- HEADLINES: Europe closed for Bank Holiday. Wheat tests $6.00 on wetter Plains forecast; US warmth accelerates row crop seeding beyond next 5 days; Crude weak at midday.
- Chicago ag markets are mixed, with soy and old crop corn steady to higher and wheat sharply lower on hints of additional Plains rainfall in the 8–15-day period. The models are at odds with forecast details beyond the next 5-7 days, but both the EU and GFS place some measure of rainfall either in TX/far west OK or KS/NE May 10-12. Key will be whether last week’s rain had a materially positive impact on crop ratings in the southern Plains. Recall poor/very poor reached above 50% last week in KS, OK and TX. Active planting progress expected this week and an eventual warming of temperatures beyond May 5 have broadly limited new bullish enthusiasm on Monday. Spot WTI crude at midday is down $1.35/barrel at $75.40.
- We must expect sizeable volatility throughout the next 3-4 months. The beginning of the growing season and coming release of USDA’s May WASDE are noted. Turkey’s Presidential election on May 14 and the renewal, elimination, or adjustment of the Black Sea export corridor on May 18 follows. All are critical for long term direction. July KC’s drop of $1.20/bu in just 10 sessions speaks to improved weather and a loosening of EU wheat supply and demand, but also shows just how sensitive to changes markets have become.
- Our work maintains that the most important catalyst in recent days/weeks has been the collapse of S American cash basis levels as Brazil struggle to move its record soy crop, with similar challenges expected once safrinha corn harvest begins in mid-June. But it is Northern Hemisphere weather that determine whether global stocks are allowed to build adequately in crop year 2023/24. Threats today are isolated to lingering sizeable moisture deficits in the US Plains and worsening drought across North Africa. Each/every weather model release will be scrutinised by the market moving forward.
- US export inspections in the week ending April 27 included 60 million bu, vs. 37 million the previous week and a new marketing year high, 15 million bu of soybeans, vs. 14 million the previous week, and 13 million bu of wheat, unchanged. For their respective crop years to date, the US has inspected for export 941 million bu of corn, down 35% from last year, 1,743 million bu of soybeans, unchanged from last year, and 670 million bu of wheat, down 3%.
- USDA is likely to trim its old crop US corn and soy export forecasts slightly amid the aggressive nature of Brazilian offers. US wheat sales and shipments remain solidly aligned with USDA’s annual target. Closer attention will be paid to corn/soy domestic processing and margins, with NASS after the close to publish official US soy crush in March and product stocks along with corn used for ethanol production.
- The midday GFS weather forecast is drier in the southern Plains but wetter in NE, IA and WI, and still maintains additional needed precipitation in eastern OK and KS. Most importantly is that the model keeps in place a lasting period of warmth beginning this weekend. Maximum temperatures in IL/IL in the 6–10-day period are projected in the upper 60s and 70s, and this pattern of warmth is forecast to persist into mid-month. Dry weather blankets the Central US Fri/Sat. A series of light/moderate and scattered events return in the 6–15-day period. Confidence in the GFS’s location/coverage details is low, but at midday heavy cumulative precipitation will favour the Northern Plains and Delta/mid-South.
- The extraction of weather premium from wheat has collided with large European stocks and Russia’s ability to fill a sizeable portion of world trade in April. Timely US corn and soy planting keeps buying/short covering limited nearby. But it is the wrong time of year to be overly bearish and coming rampant volatility provides much better selling opportunities. End users should consider extending wheat supply coverage into autumn at current prices.