All Members: Mid-day

Markets Mixed; Egypt Buys Black Sea Wheat

Aug 29, 12:07 pm | Mid-day Commentary

AgResource Daily Farm Marketing Advice for Tuesday: 1/ No new advice.

Mixed has been the morning in Chicago, with neither the bulls nor the bears having much excitement as summer draws to a close. Seasonally, it’s bottom picking time, but whether the wheat market especially can garner lasting support will in large part be a function of Russia’s interior market over the next 1-3 weeks. ARC does estimate managed funds’ position in Chicago wheat this AM at a net short 70,000 contracts, which prior to 2016 was rather large. Funds’ position in corn is pegged at net short 50,000 contracts, with funds net short an estimated 30,000.

US exporters sold 226,000 MTs of corn to Mexico, and 198,000 MTs of soybeans to China. South American exporters will continue to attract record demand, but traditional importers (Mexico, namely) no longer have much incentive to replace US corn with South American origin, particularly with Brazilian corn offered at/near parity with the US through December.

Egypt secured 235,000 MTs of wheat for early October delivery from Russia and Ukraine. Egypt paid $187/MT, basis fob, which is generally in line with fob quotes Monday evening, and which confirms the Black Sea quality wheat market at $178-183/MT into November. This compares to comparable Gulf HRW at $183/MT for October. Gulf basis is higher this week following Harvey’s impact on the coast, but on paper US wheat is still highly competitive.

The spot ethanol production margin, basis futures, rests at $.80/Gal, a 4-month high and vs. $.70/Gal a week ago. Just as important, spot RBOB has rallied to a $.24/Gal premium to ethanol. The incentive to boost blending hasn’t been this great since mid-2015. The EIA’s weekly report on Wednesday should include steady ethanol production, and another modest draw in crude, gasoline and ethanol stocks.

Stats Canada will release its August crop report Thursday morning. ARC expects Stats Can to reveal Canadian wheat production at 24-25 MMTs, with canola production estimated at 17.5-18.5 MMTs. USDA pegs Canada’s wheat and canola harvests at 26.5 and 20.5 MMTs, respectively. Canola futures this week have followed the soy market to very marginal losses, but canola maintains a premium of $55/MT to soy, vs. a slight discount on this week a year ago.

Crude is down $.60/barrel at midday, spot gasoline futures have rallied further to $1.76, EU wheat futures look to settle €.75-1.00/MT weaker, though amid a new 2.5-year high in the euro, European cash grain markets will be little changed this evening. The market is largely ignoring new lows for this move in the US dollar, but ARC views it as important longer term.

Midday GFS Weather Model Update: The midday GFS is a little quicker with Harvey’s conclusion, which should wrap up in the next 72 hours. Additional heavy rainfall worth 2-6” will impact LA, AR, W TN and W KY. The GFS then features yet more Gulf activity Sep 5-7, which will again impact E TX, LA and MS. Virtually no rainfall is offered to the heart of the Corn Belt over the next 10 days. Temps will be rather variable over the next two weeks, particularly across Canada and the US Northern Plains, but the bottom line is that overnight lows at times will fall into the upper 30s and 40s across the Dakotas, MN and MI into Sep 12th. High temps will also reach into 90s across the W Plains. 10-day precip is below.   

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AgResource Market Comment: The market in recent weeks have been digesting larger than expected global supplies – Russian wheat has been especially surprising. Funds’ next move will hinge upon NASS’s Sep yield estimates, while the US wheat market is working to boost its share of world trade to a multi-year high.

Cold Beyond September 10th; Grains Liquidate into 1st Notice Day Against September

Aug 28, 12:23 pm | Mid-day Commentary

** Low volume and mixed has been the CBOT this AM with corn, soybean and wheat futures trading mixed with the grains under pressure while soybean futures hold close to unchanged. Liquidation continues in the grains while soybeans uncover fresh export demand on weakness. The volume of trade has been poor with few traders inspired to take on large new speculative risk. Traders generally expect that seasonal lows are forming in wheat, while the corn and soybean market continues to debate yield and US crop potential. Our advice is that this is no place to turn bearish. Producers are still shedding old crop corn stocks which is pushing CBOT prices to lower lows.

 ** CBOT brokers estimates that funds have sold 4,500 contracts of corn, 3,600 contracts of wheat, and 2,300 contracts of soybeans. In soy products, funds have sold 1,200 contracts of soyoil and 500 contracts of soymeal.

