December corn futures finished today's session 4 1/2 cents higher at $6.18 1/2, November soybeans were 1 cent lower at $14.27 3/4, and December wheat in Chicago was 17 cents higher at $8.16 1/4.
Corn, soybeans, and wheat all traded moderately higher to start today as light buying surfaced in each commodity. This started in the overnight session and was accelerated by the Consumer Price Index report that came in just under the average trade guess at 8.5% but was down from the 9.1% in July. This may prevent the Fed from raising interest rates as much in September as they did in July, but an increase is still fully expected. This weighed on the US dollar heavily today and did bring some buyers to commodities. The most support came from positioning for Friday’s WASDE report and thoughts we could see slight declines in the US yields. The question is if demand will be altered enough to offset these. Weather forecasts limited today’s strength as forecasts are calling for much cooler temperatures and precipitation chances across the Corn Belt over the next week. These outlooks pressured soybeans into the close.
Corn futures continue to be driven by the losses in the EU crop and how they may lead to elevated demand for US inventory. There are now estimates that the EU will need to import upwards of 25 million metric tons of corn this year which would put the group as the world’s largest importer for the year. EU needs were verified by the removal of nearly all GMO import restrictions. A sharp rally in Brazilian corn that put them above the US was also favorable for future exports. Trade is expecting to see a slight decrease in the US corn yield this week, and one analyst has it down to 167 bushels per acre which seems unlikely this month. Ukraine reports its July corn exports were up 22.7% from June, but still very light.
Soybeans posted solid advances early today as strength in the cash market is supporting futures. US crush margins remain very high and concerns over the available soybean supply are causing sizable improvement to basis. Thoughts we may see a slight decline to yield this Friday was also supportive, although trade is also expecting to see a downward adjustment in demand as well. One analyst put out a yield of 49 bushels per acre which is well below what is needed to satisfy demand. We had a sale of 196,000 metric tons of soybeans to China for 2022/23 delivery which was also positive as it signaled a potential easing of trade tensions. US weather is less threatening for pod setting and fill which tempered gains.
Wheat futures posted decent gains today as global demand for US offers is expected to rise. Doubts over Russia’s ability to export large volumes of wheat are rising, especially high quality wheat. India has announced it will be lowering import tariffs on wheat and also limiting how much can be held in storage to prevent hoarding and lower costs. Even so, India is likely going to need sizable imports to satisfy demand this year. EU wheat exports are up 30% on the year but it appears they may be about out of exportable reserves. Australia is supplying a large volume of the current global wheat needs, but this does open the door for more US trade.
Ethanol manufacturing for the week ending August 5th was lower than expected and down 2% from the previous week. A reported 7.15 million barrels of ethanol were produced in the week compared to 7.3 million the week before. Ethanol reserves decreased 138,000 barrels during the week and now stand at 23.26 million. This compares to the 22.28 million barrels that were in reserve a year ago.
The high value of the US dollar remains a factor in global trade. We have seen buyers pass on US offers in recent weeks even on commodities we are highly competitive on, primarily corn. US corn is now just under Brazil in the global market. When the currency valuation differences are factored in this spread widens, however. As a result, many buyers are still passing on the US if possible. The strong US dollar is favoring import buying though, which could end being more of a market factor later in the year.
The commodity that is being the most impacted by the strong US dollar right now is wheat. US wheat demand tends to slip lower in times of high currency values. This is being verified by cumulative wheat sales to start the marketing year that are the lowest since 1990. One factor that is offsetting the strong US dollar is the quality of the US wheat crop. While the global wheat supply is adequate this year there are reports of low inventories of milling quality inventory, which the US has.
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