- HEADLINES: China buys US old/new crop corn; Midday GFS weather forecast has limited rain for NE/KS next 10 days; Brazilian soybean basis bottoming.
- Chicago futures are mixed at midday with soymeal higher while wheat futures sag on the EU model’s forecast of rain for Kansas/Nebraska next week. Corn and soybean futures are caught in between and trading both sides.
- Funds were aggressive sellers of wheat from the onset which has tugged corn/soybeans off their early highs. Everyone wants to be ahead of the Kansas/Oklahoma rain as US wheat futures have reached sizeable premiums to EU/Black Sea fob offers. The competitive nature of the world wheat market will add to US futures market volatility. We look for a mixed Chicago close with the bullish structure of old crop futures getting more bullish on the US corn sales to China and falling Argentine crop size. Chicago is a market of two steps forward, and one step back.
- Chicago brokers estimate that funds have sold 5,500 contracts of wheat and 3,400 contracts of soybeans, while being sellers of 1,200 contracts of soyoil. Funds are flat in both soymeal and corn. In corn fund managers were aggressive early buyers and then sold back their length on the break.
- US export sales for the week ending April 6 were 5.0 million bu of wheat, 20.8 million bu of corn, and 13.4 million bu of soybeans. For their respective crop years, the US has sold 671.5 million bu of wheat (down 35.4 million or 5.0%), 1,486 million bu of corn (down 710 million or 32%), and 1,847 million bu of soybeans (down 234 million or 11%). The weekly US corn, soybean and wheat sales pace was a touch lower than expected and was considered slightly bearish.
- FAS/USDA announced that China purchased 327,000 mt of US corn in its daily sales reporting. Of the total, 191,000 mt was for old crop and 136,000 mt for new crop. Several US exporters commented that the China purchase of US corn was a swap from an existing purchase from Ukraine. Worry is growing that the Ukraine Export Corridor deal will not be extended beyond mid-May. China has an estimated 1.0 million mt of Ukraine corn exports to ship during June and July. Should the corridor close, this business could be swapped to the US and Brazil. Today, a corridor extension is looking doubtful with Russia suggesting that the deal may be over.
- Argentine farmers are slow sellers of cash soybeans under the Soybean Dollar program that started on Monday. Daily soybean sales of 200-300,000 mt will not satisfy domestic crusher or Government demands for tax/currency. It is doubtful that the cash soybean sales pace will increase with inflation running 100% annually. Argentine farmers would rather hold cash corn/soybeans and only make sales when cash flow needs cause Soybean Dollar sales. Brazilian soybean basis levels have stabilised and are forecast to rally next week on strong demand and limited farmer seller.
- CONAB estimated the 2023 Brazilian soybean crop at 153.6 million mt and the corn crop at 124.9 million mt, right at recent USDA forecasts. The Brazilian corn area is likely to come down due to abandoned planting intentions in Parana due to excessively wet weather. The Brazilian Real has rallied to 4.90:1 US$ which is hurting Brazilian farm profitability. A continued rally in the Brazilian Real would end the push for new area expansion by Brazilian farmers.
- The midday GFS weather solution is further north and east with rain across the Lake States, which leaves the Southern and Central Plains with a deepening drought. Snows are forecast across IA/MN and WI on the weekend with accumulations of 2-10”. Warming and dry weather follows which will produce a rapid snowmelt. A second potent storm is due late next week which produces 0.5-2.00” of rain across IA/MN/WI. Temperatures are cool next week with limited precipitation for the Central and Southern Plains HRW wheat.
- Don’t get caught into thinking that a new bearish trend is developing today. It is two steps forward and one back amid favourable seeding weather for Midwest corn and soybeans. Any new rain for MN or the Dakotas is unwanted amid snowy and saturated soils. Our message remains the same, “don’t sell breaks”.