 ** US export inspections for the week ending Aug 24th were; 31.7 Mil Bu of corn, 26.3 Mil Bu of soybeans, and 24.6 Mil Bu of wheat. All were above trade expectations. For their respective crop years to date, the US has exported 273.2 Mil Bu of wheat (up 30.1 Mil Bu or 12%), 2,208 Mil Bu of corn (up 414 Mil Bu or 23%), and 2,096 Mil Bu of soybeans (up 240 Mil Bu or 13%).  ARC sees no reason for WASDE to alter their 2016/17 US soybean export estimate of 2,150 Mil Bu with 2016/17 US corn exports likely to rise 15-25 Mil Bu in the next upcoming USDA crop report.

 ** The massive and historic flooding across SE Texas has sparked a sharp rally in unleaded gasoline/diesel prices as key US refineries are expected to be shuttered for weeks. Crude oil prices have sold off on the slowing demand. Reduced US refining capacity will impact ethanol demand, but the degree is uncertain? Some biofuel traders argue that a higher ethanol blend rates could help bridge the unleaded supply shortfall? ARC would note that demand for biodiesel could rise if diesel supplies tighten since both are fungible.

 ** Heavy rains are now falling across LA and threatening crops with accumulated totals 2-6.00” of rain. The storm is centered farther east on the midday model runs which argues for continued heavy rains of 4-6” which could cause real crop damage and lodging. LA and AR crops are at some quality and quantity risk due to excessive rainfall from tropical storm Harvey.

 ** Russian wheat yields continue to be impressive with some now citing a 2017 Russia wheat crop of 90 MMTs! The problem is that Russia cannot export more than 29-31 MMTs of wheat due to logistical constraints. ARC hears reports of grain just being stacked on the ground amid the sheer volume. There is not enough domestic storage to handle a 90 MMTs Russian wheat crop!

** Midday GFS Weather Model Update: The forecast is colder from the overnight solution with some break for TX in the heavy rainfall. The GFS in the 11-15 day period offers a shot of very cold air for the Central US with lows in the mid to lower 30’s, some 25-30 degrees below normal. Whether the ground is warm enough to prevent a full out frost will be closely watched. The forecasts continue to hint the risk of an early end of the 2017 growing season. 

  The midday run is also wetter for LA and AR as the remains of Harvey track east and north. Notice that additional rainfall across LA will range from 4-8” which produce low lying flooding. Crops are at risk in terms of quality with harvest underway in LA. The W Midwest, N Plains and IL are largely dry for the next 10-12 days, it’s the forecast of cold temps that has producers nervous. 

 ** AgResource Market Comment: The funds continue to pile into larger net short positions. Crop condition ratings are expected to be near unchanged this afternoon. The market will play close attention to cold temps with the 3 day Labor Day weekend ahead. This is no place to be selling cash corn, wheat or soybeans. Our research argues that seasonal lows are forming with some bounce expected during September. 

** Midday GFS 12z Rainfall with Temp Deviations on Sept 11th 

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Midday GFS Much Colder for early September; Canadian Frost Potential

Aug 25, 12:10 pm | Mid-day Commentary

** Mixed and low volume has been the early CBOT trade with limited direction for price being offered. Corn continues to slide on fund selling, while wheat holds Thursday’s gain, and soybeans are caught in between. The volume of CBOT trade has been uninspiring and traders are watching the eventual track of Hurricane Harvey – and how it might impact mature row crops in LA, MS and AR.

 Gulf State farmers are worried that heavy rains/strong winds cause lodging of crops with harvest underway. The track of Harvey and its resulting heavy rain will be key to soy price outlook early next week. LA, MS, and AR farmers fret that heavy rains could produce crop lodging and yield loss. Some are rushing to harvest mature corn, but the soybean harvest is still slow to get underway.

 ** USDA announced that China bought 132,000 MTs of soybeans for the 17/18 crop year. And 105,000 MTs of soymeal was sold to Thailand for the 7/18 crop year. China continues to show good interest for securing US soybeans under the marketplace.

 ** CBOT brokers estimate that funds have sold 3,000 contracts of soybeans and 4,200 contracts of corn, while buying 1,500 contracts of wheat. In soy products, funds sold 1,200 contracts of soyoil and 900 contracts of soymeal. 

** Top Flight Grain Co-op around Champaign, IL estimated their area corn yield at 183 BPA vs 212 BPA last year (assuming 90,000 kernels/Bu). Their soy yield count was 50 pods/plant down from last year’s 54 pods. This is 7.5% reduction in soybean yield (assuming a similar pod weight) from 2016 and offers further hint that NASS’s 1 BPA fall in IL soy yield from last year (58 BPA) is too high. A host of private crop tours in Central IL have uncovered corn yield potential some 10-20 BPA below last year. The area around Champaign is one of the hardest hit in IL with dryness from June into mid July. Many Central IL areas are suffering from dryness and rain is still needed. Soybeans here have finished podding and it’s all about the size of existing soybean seeds. 

