- An overnight Chicago rally uncovered fresh selling amid weak Argentine fob offers from Tuesday. Most EU, Russian, Chinese and S American markets are closed for the May Day holiday. Volume from overseas for the rest of the week is limited by those taking an extended holiday. The May Day holiday is being felt with Chicago volume anemic at midday. This allows funds the ability to push values around. We look for Chicago choppiness into Friday with next week’s trade more volatile as Central US weather forecasts and along with US/China trade talks taking on more meaning.
- Chicago traders estimate that funds have sold 4,300 contracts of soybeans, 2,100 contracts of meal and 1,600 contracts of soyoil. In the grains, funds have bought 2,200 contracts of wheat and 1,200 contracts of corn. Funds booked 4,000 contracts of corn early, but have sold most of that back out at midday.
- Argentine corn/soy fob offers are cheap relative to the US Gulf. Tuesday’s fob corn offer for Argentine May corn at $144/mt was the lowest in a decade!
- Argentine corn and soybean yields are reported to be fantastic and private crop estimates are rising. Commercial traders peg the Argy corn crop at 48-51 million mt with the soybean crop at 56- 58 million mt. The soy yields are so good that protein content is being adversely impacted. Yet, farmers are aware that the forward Peso rates are likely to fall sharply which means that they must store as much of the crop as possible to beat inflation. Argentina is unlikely to be able to repay its foreign debts leaving the chance for their October election up for debate. A prior Argentine President, Christine Fernandez released a book Monday called “Sincerely” which immediately sold out. It is expected that the book is a precursor of her entering the Argentine Presidential race. Argentine farmers will see a return to a sizeable export taxes with (if) her re-election.
- US farmers are sharpening their pencils and often finding that taking the Prevent Plant option is the best profit option for acres that have not laid down fertilizer. Farmers never like to let soils lie idle, but this year there is enough discontent, that taking a year off seems like a good option. If a corn farmer has a 200 bushels/acre APH (actual production history), taken the 85% revenue policy with a 55% PP (prevent plant) option, the payment would be over $370/acre. The payment looks more attractive that switching the acres over to soybeans at today’s low price. The point is that from a crop risk perspective, farmers need to calculate their PP option if mother nature does not turn around quickly. Switching to soybeans via todays depressed new crop bid is not the best cropping option. Most new crop Midwest soybean cash bids are between $7.80-8.40/bu.
- The midday central US GFS weather update stays wet across the Midwest, the E Plains and the Delta over the next 10-14 days. And cold temperatures will hold across Canada and much of the N Plains and Upper Midwest next week. These northern areas will be drier than the C and S Midwest, but the relative coolness will not allow seeding progress. The midday forecast is slightly drier across the E IA and NIL, but rains here of 1-3.00″ will still prove to be too much amid saturated soils. The 11-15-day period offers flooding rains for the S Midwest and the Ohio Valley. The excessive rain will further slow seeding and call into question that quality of SRW wheat.
- Amid the cheapness of Argentine corn/soybeans, US weekly export sales are not expected to be very good on Thursday. Traders are hoping for tepid levels to secure a break if the Midwest weather forecast is wet for the Midwest, Plains and Delta into mid May. US farmers are not willing sellers amid static planters and cool/wet weather. Mudding in corn is not yet an option, which may change next week. US seeded corn acres are in decline with yield to follow if 50% of the US crop is not planted by May 15; Prevent Plant is being widely discussed.