Grain Market Summary 7.5.24

July 5, 2024

GENERAL COMMENTS:

For the Week:

December corn was up 3 1/4 cents per bushel, November soybeans finished up 25 3/4 cents per bushel. September KC wheat was up 12 3/4 cents per bushel, September Chicago wheat closed up 17 cents per bushel and September Minneapolis wheat closed up 20 1/4 cents.

WHEAT:

Wheat futures flew higher to end the week, led by Chicago July wheat as The Andersons had canceled more delivery receipts -- a sign of demand. Wheat is also higher as last week's export sales were a hefty 29.6 mb bringing the total new crop sales to date to 48% higher than last year at this time. The cool and wet weather in the EU has negatively impacted yields on French soft wheat. Two government agencies in France have lowered that soft wheat crop to 28.1 mmt and down 7 mmt (257 mb) from last year. Couple that with the ongoing drought that is likely to hit Russian spring wheat yields, and it is easy to see why this oversold market is finally getting a bounce. On a negative sign, consultancy Soc Econ over the weekend increased the Russian wheat crop from 80.7 mmt to 84.1 mmt. In the past several weeks we had heard estimates that were as low as 78 mmt to 79 mmt. That is still far lower than the early season projection for a record-large 94 mmt. In tenders, Japan is in for just shy of 130,000 mt of mixed U.S., Canadian, and Australian wheat, and Tunisia has tendered for 100,000 mt of optional soft milling wheat. Pressuring wheat, despite concern over the Russian spring wheat crop is the fall in Russian FOB values for the fourth straight week, with quotes at $221/mt to $224/mt. Funds come into Friday's trade still net short 64,000 contracts of Chicago wheat, and probably over 30,000 contracts in KC wheat. DTN's National HRW index closed at $5.39 and 45 under the September contract.

CORN:

Corn futures rose on Friday, led by nearby months as the corn basis has risen and exporters and ethanol producers seek to entice bushels from the farmers. On-farm corn stocks were reported to be 3 billion bushels of the 4.9 bb June 1 stocks total as farmers have had little interest selling at these prices. Strength on Friday comes despite mostly favorable weather and good conditions in the U.S. corn crop. However, in the Black Sea, the hot and dry pattern that has resulted in well below-normal rains for a few months is expected to continue past mid-July. In the U.S. weather has been mostly favorable except for those northern Plains and Upper Midwest states where flooding has occurred with more rain falling over the Independence Day holiday. Flood watches continue in some of those states even now. Demand for U.S. corn has been and should continue to be strong, with Gulf FOB corn figuring to be about a 25-cent discount to FOB Brazil prices. Export sales, which total 2.115 bb are up from just 1.536 bb one year ago, and up 38% from a year ago. Also supportive are ethanol margins which are reported to be over 40 cents per gallon. Last week's ethanol production rose another 2% to 1.064 million barrels per day. Meanwhile in Ukraine, with pollination about to begin, Ukraine corn is under severe stress and in need of rain. Ukraine's corn basis has rallied sharply in the past few weeks. The CFTC's Commitment of Traders report has been delayed until Monday. However, that could reflect a record or near-record net short in corn by managed money funds. That is a precarious position just ahead of the peak pollination time. So far, funds have had little incentive to cover those shorts, but that could all change if beyond mid-month we should get an extended hot and dry trend. In Argentina, the Buenos Aires Exchange notes that the corn harvest is now 63% done. On a slightly bearish note, the U.S. Ag Attache in Brazil pegs China's corn imports at just 20 mmt -- down from the USDA's 23 mmt estimate. DTN's National Corn Index was priced at $3.93, 13 cents below the September futures.

SOYBEANS:

Soybeans, soymeal and soybean oil rallied in unison on Friday with spot beans and meal leading the way higher. Soybean oil rebuffed early weakness to rise sharply for the seventh consecutive higher finish. Driving the gains is a tight basis, stronger crush margins and fund short covering. Both European Union rapeseed production and sunflower seed production in the Black Sea are being compromised not only by recent freezes but by the cool and wet weather in parts of the EU, and the hot and dry weather in the Black Sea. Renewable diesel demand in the U.S. is on the rise, and soybean oil stocks have been moving lower. Indonesia's proposed import tariff of up to 200% on Chinese goods has traders thinking that China will now turn to Malaysia or even the U.S. for veg oil demand. Funds have been caught leaning the wrong way on beans and bean oil, with last week's 108,000 net short in oil being a new record short. Funds have been scrambling to reel in that short of late. On the demand side, while U.S. old crop export sales are equal to the USDA projections, there has been zero new crop demand from China for U.S. beans. The 1.646 bb of beans sold and shipped are still down 15% from last year but in line with the 1.700 bb USDA export forecast. The Argentine soy harvest is complete with 50.5 bb harvested -- a bit higher than USDA's last estimate. DTN's National Soybean Index was priced at $11.17, 41 cents below the August futures contract.

Source: DTN, Dana Mantini Senior Market Analyst