- Chicago ag futures at midday are weaker as global financial markets drift lower for a second consecutive day. Crude’s reaction to the recently announced cut to OPEC production remains non-existent. And the IMF in its updated world economic outlook painted a bleak picture for growth and consumer spending in 2021. Throughout the spread and impact of Covid-19 there just hasn’t been much offsetting bullish commodity input.
- The IMF this morning projects the global economy in 2020 to contract by 3%. This compares to its October 2019 outlook which projected the world economy to grow by 3.4%. Advanced economies are expected to contract a massive 6% in 2020, with emerging markets projected to contract 1%. Meat markets will face product shortages as bottlenecks are triggered via lowered capacity. But unemployment and the loss of per-capita income/spending will on the margin weigh on total food consumption into late year. IMF does foresee a quick recovery in the global economy in 2021 (5.8% growth) but only if Covid-19 is properly contained.
- Egypt’s GASC via its Monday tender secured two cargoes of Russian wheat for delivery between May 15-June 5. Egypt paid an average fob price of $242/mt, the highest in 14-month and which includes a decent premium over fob quotes Monday evening due to logistical risks. Yet, a larger purchase was anticipated after Egypt stated it would resume imports during its local harvest to boost strategic reserves. We would highlight that, as of now, new crop wheat out of Russia and Europe is offered $24-30/mt below spot offers. This will limit additional importer interest in wheat for May-Jun arrival.
- The Black Sea’s two-week forecast is consistent with prior runs and features a much more progressive pattern of precipitation into the final days of April. There is only one single major precipitation event forecast through the period, but rather a pattern of light/steady rain will trigger cumulative two-week totals of 1.0-1.8″ across key oblasts in the South, Central and Volga Regions. This is well above normal for the second half of April in Ukraine and Russia.
- It is estimated that managed funds this morning were long a net 30,000 contracts of Chicago wheat. There is a risk of speedy liquidation if regular rainfall materialises in the Black Sea and continues into May. Wheat’s longer term outlook hinges almost entirely on the EU/Black Sea weather into early May.
- Updated EU model weekly guidance also features normal/above normal rainfall across some 70% of Brazil’s safrinha corn belt into April 27. Total corn production potential in Brazil has stabilised at 99-100 million mt following recent and needed precipitation in Parana and Mato Grosso do Sul.
- Spot ethanol futures have crawled back to at $.96/gallon, basis spot. However, Futures-based production and blending margins remain deeply negative. We expect the EIA’s data Wednesday morning to show another cut in weekly production to 185-190 million gallons vs. 198 million the prior week and vs. 299 million in late April a year ago. Additional declines in US corn consumption lie ahead.
- The midday GFS weather forecast is similar to the morning run. Winter-like temperatures this week transition to normal/above normal level readings next week. Light snow will impact a narrow band stretching from N MO to NOH in the next 72 hours. This will melt quickly as temperatures rise. The GFS forecast also maintains the potential for heavy rainfall across IL, IN and OH next Wed-Fri, but the EU and Canadian models are much drier next week. The return of abnormal cold is unlikely beyond this week.
- Weather premium is being extracted from the KC wheat market. IMF data suggests 2020′s economic recovery will be a drawn-out affair.