Highlights
August options expire this Friday. All July basis contracts and long July CBOT futures positions must be rolled or priced no later than close of business July 30th, a week from today.
The weather forecast for Canada and the Corn Belt has changed to much warmer and drier. Yesterday morning Wright on the Market reported that the number of rain days in the ten-day forecast for the Western Corn Belt had 12 fewer days of rain than Sunday morning and the Eastern Corn Belt had 8 fewer days of rain predicted than Sunday morning. That is bullish soybeans this time of year.
Given the weather forecast for this week, the U.S. corn crop is made and it will be a good one. The market was talking 182 to 182.5 bushels per acre yield late last week. We doubt that it will make the trend yield of 181 as 177.5 bushels is best we have ever done before and August weather can certainly add or reduce yields by 4 to 6 bushels. Yesterday’s NOAA updated forecast for August looks like a few bushels of corn will be lost.
Dr. Cordonnier increased his U.S. corn yield by 1.5 bushels to 181.5 with the unknown of how many PP acres the USDA will report. He is estimating corn harvested acres to be 900,000 less than USDA is currently posting. At trend yield, that would be ~163 million fewer bushels which would reduce new crop carryover to ~1,950 million bushels. Dr. Cordonnier left the bean yields unchanged at 52.0 bushels per acre.
December corn made its low on July 12th, eleven days ago! Last week was the last chance for weather to seriously reduce yields. Instead, the market thought corn and bean yields were bigger last week and December corn did not make a new low.
After the close Friday, the CFTC reported that the big spec funds reduced their record large short corn position by ~10,000 contracts while adding to their short soybean position to make a new record short bean position just in time to have the weather forecast change a week before August, which is when the bean crop is made or lost.
Corn on Brazil’s futures exchange was up more than 2% Monday. Eduardo Vanin reported late Monday:
"Even with the futures rally today, farmer selling remains very slow for both crops.
Brazil’s farmers fertilizer purchases for the 2025 safrinha corn are slower than the last three years. Urea prices have jumped, while corn prices have remained basically unchanged. Producers are considering switching their summer corn crop (planted in September and October) to soybeans and their safrinha crop to cotton and other minor crops."
Yesterday saw the old crop soybean contracts lose relative to the new crop by ~10¢. Suddenly, the market is more concerned about the supply of new crop beans than old crop beans and that means August and September basis contracts may need to be rolled sooner than expected for those who can roll. For those who cannot roll basis contracts, you should consider getting your futures or option position established sooner rather than later. A lot depends on market action today. Right now, we suggest a 5¢ decline in corn and a 12¢ decline in beans to get long futures.
CBOT prices were also supported by Biden’s announcement as some uncertainty about the presidency was removed. Markets do not like uncertainty and maybe the market feels it will be a little more difficult for Trump to win, so there is a reduced chance of a trade war with China.
The People’s Bank of China helped-out the CBOT prices yesterday by surprising the market by reducing several major interest rates to stimulate the economy. Interest rates were reduced by 10 basis points and the market expects more rate cuts when the Federal Reserve begins rate cuts.
An added bonus was yesterday’s USDA announcement that 133,000 mts of new crop corn was sold to Mexico.
Crop Conditions as reported by the USDA yesterday afternoon:
Winter wheat is 76% harvested compared to the five-year average of 72%.
Pasture and range land is 40% good to excellent down 1% from last week and down 4% from a year ago.
Tidbits
Palm oil futures experienced a significant surge on Monday, marking the fifth consecutive session of gains. Domestic demand and increased exports have been the major factors as Malaysian palm oil product exports for July 1-20 were 41.4% more than June 1-20. Higher crude oil prices also impact palm oil, as higher crude oil futures make palm oil a more attractive option for biodiesel feedstock.
China’s June soybean imports totaled 11.11 million mts. Imports from Brazil were up 2.2% at 9.72 million mts and imports from the U.S. were more than four times higher, but still only 1.31 million mts. China’s Jan-June imports from Brazil are up 16% at 34.43 million mts and U.S. down 27% at 12.2 million mts. Yesterday, China’s Dalian futures for # 2 soybeans (imported beans; # 1 soybeans are domestically grown soybeans) were up 12¼¢, soymeal up $3.70, and soyoil up 31¢ a pound.
ENSO Update:
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Market Data
Prices are as of 10:55 PM ET:
Crude oil is at $78.48, up $0.08
The dollar index is at 104.26, down 0.05
December palm oil is at 3,981 MYR, up 13. The contract high was made April, 4th at 4,152 MYR. Palm oil owns 61% and soybean oil owns 14% world market share.
December cotton is at $70.86, up $0.24 per cwt. The contract high was made June, 9th 2022 at $91.38 per cwt. Cotton competes with soybeans and corn for acres.
December natural gas is at $3.402, down 0.005. The contract high was made September, 1st 2022 at $5.627. Natural gas is the primary cost to manufacture nitrogen fertilizer.
December ULSD is at $2.4704 per gallon, up 0.0044. The contract high was made June, 9th 2022 at $2.8058. ULSD stands for Ultra Low Sulfur Diesel.
September Dow Futures is at 40,674, down 19. The contract high was made July, 18th at 41,672.
Rain Days Update
The 6 to 10 day forecast updated every day at: https://www.cpc.ncep.noaa.gov/products/predictions/610day/
Explanation of Rain Days