The Hueber Report

 

While the week may be new, the stories sound the same.  Devastating heat waves across Europe and Australia and dry conditions in the Black Sea continue to support the wheat and to a lesser extent corn markets while additional shots from the tariff cannons are fired back and forth between the U.S. and China pressuring the beans. Realistically none of these markets have done anything outside of last week’s ranges and without something fresh and more specifically positive, bulls could soon become restless and make for the exits for the time being.

If you recall, last week one of the stimuli that provided wheat with an extra kick were rumors from Ukraine that they could be forced to limit exports due to crop shortfalls and obviously over the weekend, the government decided they needed to dispel that talk.  The acting Ag Minister announced that the wheat crop will actually come in at 24 MMT versus the previously projected 22 to 23 MMT, so evidently, concerns are over.  In a related message, he also stated that no one in Ukraine will get the flu anymore.  

We will, of course, see what the USDA thinks about all of this later this week when they release the August crop production and supply/demand reports.  I have yet to see any comprehensive trade estimates, but on Friday, Informa provided their updates.  Domestically, they have total corn production at 14.392 billion coming from a yield of 176, which is unchanged from the previous number but in beans, they boosted production to 4.445 billion with a yield of 50 bpa.  Previously they were at 4.425 and 49.8. 

Managed money continued to cover shorts or add to longs last week.  They purchased 78,000 contracts of corn bringing them to a net short of 52,000 and bought another 29,000 contracts of wheat where they now hold a net long of 53,000.  They did cover 3,000 contracts of beans but remain short 59,000 and added 3,000 contracts to longs in beans (53,000) and added 2,000 contracts to short bean oil (92,000). 

The Economic Daily in China published a report that projects that nation could reduce bean imports by more than 10 MMT over the coming year.  This would be achieved through a combination of new lower protein formulations in animal diets and increased usages of sunflower seed, palm seed, etc.  While I am not sure if this is government posturing for trade/tariff negotiations, the timing does seem a little suspect, as China’s hog industry continues to modernize, there is probably also some reality in this as well.  Needless to say, global soy demand has been predominantly driven by this nation and a leveling off, or reduction would of course not be price positive, to put it mildly.