Jul 16, 2020
After getting through the simply classic July 4th week weather market, we now have some exciting things going on in the grain complex. Things are starting to feel a bit more demand-led.
As expected, the WASDE did not give us anything out of the ordinary. Those expecting a yield drop because of some pineapple pics on Twitter DID not do their homework on how the World Agricultural Outlook Board (WAOB) does their July WASDE’s. Since we were still hot and heavy in the weather maps last week the major wet/cool snap shook markets badly last Friday and that heavy tone carried through on Monday. But that was then – what do we have now? These are FUTURES markets we are talking about.
- Demand – China is buying plenty of corn – they have awesome import margins and it feels like they actually need the stuff. If they show progress towards Phase 1 and make money it seems like a no brainer and we will keep seeing more. Before getting the horns out and going FULL BULL remember that the US does not arb the best into other destinations – UKRAINE and SAM are cheaper.
- WEATHER – temps much cooler last week and you had DRENCHING rains across the belt. BUT you have some HEAT sneaking into the back end of the forecast at least in the morning maps. (mid-day maps were not bullish, unfortunately) Currently, the market is fading the temps because the Sahara like temperatures that were “forecasted” simply did not come to fruition.
- FUNDS – Currently call the funds short ~175K contracts of corn – they covered 150-160K from their lows but have added back to the short it as the rains fell across Illinois.
Continuing the theme from the corn market you have an impressive book of soy sales on Aug/Sep beans into China and they have been buying probably more than we have expected. Aug Soy calendar spreads much firmer on the business and the fact that beans feel hard to buy despite the good ownership by the crush plant.
Temps higher in the next 15 days give some concern on pod fill but since estimating soybean yields is like predicting the roulette table. I will stop before getting over my skis. (But since we are talking casinos BLACK 33 is always my go-to bet when I am on the Roulette Table.)
Speaking of Casinos – Welcome to the wheat market!
Have a good weekend!
Grain Team – Aaron, Connor, Dallas, Hank, James, Jenna, Joel, and Kevin