A Higher Overnight Trade Unable to Hold

MORNING AG OUTLOOK

A higher start overnight, driven by lower than expected crop ratings, was not able to hold across most of the Ag space as US weather forecasts have become less threatening while crude oil prices continue to pull back.  WTI Sept-26 crude oil is down $1.00 near $81.55 per barrel after Pres. Trump described peace negotiations with Iran as “good”, this while Iran and Oman are seeking an agreement to reopen the Strait of Hormuz.  Spot RBOB is up $.02 per gallon while HO is $.05 higher.  Near term forecasts have added rain to key growing areas in the central Midwest with much of Iowa and surrounding states expected to see .75”-2.0” by the end of this week.  Lighter amounts but still some precipitation expected for the far WCB and N. Plains.  The SW plains to remain hot/dry.  Week 2 of the outlook calls for above normal temperatures with normal to below normal precipitation for much of the nation’s midsection.  Much of Europe will be hot this week with only scattered rains in the east.  SA holding in a seasonably warm pattern with moderate to heavy rain in NE Argentina and far S. Brazil.  The US $$$ is moderately higher while trading to a 5-week high.  The Fed. Reserve begins their 2-day meeting with odds of a 25 bp interest rate hike at roughly 35%.  US stock indices are mixed.

Corn: 

Sept-26 and Dec-26 are both $.01 ½ higher at $4.53 ¼ and $4.75 ½ respectively with both holding within yesterday’s range.  Crop ratings slipped 4% to 63% G/E, vs. expectations for a 2% drop.  Ratings fell in 15 states while improving in only 3.  Overall ratings are the lowest for the growing season and are slightly below the historical average.  Ratings improved 7% in NC, 3% in PA and 2% in MO.  Ratings fell 11% in ND, 10% in KS, 9% in CO and 7% in MI.  78% of the crop is silking vs. 73% YA and 5-year Ave. of 74%.  25% of the crop is in the dough stage, just ahead of the 5-year Ave. and YA.  Current ratings would suggest an average US yield of 183 bpa, down from 184.4 last week with production at 16.002 bil. in line with the current USDA forecast. AgRural reports Brazil’s 2^nd crop harvest is 60% complete, vs. 68% YA.  While harvest in Mato Grosso is largely complete, harvest in the interior south has been slowed by rain.  MARS cut their EU yield forecast 6.1% to 6.93 mt/HA.

Soybeans: 

Aug-26 beans are down $.04 at $12.04 ½ while Nov-26 is $.05 lower at $12.08 ¾.  Aug-26 filled its gap from early last week however has so far held above $12.00.  Nov-26 hasn’t yet filled its chart gap needed to trade down to $12.04 vs. the overnight low of $12.06 ¼.  Aug-26 meal is down $1.30 at $319.50 while oil is off another 44 points at 710.02.  Aug-26 oil has 100-day MA support at 70.19.  Crush margins are down $.04 ½ at $2.79 bu.  Crop ratings fell 3% to 63% G/E vs. expectations for a 1% decline.  Ratings are the lowest of the crop cycle however remain slightly above their historical average.  Conditions improved in 5 states, declined in 11 while holding steady in 2.  Ratings rose 10% in NC, 9% in LA, 7% in MS and 5% in MO.  Ratings fell 8% in KS, 7% in MI and NE while down 6% in ND, OH, SD and KY.  80% of the crop is blooming, vs. YA and 5-year Ave. of 74%.  47% of the crop is setting pods, above YA and 5-year Ave. of 39%.  Current ratings would suggest an average yield of 53.3 bpa, down from 53.9 last week with production at 4.502 bil. vs. the USDA forecast of 4.475 bil.  The market has little wiggle room for US yields slipping below the current 53 bpa trendline forecast.  We’ll see if China uses this price break to acquire additional US soybeans.  We saw modest flash sales to both China and unknown yesterday.  US Gulf FOB offers has slipped to $.10 below Brazilian offers for Sept/Oct.

Wheat: 

Prices are $.03 to $.07 lower with all 3 classes experiencing 2-sided trade.  CGO Sept-26 is down $.07 at $6.53, KC Sept-26 is $.03 lower at $7.26, while MIAX Sept-26 is $.06 ¼ lower at $7.00.  CGO has fallen to a 2-week low while KC has held within yesterday’s range.  Russia and Ukraine continue to target each other’s grain storage, port infrastructure and vessels.  MARS lowered their EU soft wheat yield est. to 5.88 mt/HA, down from 6.0 last month and is down 7% YOY.  US winter wheat harvest advanced to 81%, vs. YA and 5-year Ave. of 79%.  Spring wheat ratings held steady at 53% G/E vs. expectations for a 2% decline, however 15% of the crop is now rated poor/VP up 3%.  Composite ratings have fallen for 4 consecutive weeks.  Conditions improved in MT and WA while declining in MN and both N. & S. Dakota.  92% of the crop is headed, in line with the 5-year Ave.  2% of the crop has been harvested.  Crop ratings would suggest an average yield of 49.4 bpa and production at 449 mil. below the USDA July-26 forecast of 475 mil.

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