New month, old week and it would appear that no one is interested in rocking the boat this morning. Wheat is the only market within the grain and soy complexes that is showing any strength, which is quite understandable as it is the only market that would not benefit much if any from the ongoing favorable weather forecasts. News is quite sparse overall this morning and the biggest headline that I have seen is "U.S. Agriculture Department Unveils Major Overhaul of Poultry Inspection System." I am sure for those in the poultry industry this important but for the grain markets…not so much.
There is still discussion about the poor quality of the European crops and the difficulty with harvest but that appears to be countered by the larger expectations for the Russian crop. Of course, that brings up another question. With the West implementing sanctions against Russia in response to the Ukraine situation, will that bleed over to grain trade? I suspect not. If France can still sell military ships to Russia and Europe needs their energy, I would not suspect anyone is going to mess with food. The International Grain Council issued updated estimates yesterday and boosted their wheat number 3 MMT to 702 MMT. This is still lower than the last USDA estimate of 705.
I do not think we should find it a surprise that the wheat market is stable again this morning, as I have pointed out previously we should have already absorbed much of the bearish supply information into current prices. If correct, we should move into more of a sideways pattern until we flush out more of the world production information of find a demand stimulus that could bounce us away from this price range.
The corn market has been able to remain above last week’s lows all this week but we may yet test that floor as we finish this current week. In the overnight trade, we are back down pressing against those lows and with a weekend ahead and basically nothing but a favorable weather forecast, it is difficult to think about who would want to step in front of the price at this point.
The most recent weather updates indicate moisture falling from Kansas through Minnesota later next week with moderate temperature along. You could not ask for a much better outlook as we finish pollination and continue ear fill.
The International Grains Council also bumped up their corn estimate, pushing it up 6 MMT to 963 MMT. The July USDA estimate was 980.96.
As noted yesterday morning, new crop demand has been good but by no means exceptional so not sufficient to stem the negative supply mentality. We could dip into a slightly lower low in the near-term but I still believe we should see prices move in more of a sideways pattern between now and the August 12th report. As I have commented in other letters, it would appear that we should eventually have potential to stretch down to the 3.00 level but ideally that would be just a bit further out into harvest.
The bean market appeared to see a little evening up of positions as we finished the month of July but for this first day of August, bears are back on the prowl. The weakness this morning just pushes us a little bit closer to the lower end of recent trading, which for November futures is down between 10.65 and 10.55 and realistically has done nothing to shift the near term outlook.
This market continues to be supported by the consistently solid demand for new crop and the remaining uncertainly about yield potential. For the demand part of that we of course receive constant updates but for the yield question, that remains the great unknown. Weather forecasts overall appear favorable for vegetation but if that produces big yields is yet to be seen. As I commented in the monthly letter yesterday, we do have a cushion with the huge planted acreage and a couple bushel drop in the projected yield would only produce a less negative picture, not a bullish one. We would have to look for bigger reductions than that to change the overall outlook.
All that said, it would appear that we should have potential to keep November beans roughly range bound (11.20 to 10.65) between now and the report on the 12th.