- Chicago ag futures have largely sustained the overnight rally, though after funds bought/covered an estimated 45,000 contracts of corn, 22,000 contracts of soybeans and 10,000 contracts of Chicago wheat, new buying has slowed somewhat. We also mention that RSI levels have recovered substantially and quickly in spot corn and wheat. Markets won’t break in the near term unless a much drier pattern develops in late May, and this remains unlikely.
- This week’s EIA energy report was supportive ethanol and slightly bearish crude. Through the week ending last Friday, US ethanol production totaled 309 million, up 3 million on the prior week and the highest since mid-January. Despite the boost in production, weekly ethanol stocks fell another 7 million gallons. Since the middle of March US ethanol stocks fallen 90 million gallons, or some 9%. Weekly ethanol stocks/use is lowest since November. Futures-based production margins are modestly in the green despite the surge in corn value.
- US crude stocks continue build. Crude stocks last Friday were up another 5 million barrels on the prior week and sit 9% above early mid-May a year ago.
- No new US exports sales were announced this morning. Algeria secured a sizeable 500,000 mt of optional wheat at $201/mt, including cost and freight. This was very likely French origin and is a pretty aggressive price.
- Chinese economic data in April was weaker than expected. We have no way of knowing whether coming US and Chinese data points will be used as leverage in any continued negotiations, but China’s economic data suggests growth has been struggling. Chinese retail purchases in April were up 7% on the year, which is the lowest year-on-year growth since 2003. Chinese industrial output in April was up 5.4% year-on-year, vs. expectations of 6.0-6.5%. Chinese industrial output has been trending lower since early 2018.
- Australia has confirmed it has provided a license to import wheat from Canada. Aussie cash wheat prices have been declining for some time, along with the world market, but there are strong barriers to grain imports there, and so the recent transaction is getting attention. El Niño is losing steam, but longer-term soil moisture trends in Australia remain worrisome.
- Heat in Central Russia will end as high-pressure ridging exits the region beyond the next few days. A cooler pattern will take its place in the 6-15-day period. May rainfall in key areas of Russia’s winter wheat belt will be very close to average but a far cry from incredible precipitation (and yields) seen in 2016 and 2017.
- Newly released climate forecasts from the International Research Institute maintain above normal precipitation in the Jun-Aug period across the Plains and Western Midwest. NOAA monthly guidance is still very wet in the Plains/W Midwest in June. There is also a risk of heat/dryness in Europe this summer.
- The midday GFS weather forecast is drier in IA in the 8-14-day period but otherwise unchanged. There is still no hint that drier weather develops between now and the end of the month. Three major rain events are expected in the next two weeks. The first system lingers across the E Plains and Midwest Sun-Wed.
- US production ideas are declining fast. A Central US drought is very unlikely this year, but the nearby forecast includes very few days suitable for fieldwork between May 18-31. This is particularly the case in MO, IA, MN, IL and WI. The market has to work to incentivise late planting in the near term, or else the corn balance sheet tightens significantly on lost acreage and yield potential. A further rally Thursday triggers chart-based short covering. US climate comparisons to 1993 are gaining traction.