- HEADLINES: Chicago Dec corn takes back leadership as seeding progress unlikely to exceed 42% through Sunday; Iran to become a potent wheat importer.
- Chicago grains are mostly higher at midday. Fund managers want to position long on Chicago breaks for the coming summer growing season, but they note that equity and crude oil futures continue too trade wildly. This has cut daily Chicago volume and prevents a fund from chasing a grain rally too hard.
- US crude oil values are down on China’s economic slowing due to Covid lockdowns and tightening world refinery capacity. Demand for US unleaded and diesel is record large heading into a new summer driving season. US diesel stocks are record low for early May, which is why the US national average diesel price reached a record $5.75/gallon this morning.
- It is the record cash diesel price along with strong cash demand for biodiesel/renewable diesel that is rallying vegoil prices. There is no room to take out bioenergy from the US energy mix or energy prices would explode upwards. Supplies are that tight and demand looks to grow with warming temperatures. The volatility in energy and equity prices is likely to produce a mid-range higher Chicago close going home.
- Chicago brokers report fund managers buying 2,500 contracts of soybeans, 2,600 contracts of corn, and 2,300 contracts of wheat. In the soy products, funds have sold 4,100 contracts of soymeal and bought 4,300 contracts of soyoil.
- We hear that China is back asking for US Gulf old/new crop soybean offers and US new crop corn offers from the PNW. China has been placing orders under the market to secure US new crop corn. December’s $0.60/bu discount to July has world feed user interest in September forward purchases. December corn under $7.00/bu is too cheap relative to soaring world wheat values and the lack of Black Sea feed wheat supply/offers. The world will feed an additional 14-16 million mt of corn due to soaring prices and a lack of feed wheat availability. The demand profile for world corn improves almost daily.
- 2022/23 world wheat demand estimates seem to rise daily to levels that are becoming unfillable in a world that lacks Ukraine wheat exports in bulk. Today it is being reported that Iran will need to import 7 million mt of wheat to fill its milling needs from June through March. And export sources say that the same drought impacted Iraq and its wheat import needs will be 5-6 million mt. If Pakistan and India turn into net wheat importers, the sheer size of demand is becoming daunting with North African wheat imports likely to reach 39-40 million mt.
- World wheat importers and end users are poorly covered on forward needs on the hope for a Northern Hemisphere harvest price break. However, such a seasonal decline is looking less and less likely. If the EU drought worsens in the coming weeks, the world wheat importer/miller will find themselves in a rather dire supply situation of just a few reliable exporters. Depending on future EU/US weather, the wheat market could be preparing for another linear demand rationing rally. We would caution against being short of wheat futures amid the potential for new historical price highs.
- Odessa news reports indicate that Russian President Putin is targeting the export ports with rockets that is increasing the damage/rubble. Russia reportedly used hypersonic missiles on Odessa today. Damage assessments are awaited. The longer the Russian war against Ukraine goes on, the greater the chances of lasting damage to Odessa port infrastructure which will take months/years to rebuild. We doubt that more than 1 million mt of Ukraine ag exports can move to the world marketplace in the absence of its Black Sea export facilities being operational. This falls way short of rising demand.
- A 5–6-day period of warm/dry weather will allow for Midwest spring seeding to push ahead. Most Midwest farmers will restart planting either Wednesday or Thursday, so US corn seeding will not surpass 45% until after May 15. The midday GFS weather. Forecast has narrowed the window to plant before rain returns to MO and S IL. The N Plains will hold in a wet flow which will raise interest in the Prevent Plant program. Summerlike temperatures persist with 80s/90s/100s.
- US corn seeding will struggle to surpass 42% by Sunday with soybean seeding at 27-28% leaving more than half of the crop to be planted after the middle of May. N Plains farmers won’t get back in the fields until May 18-20. 2022 will be a late seeded year with acreage/yield drags. If the US losses 1.0 million acres of corn and soybean seeding as feared, the 2022/23 balance sheets become exceptionally tight. There is no room for error.