We kicked off the day with MBA 30-Year Mortgage Rate, MBA Mortgage Applications, MBA Mortgage Market Index, MBA Mortgage Refinance Index, and MBA Purchase Index at 6:00 A.M., Core Inflation Rate MoM & YoY, Inflation Rate MoM & YoY, CPI, and CPI s.a., at 7:30 A.M., EIA Energy Stocks at 9:30 A.M., 17-Week Bill Auction at 10:30 A.M., and Dairy Products Sales at 2:00 P.M.

WTI crude futures ended weaker on Tuesday, but until petroleum demand weakens seasonally in winter, it’s clear that spot crude is undervalued below $72. There has been a steady tightening of US crude supply and demand that pre-dates the world’s recovery from COVID. US crude stocks today cover just 6 weeks of consumption when strategic reserves are included and just 3-weeks when reserves are excluded. The tightening of US crude supply/demand has occurred despite record production. A range of $73-$80, basis spot, is forecast into Nov/Dec. Last night’s API data showed draws in crude -5,205M, Cushing -2,777M, gasoline -3,689M, and distillates had slight builds of +0.612.

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Central US Forecast Maintains Welcomed Rainfall in Central Midwest; Near Term Dryness Concern Centered on TX/Delta Region: The EU and GFS models agree that rainfall of 1-2” impacts MO, eastern IA, MN, WI, IL, and western IN, in the next 72 hours. NOAA favors MO, central IL/central IN with regional totals upward of 2-3”. Crop health in the C Midwest stays elevated. The major forecasting models are in agreement that a drier and progressively warmer pattern emerges after Saturday. Model guidance features little/no rain outside the east coast/New England August 18-28. Extreme heat will remain a feature across S Plains & Delta region, where max temps in the 90’s/low 100’s will be routine. The EU forecast 27% of normal rainfall the next two weeks. A pattern of net moisture loss occurs across the southern half of the Ag Belt. Normal/surplus soil moisture stays in place across the north.Were keeping an eye on South American weather, and the Ukrainian weather remain dry and stagnant, with lite/scattered showers are possible in W Ukraine Aug 19-20. CONAB trimmed its Brazilian corn production at 115.6 MMT’s, vs. 115.7 in July, and estimates total corn supply in crop year 23/24 down 8 MMT’s from USDA. CONAB pegs beginning corn stocks at 71 MMT’s vs. USDA 10. Brazilian corn supply and demand remains shrouded in mystery, but like soybean cash markets suggests some measure of supply dislocation has occurred. CONAB also projects domestic Brazilian corn use this year at 84 MMT’s, vs. USDA’s 79.5 and estimates exports at 36 MMT’s – vs.- USDA’s 50! Ag Resources (ARC) doubts CONAB is correct with its 36 MMT export number, but it’s difficult to reconcile USDA’s annual balance sheet with the recent surge in Brazilian fob premiums to $1.12-$1.15 over CBOT for delivery in November. The seasonal evolution of Brazilian fob basis is in June – has passed. ARC notes that Brazil is dealing with several issues, including deflated interior prices and river-based logistics in the north due to drought. But whatever the reason, US corn is priced below Ukrainian and Brazilian origin throughout the next 8 months. Enlarged US corn exports will continue, and ARC notes that competitive US Gulf/PNW prices have allowed for abnormally strong sales and shipments since spring. US corn export demand has been uncovered. Additionally, Brazilian river logistics are unlikely to improve until November, when seasonal rainfall arrives in earnest. The trade has been dismisses of CONAB production estimates this season but rising corn basis and uncompetitive soybean cash prices are becoming noteworthy.

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