- HEADLINES: Chicago mixed with European wheat closing strongly; Soybeans sag on bearish US soy export expectations; Drier GFS weather forecast for Northern Plains next 10 days.
- Positioning for the USDA/CONAB Reports. Chicago grain futures are mixed at midday with soybean futures weaker while the grains hold in the green. The USDA April report will be released Thursday, and pre-report positioning is featured this morning. Traders are betting that USDA will cut US 2023/24 soybean exports by 20-40 million bu due to S American sales competition and slowing US export sales. Moreover, traders expect that WASDE will raise US corn ethanol demand by 25 million to a record 5,400 million bu and adjust 2023/24 US corn feed/residual upwards by 50-75 million bu due to near record September-February US corn feeding rate that was expressed in the March 1 Stocks report. Price (the market) is doing its job by initially building US corn domestic use. US 2023/24 wheat end stocks are forecast to be slightly larger on a potential cut in feed use of 10-15 million bu. The report lean is supportive to corn, neutral to slightly bearish wheat, and bearish soybeans.
- We would argue that WASDE must also raise its 2023/24 US soybean crush rate by 20-30 million bu which would nearly offset the entire export decline, but WASDE may wait until the May report before raising crush in their wanting to make sure the US soybean processor is able to maintain a margin. US crush margins are floating just about profitability depending on the age of plant. We see soybeans as a sell the rumour and buy the fact opportunity.
- The USDA announced the sale of 254,000 mt of US soybeans that were sold to an unknown destination for the 2023/24 crop year. The buyer is rumoured to be the EU that is securing/importing US old crop soybeans, crushing them and then drawing back the soyoil into the US for various carbon and blender’s credits. The spread between Brazilian and the US Gulf is just 28-35 cents/bu for mid to late summer which favours US soybeans if soyoil is exported back to the US for subsidy. We understand that 500,000 mt of old crop US soybeans have been sold in recent days to EU crushers to profit from like transactions. Spot Chicago soyoil is testing key chart support at the 50-day moving average and bottom of a flag formation.
- US ethanol production was 310 million gallons last week, up 10% from last year, but down 5 million gallons from last week. US weekly ethanol stocks were 1,101 million gallons which was up 4% from last year as it nears a seasonal peak. The strong US usage season for ethanol is just ahead and stocks will soon start to be draw down on the return of 15% ethanol blends across the Central US. We would argue that WASDE should raise the US 2023/24 corn ethanol grind by 25 million bu either tomorrow or in May. Seasonal downtime is ahead, and the size of the decline will define if additional corn grind increases are needed. US ethanol margins are profitable, and the swap market argues that cash ethanol prices are rising on demand. The weekly production of US ethanol is record large.
- Chicago brokers estimate that managed money has sold 4,600 contracts of soybeans while buying 1,900 contracts of wheat, and 4,100 contracts of corn. In soy products, managed money has sold 3,200 soyoil and 2,500 contracts of meal.
- Additional heavy rain will drop across the N Delta and the Gulf States for another 24 hours where corn seeding windows are closing. The system pushes northeast through the Eastern Midwest with rainfall of 0.4-1.50”. The Plains and the W Midwest stay dry with warming temperatures. A new system forms over the E Plains on Monday and slowly lifts northeast. The model is slightly further east with less rain compared to the overnight run and more like the EU model, though it is wetter through the Eastern Dakotas with rainfall of 0.25-1.00”. This storm lifts northeast into Thursday with cold and dry weather encompassing the Central US into the next weekend.
- Chicago grain futures are awaiting the April CONAB/WASDE reports tomorrow. The reports are expected to be non-inspiring, and the focus of traders quickly shifts back to Central US and world weather. Planting will accelerate across the Plains/W Midwest, but N and W Plains dryness causes worry for wheat.