 ** NASS will release their monthly Cattle on Feed report this afternoon. The trade has really missed the last few months on placements, and the guesses for this report range between 102-115%. It’s the placement rate which will determine if the report is bullish or bearish. ARC would note that the number of US livestock (cattle, pork and poultry) will be record large in the 4th quarter and the first half of 2018. If a bull meat story is to develop, it will have to be based on US export demand. China’s interest for US beef will key US beef price direction during Q1 2018.

 ** The Jackson Hole Central Bank Meeting is not producing any big revelations other than normalization in the US, and the inability of the world Central Banks to spur inflation. The US sees inflation at 2% for 2018 and beyond.

** Midday GFS Weather Model Update: The forecast is much colder from the overnight solution with just a few lite showers for the Lake States this weekend as a weak Trough is pulled southward via the upper air impact of Hurricane Harvey in the Gulf. E Midwest rain totals would range from traces-.4”. The remainder of the Midwest is largely dry for the next 10-12 days.

  All eyes on the path of Hurricane Harvey. The models are callig for landfall at high tide late today and then holding Harvey nearly stationary across SE TX and taking the storm on and off shore into Tuesday. Extremely heavy amounts of rain are expected with totals running from 12-30.00” in Coastal TX/LA areas. Inland rains into TX and LA could reach 6-12.00”.

  Seasonally cold temps are being pulled southward from Canada in early September with a Canadian frost on Sept 2-3. A cold pattern is established thereafter that has to be closely monitored. A Ridge/Trough pattern allows such cold to flow southward into the NC and NE US. The GFS 10-15 day forecast is chilly!  

** AgResource Market Comment: The cold extended Canadian and NC Midwest forecast has to be monitored. It could become a talking point as crops need an extended growing season via to a lack of GDDs. It’s a race to the finish for corn/soybeans.

** 10 Day GFS Rainfall and Monday Sept 4th Temp Deviations (note 20 degree below white estimate)

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Wheat Reverse Losses as Traders Position Long Soybeans for Farm Journal Crop Data Release

Aug 24, 12:03 pm | Mid-day Commentary

** If there are “dog days” of trading (forget summer), this appears to be it.

CBOT corn, soybean and wheat futures are mixed in slow volume with some soy/corn spreading noted. Traders expect that the Farm Journal Crop Tour results (to be released this afternoon) could be supportive of soybeans and neutral to slightly bearish of corn.

  In a broad sense, the FJ Tour indicated that the US had a good, not great ’17 corn and soybean crop. ARC would note that if US corn and soybean yields were 166 BPA and 47 BPA, they would be just 2% below trend. Historically, the heat/dryness during July is not countered by the cool August temps with rain not arriving until the last half of August. A 2% yield decline off of trend is not a big deal – and well within the historical range of possibilities.

  The market will wait for the Farm Journal Crop Tour results and then worry about how large the net fund short position that funds hold heading into the weekend. The downside risk is minimal as December corn heads for $3.50.

 ** Hurricane Harvey is rapidly strengthening and could reach a Cat 2-3 storm before coming ashore. This storm will produce record amounts of rain and pose a risk to Gulf State row crops. It will take more time to fully assess the location of landfall, but the storm is not going to move quickly thereafter. This implies that Harvey flood recovery efforts will be slow and areas impacted could endure a lengthy period of flooding. Harvey could make landfall several times along the coast causing havoc for residents. The actual path will be key for Gulf State row crops next week.

 ** US weekly export sales for the week ending August 17th were; 14.2 Mil Bu of wheat, 20.7 Mil Bu of corn, and 59.1 Mil Bu of US soybeans. The sales for corn and soybeans combine both new and old crop. For their respective crop years to date, the US has sold 424 Mil Bu of wheat (equal to last year), 2,227 Mil Bu of corn, (up 264 Mil Bu or 13% from last year) and 2,227 Mil Bu of soybeans (up 293 Mil Bu or 15%). There are still a large 147 Mil Bu of US soybeans that are sold, but unshipped in an old crop position. ARC maintains that 85+ Mil Bu plus will be shifted over to new crop and that September 1st US soybean sales should be around 500 Mil Bu.

 ** Future US soybean demand looks robust as China continues to rapidly expand its livestock herd and aquaculture industry. Brazilian soy exports/commitments to export amount to 58 MMTs, just 5 MMTs from USDA’s annual forecast. Brazil has nearly sold/shipped its massive ‘17 soybean crop at a fast clip. This means that US soybean exporters will have an open window for soy sales/exports with China having covered their imports only into early mid-October. Chinese crushers are hoping for further weakness, but based on expanding Chinese livestock herds, USDA will not soon relent on their record large 2017/19 export forecast of 2,225 Mil Bu.

