- Chicago values are mixed to mostly lower at midday as trader’s debate US trade negotiations of NAFTA and China, and how this might impact US export demand. The Wall Street Journal is reporting that the odds of a new NAFTA trade pact passing before yearend is in decline, and the lack of comment out of Washington on Chinese/US Trade negotiations has everyone fearing the worse. President Trump tweeted this morning; “That China is making hundreds of billions of dollars from the US for many years”. “Stay tuned!” The relative hardline stance against China along with N Korea retreating from nuclear disarment has most suspecting that little will be agreed to by the weekend, leaving the option that the US could place tariffs on $50 billion of Chinese goods. Fund managers fearing the worse are in liquidation mode. The surprise is that funds are moving length to the grains. It is going to be difficult to have a bull in either corn or wheat without soybeans. Consequently we look for a mixed close with the grain/soy spreads widening.
- Chicago brokers report that funds have sold 6,000 contracts of soybeans, while buying 4,500 contracts of corn, and 3,200 contracts of wheat.
- US ethanol production rose to 1,058 thousand barrels/day that will produce 311 million gallons of ethanol/week vs 306 million gallons last week. US ethanol stocks fell to 903 Mil gallons, down 8% from last year. US crude oil stocks were 432 million barrels, down 17% from last year which is as the US heads into the heart of the summer driving season. This will underpin spot WTI crude oil futures below $65.00. A push above $80.00 is likely if geopolitical concern increases.
- Much is being made about regional dryness that exists across the S Midwest and Plains. Yet, history reflects the lack of a correlation of mid-May dryness and US summer crop yields. A strong jet stream is passing across the Central US which will produce frequent rains over the next two weeks. For now, there is no evidence of a drought type of Central US weather pattern. The old farm adage of “plant in the dust and your bins will bust” may apply to 2018 US crop conditions in the Central US. Producers report this year’s corn/soy crop as being one of the best starts in years in the Central Midwest.
- Brazilian fob corn offers are rising while Brazilian fob soybean offers are in decline. August Brazilian fob corn is offered at $.90 over compared to Argentina at $.71 cents and the US Gulf at $.80 over. In soybeans, Brazilian cash basis has been falling almost every day for the past three weeks as China has been a diminished buyer in the world marketplace with spot offers at $.65 over compared to the US Gulf at $.70 over. Brazil is offering soybeans in abundance through September. In a known position, China has booked just 1 million mt of US new crop soybeans. They will likely book Brazil next week if US trade negotiations fail.
- The midday GFS N American weather pattern is drier across IA/MN/WI/N IL, and MI than what was offered overnight for the next ten days. The rain chances are pushed south and west to; NE, KS, MO, S IL, IN, KY, TN and the SE US. The window of drier weather should allow Lake States producers to push ahead with their spring planting, while crop areas farther south receive some needed rain. This remains an active weather pattern for the Central US with heavy rains across the Central Plains. NE/KS are favoured for 2-4.00” rain over the next two weeks, which will favor HRW wheat and the restoration of soil moisture for the summer row crops here. The midday GFS weather forecast is more favourable for crops with rain across the Plains and drier weather for the Lake States to advance corn seeding.
- Trade uncertainty is never bullish for Chicago amid sagging S American bean/meal premiums. HRW wheat looks to receive soaking rain and better rain chances exist for the Canadian Prairies in the last week of May. The surprise rise in Indian wheat production does not help wheat. USDA’s weekly export sales report will reflect slow US soybean sales. It is hard to be overly bullish anything Chicago unless adverse weather develops to cut supply.