ample incentive to maintain a strong weekly grind rate.
South American corn fob basis is slightly weaker this morning, with Argentine origin offered at parity with CBOT prices. Gulf basis is also falling, and at $.30/Bu is still historically weak. The US is no doubt losing corn and wheat export potential, but the market is positioned to re-capture demand once South American supplies are drawn down in late fall/early winter.
Midday GFS Weather Model Update: The GFS is much wetter through the next 10 days across a majority of the Central US (the updated 10-day outlook is attached). If realized, this is of course very much welcomed, but we await the EU model’s PM release for confirmation. The GFS projects a more defined NW upper air flow beyond the next few days, which will work to funnel moisture and cooler temps into the E Plains and Midwest July 23-30. Notice that soaking rainfall of 3-4” is offered to IA, MN, MO, IL, IN and OH, which would solve a lot of short term dryness issues. Excessive heat and ongoing dryness would be restricted to the Plains and Canadian Prairies. It’s a favorbale outlook, but probably overdone.
AgResource Market Comment: There’s no change in the strategy, and we’ll continue to sell strong rallies. The risk is that the EU ensemble model is correct on the 10-day pattern, which implies further expansion of drought into Aug 1.