- The soy complex is higher with corn/wheat slightly lower as traders offer optimism regarding US/China trade. July soybeans held against $10.00 support amid the ZTE olive branch held out by President Trump to Chinese President Xi. US wheat futures have fallen on funds being long of Chicago wheat with rains slated to drop across the Plains and portions of the Black Sea this week. Corn futures appear caught between the bullish tug of soybeans and the bearish pressure of wheat. The NASS May 13 corn seeding pace will determine if corn needs to add or subtract weather premium. North Central US producers report that if they cannot get corn seeded in the next 7-10 days, they will switch acres over to soybeans. WI, MN, MI and N IA farmland has been swamped with excessive rain and recent cool temperatures have limited evaporation. It will take 4- 6 days of warm/dry weather before soils firm enough to allow the planting effort to resume. We estimate that 35 million acres of US corn have yet to be planted or 40% of the 2018 crop.
- Chicago brokers estimate that funds have sold 3,400 contracts of wheat and 1,000 contracts of corn, while buying 8,200 contracts of soybeans. In soy products; funds have bought 5,400 contracts of soymeal and 1,100 contracts of soyoil.
- July soybeans have forged a technical reversal up as Friday’s high has been taken out. It is a reversal up from key $10.00 support. The next upside price target rests at $10.35-10.40/bu, last week’s high.
- The US is softening its position on trade with the ZTE announcement by the Trump Administration ahead of the arrival of the Chinese trade delegation late week. Moreover, Asian sources suggest that China may be preparing to allow US sorghum back in as a conciliatory move. No confirmation is offered by US cash traders in the Gulf, but the rumour has made the rounds. We will continue to follow the news, but until Chinese or US sources confirm a removal or relaxation of China sorghum import tariffs, we are suspicious of the rumour. Nonetheless, in the background of ZTE, the rumour is interesting.
- The midday GFS N American weather pattern remained wet and warm through the Plains and the southern 2/3’s of the Central US. The GFS is farther south with rain compared to the overnight EU model solution. Note the heavy rains across FL from a tropical feature with the SE US drought being diminished. The exact positioning of storm systems will be key to Midwest planting with any northward shift in the rain helping to worsen delays. If US corn seeding is less than 58%, any additional rains will be bullish corn. If US corn seeding is 64% or more, the rains will prove more beneficial to crops. Weather in the next ten days will be key if N Midwest and Dakota farmers shift corn acres to other crops, namely soybeans. Northern US producers are becoming anxious to get corn seed in the ground.
- A softening of US/China trade ideas has pushed bulls to own soybeans/soymeal. Wheat is lagging amid Plains rain forecasts and the slowing US old crop export pace. The dynamics of US trade negotiations/weather makes positioning in Chicago markets difficult. There remains a bull story in corn with Brazil’s winter crop in decline.