- HEADLINES: Wheat recovers on global weather threats; Midday GFS weather forecast features first tropical storm of 2022.
- Chicago futures are mixed at midday, with wheat surging to newer highs while corn and beans struggle amid improved Midwest planting weather and a lack of new export news. FAS’s daily reporting system was absent for a second day, and while China does sit under the market with new demand, sources suggest buyers have been on the side-lines amid this week’s rally.
- Other breaking news is absent, but weather continues to threaten Northern Hemisphere wheat production. There is just not much precipitation offered to the US Southern and Western Plains into the opening days of June. Nor is there any sign that abnormal heat will abate for any lasting period.
- And drought in China has been building somewhat quietly, but April 1-May 17 precipitation across two-thirds of China’s winter wheat belt has been recorded in a range of just 20-50% of normal. Little/no relief is offered into May 26. And vegetation health maps now show conditions noticeably worse than normal in this region. USDA projects Chinese wheat imports in 2022/23 to be unchanged at 9.5 million mt, which honours their prior WTO commitment, but like so many regions it is the loss of wheat available for summer feed use that is a concern.
- July and Sep corn futures in Brazil remain perched above $8.15/bu amid currency weakness, with the Real this morning falling to a two-week low. We have been surprised at the lack of harvest-based weakness in Brazil’s corn market. Argentine fob corn basis has fallen to test recent lows at $0.25 under Chicago futures, but harvest there is likely to reach 35-40% in the first half of June. That is when cash corn in Argentina typically scores its annual bottom.
- Firm Brazilian corn prices along with surging global rapeseed and wheat markets indicate there are few alternatives to US corn and soy supplies available for importers in the long run. We also note that wheat importers are very poorly covered beyond early summer, and it remains that wheat’s rally to date has been more cantered on supply rather than demand. Pakistan and Bangladesh aim to tender for new crop wheat supplies in late May.
- As an aside, global dairy markets are also in recovery following weakness in late April/early May amid the need for herd expansion in the US, Europe, and Oceania. The need for enlarged food and energy production will make rationing raw material more difficult and our near-term bullish outlook in large part centres on continued positive end user margins.
- Paris milling wheat futures ended flat. Spot Paris corn rallied another €2.25/mt to close at €374.50/mt ($10.00/bu). WTI crude has fluctuated between modest gains and losses at midday.
- The midday GFS weather forecast is much wetter in the eastern half of the US beginning late next week, but confidence in its solution is low. The GFS forecast has already been erratic with daily outlook in recent weeks, and the midday run features a fairly potent tropical storm working into the eastern Gulf May 27-28. Such a storm will disrupt the North American air pattern temporarily, and so much depends on the accuracy of this forecast. Updated EU and Canadian model output will be monitored closely.
- Otherwise, meaningful rainfall into May 22 will be confined to a narrow swath encompassing MO, southern IL, IN and OH. A cooler temperature pattern is probable in area areas on the weekend.
- We would advise awaiting corrections before adding to supply coverage, but we strongly doubt an intermediate top will be scored until/unless favourable Midwest summer weather can be confirmed in the next 30-45 days.