- HEADLINES: Old crop futures correct ahead of holiday weekend; No sign of corn demand slowing
- Chicago futures are wildly mixed at midday, with wheat and old crop corn and soy down sharply, while new crop contracts maintain modest gains. Profit taking ahead of a 3-day weekend is noted, particularly following fund buying corn and beans on Wednesday of 32-35,000 contracts. The ongoing collapse in Black Sea cash wheat values continues to weigh on US and EU futures. EU and Canadian canola markets also sharply lower at midday, with soyoil following.
- Fresh news of any kind is sparse. US weekly export sales are bullish corn but confirm that wheat and soy exports will be limited until late summer/early autumn. Corn sales through the week ending March 25 totalled 31 million bu, down sharply from the prior week’s 174 million but this reflects sustained buying from traditional importers of US origin, which will continue through summer. Total US corn export commitments now sit at 2,588 million bu, just 12 million short of the USDA’s annual forecast with 22 weeks remaining in the crop year. An upward revision to US corn exports of 200-300 million bu is expected within the April USDA report.
- US wheat sales totaled 9 million bu, vs. 13 million the previous week.
- US soybean sales totalled 4 million bu, unchanged on the prior week. the rapid slowing of US sales reflects more aggressive Brazilian fob offers, which as of this morning remain $0.60-0.65/bu below US Gulf quotes. US soy export demand will remain slowed into the tail end of summer. Yet, domestic crushers are now left to battle for remaining supplies. We would reiterate that interior soy basis levels firmed following Wednesday’s limit moving. This indicates that there is a real scramble for origination, which will worsen during the summer months.
- And we also maintain that the USDA’s US soy export forecast is still 100 million bu too low. To meet the USDA’s annual forecast, weekly sales over the next 22 weeks must average only 1 million bu/week. Even in years of large spring/summer exports from Brazil, US sales to nearby destinations average 10-20 million bu per week April-August. Exports will not be a driving market factor, but will not cease entirely.
- Spot WTI crude oil is up $1.40/barrel to $60.50 at midday as the market expects OPEC+ production increases to be rather gradual (350-450k per day) in the May-July period. Energy demand in the US and Asia will absorb such supply increases easily and downside risk in energy remains limited. May Chicago ethanol is up $0.08/gallon at $1.91, a new multi-year high, on depleted US stocks. Normal ethanol production rates lie just ahead, which suggests USDA’s corn feed, industrial and export forecasts are understated.
- The midday S American GFS weather forecast is wetter in N Brazil but drier across the southern 2/3rds of Brazil’s safrinha corn belt. High pressure ridging will remain intact across south-central Brazil throughout the next 10 days. This will act to block precipitation, and sustain heat, across major producing states Mato Grosso do Sul and Parana. Dryness returns to all areas in the 11-15 day period. There is also concern surrounding Canadian model output that is completely dry across a bulk of Brazil’s safrinha belt throughout the next two weeks. The Canadian model has been the best performer in the 6-15 day period over the last 30 days.
- For better or for worse, volatility will stay at levels not seen in years throughout the spring and summer months. But structural supply issues will not be solved without two consecutive years of above-trend corn/soy yields.