- Weather has been a “hot” topic from a US growers perspective in recent times and we thought it worth pointing out that although April and the first half of May were extremely wet, the month ended on the drier side with temperatures starting to warm up. It is pertinent that 45% of Central US crop areas received less than 75% of normal rainfall during May, while the N Plains endured less than 50% of normal precipitation. Dryness over the N Plains has to be closely monitored for expansion south and eastward in June and July.
- Overnight strength in soybeans gave way to technical trade which left both old and new crop slightly weaker at the close. Old crop prices continue to weaken against new, and the July finished 5.5 cents under November. The new crop soybean/corn ratio has narrowed to 2.35:1 (a four year low) and is expected to stabilise around 2.30:1. New crop Nov ’17 soybeans at $9.00 feel too cheap with the bulk of the growing season ahead. 12.3 million acres of soybeans are seeded in the parched Dakotas representing 14% of the US total. N Plains producers are concerned by dry soils and poor germination. We are turning more bullish towards soybeans as both oil and soybeans reach our summer downside price targets.
- The weather models are in better agreement with the GFS the EU and Canadian models starting to come together, and forecast warmth and dryness will be welcomed in all but the N Plains, where abnormal dryness and moderate drought are expanding. Whether rain returns in mid-June merits close attention, and overall the market lacks inspiration ahead of the growing season. Argentine corn offers are increasing as solid demand is noted. Brazilian corn exports in May totalled 310,000 mt, vs. near zero in May of 2016, and seasonal shipments will begin in earnest in late July. Record Brazilian corn exports are probable, and US export sales will likely slow through the balance of the crop year. The US big demand is about to end. However, unlike a year ago, world cash wheat prices are firm and are rising in the Black Sea. Hot and dry weather will plague key areas of Ukraine and S Russia over the next ten days, and the speed of drought development in the N Plains is noteworthy. Without a 170 bu plus national corn yield, US end stocks fall to or below 2.0 billion bu. The point is that uncertainty remains, and lower projected global corn stocks and a sizeable net fund short linger in the background. The debate centres on US corn yield and weather during July.
- US wheat markets ended steady to higher, with Minneapolis’s premium to CME and KC widening to $1.44-1.47 basis July. This premium is testing the highs of January, and is generally a level rarely seen in recent years. Drought is developing across the Dakotas, other issues are mounting across the N Hemisphere, and there are real concerns over 2017/18 HRS stocks. The midday EU weather model has added a fairly strong high pressure ridge in Ukraine in the 6-10 day period. As such, meaningful rainfall will be absent from the Black Sea in the next ten days and high temperatures there will reach into the upper 80s and low 90s in the June 8-11 window. Assuming the forecast is correct May 1-Jun 10 precipitation in Ukraine will range from just 35-60% of normal. Note too that Russian fob offers are firm at $192/mt for spot, vs. comparable HRW at $190. S Plains harvest results continue to feature sub-par protein levels, and on this evidence we can not advise a bearish outlook with managed funds in Chicago short an estimated 125,000 contracts. Harvest lies ahead, but weather pattern changes are needed in the Northern US and Black Sea to push spot futures below $4.20.
- 31 May saw Egypt’s GASC secure 180,000 mt of wheat in their latest tender, 120,000 mt from Russia and the remaining 60,000 mt from Romania. Interestingly, US grains did not feature at all in the lineup.