• Managed funds on Tuesday were long a net 416,000 contracts of corn, Chicago wheat and soybeans combined. This compares to 432,000 contracts the prior week and following late-week liquidation in wheat and soy, we estimate current managed fund length at just 381,000 contracts – the smallest since September.

• The market has been content to wait on weather improvement as crop moisture demands are low currently. However, this changes dramatically in the next 2-3 weeks. Should the Central US pattern fail to change by late June, managed fund length in Chicago ag markets will score new highs.

• We have previously mentioned how even small perceptions in supply change have a massive impact on even daily price determination. Watch weather forecasts intently.

• Palm oil market weakens on rising production but stocks unable to gain: Spot Malaysian palm oil futures have fallen 20% from highs scored in mid-March. Asian palm oil production continues to climb seasonally, with Malaysian output in May up 3% from April at 1.57 million tons. Palm oil production peaks in June amid concern over Covid-based demand weakness in India, the market understandably shed premium. Additionally, amid tight global vegoil stocks, elevated volatility can be expected.

• Yet, we would reiterate that the palm oil market remains tight. Despite the seasonal boost in production, Malaysian palm oil stocks in May totalled 1.57 million tons, up just 1% from April and down 23% from May 2020. Monthly stocks/use actually contracted in May. Palm oil will be the weakest of the world’s vegoils moving forward, but seasonal lows will be scored $0.40 per pound, vs. $0.20 a year ago. The world’s vegoil market structure stays bullish. Soaring biodiesel production and consumption compounds US soyoil supply issue long-term.

• Soybeans fall following western rains: Soybeans were under pressure to start the day as some better-than-expected rains fell in the Plains. Rains were a welcome relief for crops in the areas that received them, but not enough to break drought conditions.

• Selling accelerated at midday following a news report that said President Biden was considering a number of small refiner waivers. The report sent RIN prices sharply lower and took soybean oil futures to limit losses. Given the administration’s hard-line stance on climate change, it would be a surprise to see any relief on the RFS granted.

• The CoT report showed another big week of liquidation in soybeans and soybean meal. Funds bought 2,695 contracts in soybeans, 5,835 contracts in soybean meal, and sold 4,764 contracts in soybean oil.

• November soybeans found support under $14.30, and we maintain our bullish outlook on breaks. Rain in the Plains offered mild relief in the areas that got it. But drought continues to spread across IA and MN, while crops in N IL are now under weather stress.

• Dec Chicago corn ends weak on North Dakota/W Iowa rains; Forecasts next week critical: Chicago corn futures ended lower on Friday, but Dec ended the week up 19 cents amid the addition of weather premium. Any rainfall is welcomed across the driest areas of the North Central US, but moderate/scattered totals will not solve long-term moisture issues. As of June 9, rainfall of 10 or more inches is needed across the Dakotas, IA and portions of the Great Lakes to end drought prior to pollination. Dry/warm conditions are most probable into late month.

• Forecasts late next week begin to peek into the opening days of July. The models have been abysmal in forecasting extended range weather as of late, but for better or worse extended range guidance drives price action nearby.

• There will be no tolerance for sustained heat/dryness, and in fact such a pattern will make any acreage hikes on June 30 somewhat irrelevant. We would strongly advise against chasing breaks as weather becomes critical to yield and price determination.

• Amid record old and new-crop demand, even minor corn yield loss is bullish. Managed funds on Tuesday were long only 276,000 contracts vs. 290,000 the prior week and vs. April’s peak of 402,000.

• Spring wheat drags Chicago wheat lower: US and European wheat futures ended lower as unexpected rain impacted swaths of North Dakota. Short-term regional benefits to spring wheat yield have occurred, but concern over massive production loss is intact as heat/dryness resumes across the Northern Plains over the next 10 days. Close attention will also be paid to ongoing heat and dryness across the Black Sea spring wheat belt. Little to no moisture relief is forecast into late month. Soaking rain is needed across Central Russia and Kazakhstan during July.

• Managed funds on Tuesday were net short 1,400 contracts of Chicago wheat. There will be no shortage of world wheat supply in the short-term as the Northern Hemisphere harvest begins in July.

• Yet, cash HRW in W Kansas this evening is quoted $60 per ton below cash corn for July-Aug. EU wheat’s discount to corn has reached $59/mt. And importers have returned to the market despite new crop fob prices being some $60-65/mt above last year’s seasonal low.

• We doubt that the spec community opts to hold a short position for any length of time. The new crop harvest gets absorbed quickly by record global consumption. Sep KC wheat below $6.20 and Sep Chicago wheat below $6.50 are places to add to forward end user coverage.

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