** CBOT brokers report that funds have sold 4,300 contracts of corn and 900 contracts of wheat, while buying 4,500 contracts of soybeans. In soy products, funds have bought 1,000 soyoil and 1,200 contracts of soymeal.

 ** Midday GFS Weather Model Update: The forecast is little changed from the overnight solution with limited rainfall projected for the C and E Midwest for the next 12-14 days. Hurricane Harvey looks to make landfall farther south across the southern quarter of TX with extremely heavy rains slated to drop over E TX, LA and S MS. This storm will be caught on the southern end of the Ridge and be slow to move along the Gulf Coast. Harvey could produce 8-20” of rain here. The extended forecast offers cold air over NC Canada that will be watched during September.

** AgResource Market Comment: The Farm Journal Tour yield estimates will be out this afternoon. Optional origin wheat sales into N Africa will likely to include US HRW wheat. In yield, a 2% drop from trend does not appear unreasonable for US corn/soybeans. The time is near for seasonal and annual bottoms to form at the CBOT. 

** GFS 12z Rainfall estimate and change from Overnight 0z Run; 

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CB0T Corn Sags, Funds Sell Soybeans, US wheat is mixed.

Aug 23, 12:02 pm | Mid-day Commentary

** It has been a mixed morning at the CBOT with sizeable speculative selling noted on the morning soybean bounce. The US Commerce Dept’s preliminary duties on Argentine and Indonesia biodiesel have created a rise in CBOT soyoil values and a decline in soymeal. Soybeans initially rallied, but have been caught between the product pricing as the trade struggles to understand what the new duties mean for future US vegoil prices and US crush totals?

  WASDE will provide their S&D view on what the commerce ruling means for US domestic biodiesel demand in September. Traders agree that many scenarios could unfold on how to meet the 2.1 Bil gallon EPA mandate in 2018. US domestic vegoil prices could reach levels that slow US exports, or US soybeans could be shipped to the EU and crushed, with the soyoil brought back to the US? Canadian canola oil imports could help bridge the supply gap – along with many other scenarios. 

  What we do know is that the US has lost nearly 4 Bil pounds of biodiesel supply and that US prices will have to rise relative to other origins to pull in imports or cause others to crush US soybeans overseas and bring the vegoil back into the US. ARC notes that there is an 18% import tax from most nations other than the EU which even complicates the scenario planning even more. Our bet is that higher US soyoil futures will be led by tightening cash supplies. 

The US soyoil cash market will help in deciding which scenario best applies amid all of the potential for substitution. Soyoil bull spreads and long oil and short meal are the best ways to be positioned for a longer term bull market in soyoil. ARC notes that with US 2017/18 soyoil end stocks just above 2,000 Mil pounds, digging into stocks will not be able to fill the void.

 ** FAS reported the cancellation of 640,970 MTs of US soybeans to China for the old crop year, and the sale of 295,220 MTs to an unknown destination with 11,220 MTs for delivery in the 16/17 crop year and 284,000 MTs for 2018/19.

 ** US HRW wheat has become so cheap that it could work into non traditional N African nations. Algeria is tendering for 11% wheat and US HRW wheat is the cheapest. It’s been years since US HRW wheat has worked into Algeria and supplanted French wheat. But the US wheat market has gotten so cheap that its starting to attract interest from non traditional buyers. As a result, the overnight tender will be watched more closely with the tender being a warning shot for wheat bears,

 ** US weekly export sales expectations for the week ending August 17th are estimated in a range of; 19-24 Mil Bu of wheat, 26-30 Mil Bu of corn in both crop years, and 27-34 Mil Bu of soybeans. US exporters were active in selling cash soybeans to China last week and those sales are continuing this week as they cover their imports into early October.

** Midday GFS Weather Model Update: The forecast is not much changed from the overnight solution with limited rainfall projected for the Midwest for the next 10-12 days. Wisconsin will see meaningful rains from a T storm cluster this weekend, but otherwise, rainfall amounts look to range from .1-.5” across IA, IL, IN and E OH into Sept 4th. Heavy rains look to batter crops in LA, AR and MS as tropical storm harvest makes landfall in Eastern Texas. Rainfall totals look to range from 2-6.00” with localized heavier amounts across the Gulf States. The GFS has the remains of Harvey producing some .25-1.00” rains across S IN and OH around September 2nd. We suspect that the model has the rains too far north and the moisture will be farther south across TN/KY.  

 ** AgResource Market Comment: So much to debate! US corn and soybean yields are being hotly debated, the impact of US duties on biodiesel production, and how much of the Russian grain crop rots amid a lack of storage, rail cars, and load out capacity at ports. Russian rail wagons are booked full into December and port load out times are now over 3 weeks! Dec corn has a target of $3.53 while US HRW wheat could garner new export demand.

