MARKETS: Monday Check-in

FX: The US Dollar gave back some gains last week. The smaller moves exerted less influence on prices. Most still expect the greenback to, bumpily, trend lower. That trend is supportive for US$ prices but weakens non-US$ prices. As always, the currency influence is usually only obvious when other influences are minimal. The week ahead has plenty of other potential influences.

Energy: Oil prices slumped week. Importantly, the oil futures curve kept its backwardation amid the move.

Rates: Fedspeak sounded more favourable to lower rates from September. Is the US President’s Fed cajoling working? We suspect not. Correlation is not causation. Some weaker US economic data was making the case for a cut. A cut would alleviate the pressure on carry a little, but the likely cuts are no shapeshifter.

Crop
An evolution point beckons in coarse grain crop estimates this week. The market has been debating Brazil and US corn crop estimates. Major official updates on both crops are due this week. Both are likely validate market conjecture that both crops are well larger. And so peg consensus crop estimates at higher levels. After that, another step up in global production estimates becomes harder. In part because higher yield estimates become less plausible. But also because of more contrary news. Summer crop estimates in Europe are already falling. A more significant fall is becoming more likely in Ukraine and Russia. And, more speculatively, the US Delta’s dry period might lop the top off US crop estimates. So, perhaps we are closing on the peak for crop estimates. For that to happen, though, the market needs validation from the USDA and CONAB.

SnD
Crops continue to be the biggest issue for coarse grain SnDs. Exports continue to be an important secondary SnD issue. US corn exports continue strong for this time of year, likely because Brazil’s production has been slow to emerge. Here too, CONAB’s Brazil corn crop estimate is important. With that estimate, analysts can assess the likely overlap of Brazil and the US being impatient corn sellers. And whether other producers, like Australia, will also face unusual competition. The SnD impact is mostly ‘through the year’. Carry time and costs are at stake.

Markets
Investor spread positions jumped sharply again last week. Those trades accounted for much of the rise in open interest. Investors cut their corn shorts sharply, but retain an ‘influencer’ level short position.

The View
Corn prices traded new lows last week before recovering modestly. Prices fell as the market consensus shifted towards larger US crop estimates. Dec ’25 corn briefly traded a shade below 4US$/bl. The recovery suggests the market was uncomfortable being ‘all in’ on big crop forecasts. The discomfort is likely less about big-crop scepticism and more about big-report fear. And, alongside that, a perception that much of the big crop impact was already ‘priced in’ below 4$. In our view, the bias is towards big crops and extended carry periods. So, the low for season 2025 prices is likely still ahead. And, that low is materially lower, say about 20US¢ (or 8US$/mt). Feed grain prices will broadly follow corn prices lower. This view is somewhat greenback-dependent.

Crop
Oilseed weather issues also took a turn for the worse. US issues remain modest in scale because they are confined to the Mississippi Delta. The largest oilseed issue is in Ukraine and Russia. Sunflowerseed crops have suffered from warm and dry conditions for some time, so lower crop forecasts are now more likely. Sunflowerseed is somewhat ‘off Broadway’ compared to soybeans. But, globally, sunflowerseed accounts for about 10% of oil consumption and about 6% of meal consumption. Thus, potential losses here can move the global supply ‘needle’. Canada’s canola provides contrary news. Most expect Prairie canola yields to be below normal. Rain this week will likely halt the decline, but it is too late to restore yields. Finally, the weather horizon will soon extend to end-August, and so the end of the critical window for northern summer oilseeds.

SnD
The production component is likely a shade lower, but not enough to move the overall supply balance from neutral. The USDA’s updated crop estimates this week are important for anchoring market expectations.

The Trade War’s impact on oilseeds continues to be vividly displayed soybean trade. China’s landed imports to July are 18% above last year. And bookings from Brazil for the rest of this year are well above those from last year. Anything China purchased recently is from South America. Despite that, US exports of season ‘24 beans are ahead of schedule. Having already sold a lot of soybeans to China, season ‘24 is less challenging. Season ‘25 is another matter. The market still needs convincing that the coming season’s production can find other destinations. We think there are alternatives, largely because global inventories are unlikely to be excessive. But the need for proof is understandable. For canola, successful US diversion would remove a potentially negative influence.

Markets
Position data perhaps showed the first signs that investors are stepping back from long oil share trades. To be sure, investors remain extremely short soybean meal and heavily long soy oil. So, the long oil-short meal trade remains crowded. Thus, these markets remain vulnerable. There is no obvious SnD catalyst for a reversal. But, the catalyst might simply be investors concluding that there is little further upside to oil share. Investors also made a hefty addition to their already large short position in soybeans.