- HEADLINES: Fund selling pounds corn/wheat on charts on hope for a cease fire in the Russian/Ukraine war; The break produces importer interest.
- Early selling pressure developed as Chicago rocks back-and-forth between headlines at historically high prices. Market volatility stays extreme with key support in July corn below $7.00 while December KC wheat has support below $10.00. Soybean futures are awaiting fresh demand from China, but fob basis falls has made Brazilian offers cheaper today. May Chicago/KC wheat futures traded down the $0.85 cent limit with Chicago limit down at midday.
- Chicago is caught in a broad trading range awaiting fresh headlines on the Russian war against Ukraine. Volatility is something that we have warned about since February, and there is no sign of it ending anytime soon. Buying and selling within air (order) pockets will be a feature into the summer with it not taking much volume to move Chicago in a sizeable way. We still hold a bullish bias on corn, soybean, and wheat futures. However, we would avoid selling sharp breaks or buying sharp rallies. Until the March 31 NASS stocks/seeding report is passed, a range trade is the rule.
- Chicago brokers report that funds have sold 15,000 contracts of corn, 7,600 contracts of wheat, and 3,400 contracts of soybeans. In soy products, funds have bought 900 contracts of soyoil while selling 3,600 contracts of meal.
- Ukraine President Zelenskyy indicated that ceasefire/peace talks were becoming more realistic with Russian Foreign Minister Lavrov suggesting that there was hope for a compromise. When-and-where such a compromise will occur is unknown, but the US is demanding that Russia pledge that it will never again make war against Ukraine before economic sanctions end. Demands for Russia to pay for their damage and promise to never inflict another war is something that Russian President Putin will have a hard time accepting. Nonetheless, the world grain market is down in the hope of negotiated solution.
- No one has any idea when a settlement of the Russian war will occur, which is why Ukraine President Zelenskyy sought an additional $800 million in military aid from the US in an unusual/televised speech to the US Congress this morning. Whether be it Afghanistan, Chechnya or even Vietnam back in the early 1970’s, history reflects that war takes longer to resolve in a peace accord than was ever initially expected. We hope that Russia sees its wrong and stops its aggression, but peace accords are complicated and are full of emotion. Be prepared for additional fits and starts on the Ukraine/Russian peace accord.
- US exporters report that even if the Russian war were to end today, it would be 3-5 months before Ukraine or Russian grain would be flowing again. There is too much logistical damage at Ukraine’s ports, rail lines and roadways (bridges) that would allow any normality of ag export trade. And the dropping of Russian economic sanctions could take even longer. Although headlines move markets daily, our point is that Black Sea normality is many months away.
- Cash traders indicate that a package of US cash corn was sold off the PNW for July with tonnage estimates ranging from 1.25-2.00 million mt. The buyer is being kept under wraps. Additional demand may be working, but the drop in price is producing new Asian corn interest. Importers see the break an opportunity to replace corn that will not be exported from Ukraine.
- The midday GFS weather forecast is wetter for the Central US Plains with a broad area of 1-2.00” of rain across Kansas/Oklahoma early next week as a strong system pulls westward from the Rockies. The system also produces rain for the Upper Lake States and the Delta. The S American forecast is wetter across NE Argentina into Southern Brazil with just a few widely scattered showers for winter corn in Central Brazil.
- Tuesday’s volume was the lowest for the year to date which reflects the shift of traders to taking reduced market risk on the uncertainty of headlines. Black Sea grain exports will be disrupted for months if a ceasefire is signed next week. Replacing Black Sea sales with US corn, soybeans and wheat is ongoing with US corn seeing the biggest rise. US export sales will be large on Thursday with a tradable Chicago bottom likely either forming today or early Thursday. Don’t sell this break would be our advice.