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Grains Weak on Russian Wheat Crop; Tropical Storm Activity Ramps Up

Aug 22, 12:10 pm | Mid-day Commentary

AgResource Daily Farm Marketing Advice for Tuesday: 1/ No new advice.

The morning CBOT trade again features weaker grain markets and steady/higher oilseeds. US and European wheat contracts continue to reel from Black Sea harvest data, which in Russia points to a final crop size of 80-82 MMTs, which in turn will send end stocks there to a record 20-22 MMTs. So far the Black Sea cash market has been more stable this week, but in the near term there’s no doubt wheat supplies will be overabundant. Corn is following to some extent, while soy & canola futures are slightly higher at midday.

Pro Farmer’s tour continues to find what you’d expect. Variability for the most part, but also yields down on last year or closer to running averages. Falling wheat prices have allowed the grain trade to largely shrug off tour reports, but we do maintain that Pro Farmer’s final number on Thursday evening will be important. Thereafter, this also looks to be a year in which actual harvest data will present the clearest picture.

In the meantime, weak seasonal trends persist, though we do note corn and – especially – wheat futures are heavily oversold, technically. Major importers have been slow to capitalize on the collapse in world wheat prices, and recall seasonal wheat trade peaks in Sep/Oct.

Other fresh news is again lacking. Crude futures at midday are slightly higher and look to have found fair value in a range of $46-51, basis spot. RBOB and ethanol futures are up a penny, and as such US ethanol production margins continue to rally. Spot-futures based margins this AM are pegged at $.76/Gal, vs. $.60 in early August and $.70/Gal on this week a year ago. Wednesday’s weekly EIA report should include steady ethanol production, and yet another decline in total US crude inventories.

India’s monsoon through the end of August will offer an improvement in soil moisture across pockets of its primary oilseed belt, but overall looks to finish much weaker than in recent years. Much of India’s wheat region – current rainfall will be used for irrigation in early 2018 – will see just 20-65 of normal rainfall in the Aug 1-Sep 5 period.

Australia looks to avoid worst-case scenario – a continued El Nino-like pattern – but still the near term outlook fails to include much meaningful rainfall across the Wheat Belt into the first week of September. There’s still time for a boost in soil moisture to affect yield potential, but beyond the next few weeks, weather there will be more critical. Overnight lows in Eastern Australia again reached into the low 30s, which follows minimum temps on the weekend in the mid/upper 20s. Some 30% of Australia’s wheat area is being affected by abnormally cold temps.

Midday GFS Weather Model Update: The midday GFS is drier east of the MS River through the next 10 days, and is little changed elsewhere. Lite rain exits the Corn Belt entirely by early Wed, and a cool but drier pattern will be established into early Sep. Complete dryness is not indicated, but through the remainder of the growing season rain events look to be much more scattered in nature. Central US temps will maintain a cooler than normal bias over the next 10 days; no frost is indicated, but a close eye will be kept on minimum temps in the Upper Midwest moving forward. We also mention that a tropical storm is forecast to impact TX this weekend, and then linger across LA & MS next week, causing potential fits for corn/bean harvesting there. 10-day rainfall is attached.

midday 8-22

 

AgResource Market Comment: Based on plant population data, a heavy burden is being placed on pod & ear weights. KC wheat below $4.00 is very much undervalued, as Gulf wheat this evening will be offered at a modest discount to even Russian origin.  

CBOT lower at Midday; Not Enough Rain in the E Midwest into September 2nd

Aug 21, 12:12 pm | Mid-day Commentary

** The morning CBOT trade has been “darker” as the eclipse across the Central US nears. The selling has been consistent with traders talking about the rain for IA/W IL and a bigger Russian ’17 wheat crop.

  The volume of AM trade has not been large with market participants waiting for the eclipse. Soybeans have been able to hold better than the grains, but the rains are still keeping the complex in the red. ARC looks for a weaker close, but it is too late to become overly bearish of corn, soybeans or wheat. This is no place to be making new sales, but it will take some actual yield results to make any kind of leap to the upside. The market maintains a bearish mentality awaiting confirmation on the August NASS yield estimates.

 ** CBOT brokers estimate that funds have sold 3,600 contracts of wheat, 5,600 contracts of corn, and 3,200 contracts of soybeans. In soybean products, funds have sold 2,700 contracts of soymeal while buying 2,200 contracts of soyoil.

 ** US weekly export inspections for the week ending August 17th were; 21.43 Mil Bu of wheat, 27.22 Mil Bu of corn, and 24.44 Mil Bu of soybeans. The soybean and wheat export pace was better than expected, while corn was shy of trade expectations.

