- It has been a mixed morning with Chicago grains weaker with soybeans slightly higher at midday. Trade volume remains diminished with few end users desiring to chase a rally without a dire US/world weather problem. China is securing US soybeans daily which is helping underpin the complex. For now, most argue that COFCO is booking US soybeans for their own crush plants. At some point, China is expected to start securing US soybeans for their reserve. We look for a mixed Chicago close as the fund selling abates in soybeans/wheat heading into the weekend. Funds appear willing to add to their growing net short corn position.
- Chicago brokers estimate that funds have sold 3,200 contracts of corn, 2,900 contracts of wheat, while buying a net 1,200 contracts of soybeans. In soy products, funds have bought 1,900 contracts of soyoil while selling 1,500 contracts of soymeal. Fund managers appear to be slowing down on their sales of soybeans and wheat as both test chart-based support.
- Weekly US export sales for the week ending May 7 were; 13.0 million bu of wheat (both crop years combined), 42.2 million bu of corn and 17.5 million bu of soybeans.
- For their crop years to date, the US has sold 838 million bu of wheat (up 24 million or 3%), 1,000 million bu of corn (down 456 million or 31%), and 1,273 million bu of soybeans (up 48 million or 4%). Research argues that WASDE is still too high with its US 2019/20 soybean export estimate by 50-100 million bu. Chinese demand will be focused on the new crop position with August needs covered.
- FAS this morning confirmed that China secured another 198,000 tons of US soybeans and 20,000 mt of soyoil. The soyoil sale was a surprise while China’s soybean purchase was under trader expectations. We continue to hear that China is bidding for September/October US soybeans on basis.
- The CFTC warned the US Commodities Industry should it should be prepared for heightened market volatility and the potential for negative pricing for certain futures contracts in the wake of Covid-19. Last month, the US May WTI crude oil futures contract fell below zero for the first time that a non-electrical commodity was priced at a negative level. The CFTC issued the advisory letter to warn traders and brokers of the potential for negative prices and to combat against the occurrence during the delivery period. Exchanges may seek emergency authority to either liquidate, transfer positions or suspend trading to preserve the integrity of the marketplace if needed during expirations.
- The US Transportation Dept revised rules for short haul US truck drivers allowing them to work 14 hours instead of 12 and expanding the distance limit to 150 miles from 100. The new regulation will salvage $2.8 billion over 10 years.
- The midday GFS’s US weather forecast is wetter than the overnight run with showers/storms to be more frequent following the weekend. Research cautions that the position of Tropical Storm Arthur is causing sizeable run to run model deviations. However, outside of the N Plains, much of the Delta and Midwest would receive 1.50-3.00″ of rain over the next 10 days. Such rain is 50% greater than average. We suspect that the forecast is too wet with downward revisions to come. A warming of temperatures is imminent, with highs across the Plains and Midwest to reach into the 60′s, 70′s and 80′s.
- Wheat and soybeans have limited downside price potential from current depressed levels. This is no place to be making new sales, but rallies depend on enlarged China buying of US soybeans or a continued drying weather pattern across Europe and the Black Sea. We are troubled by the ongoing decline in European soil moisture into June. The 14-day forecast calls for only sporadic rain. A bearish long-term outlook is advised with corn likely to score a short term trading low in early June.