- HEADLINES: New crop corn, soy fall to newer lows; GFS weather forecast stays optimistic on Plains precipitation; Macro input leans negative.
- Chicago ag markets are mostly lower, with any morning strength confined to KC and Minneapolis wheat. This week’s tour of Kansas so far has found decent yield potential in the centre and east of the state, but there is no indication yet that NASS’s deep cut to production there is invalid. Abnormal heat will be in place across the Canadian Prairies this week, and the need for elevated rain there becomes immediate in June. The North American hi-pro market, today, is an island of supply concern, but solving the global trade matrix becomes much more difficult if confirmed production loss spreads outside of the US southern and central Plains.
- There is no real catalyst to explain the break in row crop markets, but seeding dates across the principal Midwest are normal/early and coming warmth and dryness will facilitate an acceleration in emergence and growth. Brazil’s forward soy fob quotes have added premium in the last week, but basis there for immediate shipment remains deflated at $0.80/bu below July Chicago. Safrinha harvest begins in earnest in Mato Grosso by early June. Brazilian storage capacity remains an issue. Waning US export demand will keep old crop US corn/soy stocks above pipeline minimums, though Mar-May residual disappearance is key with interior basis still suggesting a lack of surpluses.
- There also remain lingering concerns over global economic growth. Crude at midday is down $0.40 at $70.70. Copper futures are down sharply, with spot COMEX scoring a new 6-month low. The Dow is down 200 points. There has been a modest flight to the US dollar as safety is sought. Other exporter currencies have been weakening this week.
- Paris milling wheat futures are down €4.75-5.00/MT and have surrendered the entirety of Monday’s rally. Rapeseed futures in Europe have fallen to two-year lows. Ag market liquidation has been the theme amid hope for favourable for Northern Hemisphere weather and a material rebuilding of stocks in 2023/24. Momentum has been on the side of the bears.
- We would note that all markets are deeply oversold, with corn, wheat, soybeans and soyoil RSI’s at unsustainable levels. A recovery is imminent, but the degree of this recovery in the very near term will be determined by Mother Nature.
- The midday GFS weather forecast is wetter in the southern and central Plains next week, and compared to the overnight run the model has expanded rainfall of 1-2” into NE and IA. Soaking rainfall is still projected across the TX/OK panhandles and much of CO and KS late this week and again next Wed-Fri. The EU and GFS models have been at odds over follow up rainfall in the Plains in the 6-10 day period, and changes to the EU solution this afternoon will be monitored. Otherwise, a warmer temperature profile moving forward is viewed as favourable. New North American concerns stay confined to the Canadian Prairies.
- Markets will hinge mostly on supply over the next 90-100 days. The lack of major Central US problems today can’t be ignored. Yet, it is difficult to be bearish corn and soy at/near levels that trigger crop insurance payments (basis 85% coverage) ahead of a growing season.