** For their respective crop years to date, the US has sold 248.2 Mil Bu of wheat (up 26.3 Mil Bu or 12%), 2,175 Mil Bu of corn (up 437 Mil Bu or 25%), and 2,070 Mil Bu of soybeans (up 249 Mil Bu or 14% above last year). The US O/C soybean/corn export paces are on track to reach the WASDE annual estimate.

 ** FAS announced this AM that the US 463,000 MTs of US soybeans to an unknown buyer and 198,000 MTs of US soybeans to China for the 2017/18 crop year. The combined sales amount to 661,000 MTs of US new crop soybean sales.

 ** Based on reported yield data, commercial sources are taking up their Russian ‘17 wheat crop estimate to 81-84 MMTs. The harvest has not fully reached into the normally lower yielding spring wheat crop, but so far, the yield data has been huge which has some crop watchers raising their Russian wheat crop estimate by another 2-4 MMTs. ARC notes that interior prices have been slow to reflect the big crop as producers have been loath to sell into a declining world wheat marketplace.

  The key for world wheat markets is not the size of the 2017 Russian wheat crop, but its export capacity which most peg at 30-31 MMTs under favorable winter weather conditions. Russia may have a monster of a wheat crop, but getting into the world export arena will be difficult. This means that Russia will have plenty of carryover supply for the 2019/20 crop year. ARC would advise against turning bearish wheat on the rising Russian crop unless one  expects new logistical capacity to be quickly built for export before winter?

** Midday GFS Weather Model Update: The midday GFS is similar to the overnight run with additional showers of .2-.8” for IL and the remainder of the E Midwest through Tuesday. The W Midwest drys out with just a few lite showers in the N and C Plains during the last half of the week and weekend. Rain totals would be less than .50” with coverage pegged at 40% of the area.

 The E Midwest stays in a largely dry trend into Sept 2nd, when a frontal pass produces a few lite showers. Our confidence in this rain is low with a Ridge/Trough pattern reforming and numerous tropical storms in the Atlantic and Pacific Ocean. The 11-15 day outlook is warmer, with below normal rain. A couple of good rains are demanded by E Midwest crops to end stress.  

 ** AgResource Market Comment: Crops in IL, IN, OH and KY will likely see lower crop condition ratings this afternoon while N Plain’s crops increase. Russia will have massive amounts of wheat to sell, but export logistics will keep them close to last year’s total. This  means that other exporters like the US, Canada and EU will have export opportunities with world wheat stocks excluding China in decline. An early week bottom is expected.  

** GFS 10 day Rainfall Forecast: 

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CBOT Mixed with Sept Soybeans Gaining on November; Midday GFS Too Wet

Aug 18, 12:02 pm | Mid-day Commentary

** Mixed has been the morning at the CBOT with corn, soybeans and wheat trading both sides of unchanged. The volume of trade is ebbing heading into the weekend as traders reduce risk and take a pause amid uncertain late August weather. Several tropical systems are evident in the Gulf and they are causing the models forecast fits. The EU model remains the most consistent in its forecast solution, yet traders are tiring of the weather market and want to know more accurately where US corn and soybean yields following the August dryness? The Pro Farmer Tour starts Tuesday and it will offer some yield hints as the Tour has a solid track record of forecasting the September USDA report. 

The CBOT has endured considerable selling this week with a big change in ownership from speculators to end users. The time is right for a seasonal low in wheat, while corn/soybeans tend to bottom during late summer. There is a chance that soybeans have scored their lows if the dry weather trend were to persist across the fat portions of the Midwest into early September?

 ** US exporters argue that China has really stepped up its US soybean purchase pace as prices reached their lowest levels since early summer. China has limited forward coverage beyond late September as they correctly bet on weaker prices and a return of positive crush margins.

** The UDSA did not report any new export sales this AM. 

 ** US SRW wheat is offered out the US Gulf at $181/MT vs. 183/MT for Russian wheat and $188/MT for French. US wheat is the cheapest in the world and buyers are reported to be stepping up. Australian and Argentine soybean offers are steady at $235/MT and $190/MT, respectfully. Southern Hemisphere producers are willing to let the north fill world wheat demand until more is known about their own new crop prospects? ARC notes that last year on this date, Russian fob wheat was offered at $169/MT. Thus, the world wheat market is up $.40/Bu while US wheat futures are equal to or just below last year’s price.

 ** Argentine fob corn is offered this AM at $149/MT against Brazilian at $157.30/MT and the US Gulf at $161.50/MT. US corn will not be able to compete against South America which will slow US corn exports.

