- Ag markets sag on drop in Russian cash wheat, weaker Brazilian soy FOB premiums; NOPA crush record large for May.
- Sharply lower Paris wheat futures and sagging Brazilian soybean premiums have pressured Chicago futures at midday. Managed money piled into long Paris wheat futures amid the Black Sea drought. These longs are now being unwound as the European and Black Sea harvest commences. The downside target for September Paris wheat futures is €225-229/mt. This is a chart gap left as the May contract expired and September became front month.
- Brazil’s President Lula postponed recent 120-day tax legislation but is promising to return with another proposal in coming days. The tax will be watered down, but Brazil must raise more revenue to cover existing debt and Lula does not favour cutting government spending. Farmers are using this period when taxes reverted to their old rate to sell cash soybeans/corn, which is pressuring nearby Chicago futures.
- Traders are less certain what to do about Central US weather with excessive rainfall across the NW Midwest/N Plains and hot/dry conditions from Illinois eastward. Traders suggest that they will wait for crop condition ratings to tell them how adverse the weather extremes have been on US corn/soybean yield potential in the coming weeks. And remember on June 28 NASS will update the industry on June 1 stock and final 2024 seedings. The combination of weather and NASS reports will produce considerable market volatility into July.
- Managed money has sold 6,700 contracts of Chicago wheat, 9,300 contracts of corn, and 4,100 contracts of soybeans. In the products, the managed money has sold 5,100 contracts of soymeal and 2,600 contracts of soyoil.
- US weekly export inspections for the week ending June 13 were 52.7 million bu of corn, 12.9 million bu of wheat, and 8.5 million bu of soybeans. For their respective crop years to date, the US has exported 1.540 million bu of corn (up 316 million or 20%), 1,489 million bu of soybeans (down 305 million or 17%), and 10.9 million bu of wheat (down 1.0 million early in the 2024/25 crop year).
- The May NOPA crush was 183.625 million bu, a record for the month. NOPA member soyoil stocks fell 6% to 1,724 million pounds, below trade expectations suggesting a record May soyoil use. The big rebound in the US May soybean crush rate argues that seasonal downtime due to plant maintenance has ended with green diesel demand expanding. We maintain that June-July-August crush will also be record large and that the US 2023/24 crush will equal 2,310 million bu.
- The midday GFS weather forecast is warmer than the overnight model run. A broad high-pressure ridge covers most of the Central and Eastern US this week. Central and Eastern Midwest high temperatures will reach into the 90’s through Friday. Ridge riding storm systems will push along the NW flank of the ridge producing heavy rains across the N Plains/the NW Midwest with 10-day totals of 3-8.00”. Low lying flooding will be the result of crops suffering from excessive soil moisture.
- The other extreme is Central and Eastern dryness. Limited rainfall is expected for the next 7-8 days, with dryness to expand to all regions June 25-30. However, the GFS model struggles with tropical Gulf upper air convection and we have limited forecast confidence beyond the next 7-9 days. Our bet is that heat remains a feature of Central US weather well into July.
- Brazil tax legislation is postponed and is expected to be reintroduced later this week or next week. The tax on farmers may not be 20-23% but a few percentage points lower. Brazilian farmers are fearful of a tax hike and are selling cash grain which is pressuring basis. And Paris wheat futures are getting close to seasonal lows which will come early. Russian cash wheat prices are down $234/mt to start the week. The world wheat market is looking for demand with US farmers not anxious to sell wheat off the combine with values down $1.30/bu from a high just two weeks ago.