 ** Brazilian/Argentine fob soybean offers are nonexistent beyond September. The US will have the world soybean import to itself from October into the South American new crop position. Brazil and Argentina are cheaper in their soy product fob offers into year end. It appears that South American crushers are going to capture margin and export soy products – not soybeans. 

 ** CBOT brokers estimate that funds have sold 1,000 contracts of wheat, while buying 1,000 contracts of corn and 2,200 contracts of soybeans. In soy products funds have bought 5,000 contracts of soyoil and 1,000 soymeal.

** Midday GFS Weather Model Update: The midday GFS has pushed the heaviest of the the rain into Eastern IA and is slightly farther south with rains into Central IL early next week, but otherwise unchanged. The models are struggling with all of the tropical storms, but there will be scattered showers on Monday/Tuesday across the W and NC Midwest with totals of .2-1.25”. The coverage of the rain looks to be 50-55% with the E Midwest seeing just .2-.6”.

  A broad Ridge/Trough pattern then forms with a NW upper air flow thru the Midwest producing mostly dry/cool weather conditions next week. Rains are  confined to the Gulf States and Plains into next Friday. A storm system forms across NE and drifts eastward into IL next weekend with rains of .25-1.25” Our confidence in this system is low. The 10-14 day period features a broad Ridge across the Western 1/3 of the US and a Trough across the east with cool Central US temps.  The GFS forecast remains too wet.

 ** AgResource Market Comment: It has been a week of ownership change at the CBOT. Funds are now holding a size able net short in wheat, corn, and meal. End users are hoping for further weakness to add to their coverage next week. Our field work maintains a US corn/soy yield estimate well below NASS. This is not a place to be bearish with Pro Farmer tweets to start on Tuesday.  

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Soybeans Rally on Demand; Grains Sag on Continued Fund Selling

Aug 17, 12:19 pm | Mid-day Commentary

** It has been hard to kick the “bearishness” in grains with the charts pointing down and funds piling into larger net short positions. World wheat prices are edging lower following the GASC tender, which is also leaning on corn. The world wheat market is not understanding Russian logistical constraints – and that Asian demand that will not be filled by Australia/ Canada this year due to smaller crops. This demand will be pushed to the US.

  There is more to the outlook of world wheat prices than a Russian crop of 78-80 MMTs. The ‘17 Russian wheat crop is record large, up 5-7 MMTs from last year. However, combined ‘17 Australian/Canadian crops will be down nearly 20 MMTs with the US crop off 15.50 MMTs for net losses of these 3 primary wheat exporters of 35-36 MMTs in 2017/18. Add in another 1 MMTs loss of US wheat due to greater abandonment of US HRS, and an EU wheat crop at 146.5-147.5 MMTs (down 1.5-3.0 MMTs), non Russian exporter wheat supplies will be off 40 MMTs!

  US soy futures are higher on the disappointing rains that fell across IA and Central IL. This fat area of the Midwest remains short to very short on soil moisture and a finishing rain event is demanded to prevent pod abortion.

  This is no place to turn bearish of corn, soy or wheat with the downside price risk measured at another 5-15 cents. August rainfall will not reach normal levels, and unfortunately will follow in the dry trends of June/July.

** The US reported weekly export sales of; 23.3 Mil Bu of wheat, 28.9 Mil Bu of corn, and 49.7 Mil Bu of soybeans. US corn and soybean sales included both the old and new crop years. The sales of corn, soybeans and wheat were all above trade expectations and considered supportive to price.

 ** For their respective crop years to date, the US has sold 410 Mil Bu of wheat (1.0 Mil Bu less than last year), 2,223 Mil Bu of corn (up 263 Mil Bu or 13%), and 2,248 Mil Bu of soybeans (up 309 Mil Bu or 16%). The US sold another 16.7 Mil Bu of old crop sales with 188 Mil Bu yet to be shipped out (just 3 weeks remaining in the 2016/17 crop year). ARC estimates that US soybean sales for the 2017/18 crop year should exceed 500 Mil Bu on September 1st or equal 22-24% of USDA’s annual US soybean export forecast.

 ** The US Climate Prediction Center called for below normal temps for the Central Plains and equal chances of above or below normal temps for the remainder of the Midwest. Of course, producers will be hoping for another extended growing season. The long range EU and now CPC argues for a near to slightly earlier than normal end of the ’17 growing season. What this would mean for US crop production is extremely uncertain. Nonetheless, we are willing to bet that concern for immature crops will quickly grow following the US Labor Day holiday. 

** CPC September Temp Outlook: 

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** USDA reported 165,000 MTs of US soybeans sold to China for the 2017/18 crop year. Exporters explain that China will exclusively focus its demand on the US  

 ** Midday GFS Weather Model Update: The midday GFS has added rain for IA and is wetter than recent runs. The model pops T storm clusters across IA starting early next week with another episode late next week. Our confidence in these T storm clusters is low – either in their placement or rainfall amounts. The forecast is similar in that not much rain falls across the remainder of the Plains or the Delta or the E Midwest.A broad Trough/Ridge pattern early next week with the mean position of the Trough across the Intermontain West and a Trough across Hudson Bay. Numerous tropical storms beyond the next 5 days makes any model output suspect.  

 ** AgResource Market Comment: Big volumes are trading in wheat as end users absorb a portion of the fund selling. How wheat closes will be important for its longer term trend. IA total rainfall from May 1- Aug 16th is well below the 2012 drought year. Crop stress is worsening. ARC research argues against a bearish stance as seasonal and potential annual lows are being formed in wheat/soy.

** GFS Rainfall Forecast for the next 10 Days:

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Midday GFS is Drier with Ridge/Trough Pattern Returning into Sept 1st

Aug 16, 12:09 pm | Mid-day Commentary

** Funds managers returned with their selling shoes on this AM and have pressured CBOT corn, soybean and wheat futures to new lows for the current decline. The charts are down with September Chi wheat scoring new contract lows while November soybeans takes aim on technical support that runs from $9.10-9.20. Spot corn futures have fallen to their lowest levels since the beginning of the year as Sept prepares to test $3.50. Technically, all of the  CBOT markets are extremely oversold and end users are scaling into purchases. But funds continue to add to net shorts with seasonal price trends down and as of yet, there being little push back from the market. The speculative selling will slow when the market pushes back to tell the bears they are wrong. Minneapolis wheat has been the leader to the downside and upside in recent weeks and it is holding independently strong relative to Chicago and KC.  

 ** CBOT brokers report that funds have sold 6,000 contracts of corn, 3,700 contracts of soybeans, and 4,700 contracts of wheat. In soy products, funds have sold 3,500 contracts of soymeal and are net flat in soyoil.

 ** China in a ceremony in Omaha NE signed letters of intent to purchase 3.8 MMTs of US soybeans as Chinese crush margins are in the black. The value of the deal was pegged at $1.56 Bil and large USDA daily sales announcements expected by Friday.  The last Chinese soybean signing ceremony (July) produced new US soybean sales of 1.3 MMTs within 48 hours of the event. 

** The University of Missouri’s Division of Plant Sciences is estimating Dicamba damaged soybean acres at 3.1 Mil – and still growing. The investigated cases of infection have risen to 2,242 from 1,411 in July. The survey is based on the reports of US extension agents as of August 10th. The impact on US soy yield is yet uncertain, but needs to be monitored more closely.  

** US weekly export sales for the week ending August 10th are estimated in a range of 475-550,000 MTs of wheat, 350-550,000 MTs of new and old crop corn, and 600-750,000 MTs of old and new crop soybeans. US soymeal sales are estimated at 60-110,000 MTs and US soyoil sales at 5-15,000 MTs.

** The attached graphic  is Chi spot wheat futures on a daily basis. Notice that at $4.20 Chi places futures is against an uptrend line that extends back to Nov 2016. The RSI shows the market at the most oversold level since a year ago. Different this year is that cash wheat bids are rising and above replacement. Minn cash wheat on rail is bid at $1.00 over with cash SRW wheat bid at just 3 cents under in Toledo.

** Spot CBOT Daily Wheat Futures:

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** The weekly EIA ethanol report showed US production rising to 311 Mil Bu of corn consumed vs 298 Mil Bu in the prior week. US ethanol stocks rose to 917 Mil GA, up 20 Mil gallons or 7% above last year. The report was positive corn.  

 ** Midday GFS Weather Model Update: The midday GFS has reduced rainfall totals for IA and is much drier than what was offered overnight across all of the Central US. The GFS forms a broad Trough/Ridge pattern early next week with the mean position of the Trough across the Intermontain West and a Trough across Hudson Bay. A NW upper air flow through the Midwest reduces the flow of Gulf humidity and curtails the chance of meaningful Midwest rain. Iowa is short changed with rains of just .2-1.00” in the next 10-12 days. This is not the way that producers hoped that summer to finish after a dry first half of the month!  Worry for US corn/soy yields is rising without a solid finishing rain event.

 ** AgResource Market Comment: Bearishness reached a fevered pitch across the CBOT as funds continue to pile into new net short positions. However, with each new model run, the Midwest rain chances are curtailed. US soy yields are at most risk and its premature to below $9.20 November. We are buyers of any further break in soybeans, corn and wheat. We are vastly overdone to the downside.

** GFS 10 Day Rainfall Forecast and change from Overnight:

 

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