- HEADLINES: On the anniversary of the 2022 Chicago wheat price high, grain futures fall sharply on China corn cancelations and 2-month Ukraine corridor extension.
- Chicago ag markets are sharply lower in active volume on massive fund speculative selling and liquidation. Corn/wheat have paced the decline on the news that China cancelled another 272,000 mt of US corn and that the UN/Turkey and Russia was able to cobble together a 2-month extension of the Black Sea Grain Corridor. A brief mid-morning rally failed and when the 2-month extension of the corridor was confirmed by the UN, prices dropped sharply in a waterfall type of decline. The market lacks resting orders and it does not take much buying or selling to really push values around.
- We note that today is the one-year anniversary of the top in 2022 Chicago July wheat futures at $12.84. The US wheat market had been on an upside push until it was learned that Russia/Ukraine and the UN were negotiating on the Black Sea Grain corridor. Few imagined last May that a deal would be struck and signed last July, but that led to the almost constant decline in world wheat prices. One year later the agreement is extended with world grain prices falling back to multi-year lows. Sometimes such anniversaries are important in world grain trading, let us see if today’s sharp decline on a key anniversary can produce a market bottom. Funds are now heavily short heading into a new Northern Hemisphere growing season.
- Chicago brokers estimate that funds have sold 4,100 contracts of Chicago what, 11,300 contracts of corn, and 7,100 contracts of soybeans. In the soy products, funds have sold 5,200 contracts of soyoil and 2,200 contracts of soymeal. Funds are flipping into a net short soy position based on their recent massive selling.
- Chicago resting orders are limited, which adds to market volatility. The bulls have been washed out on the post May WASDE price decline while a new Northern Hemisphere growing season is ahead. The statistical odds are high that a few sizeable weather scare rallies will develop based on Black Sea, Indian, Canadian droughts. El Niño is developing, but the summer weather pattern is concerning based on hot spots in the Pacific.
- US weekly ethanol production was 290 gallons, up from last week’s 284 million gallons, but down from the 304 million gallons/week that is needed to reach the USDA annual ethanol grind forecast. The US is running behind on the grind, but there is time for the annual WASDE target to be achieved. US ethanol stocks fell 4 million gallons to 974 million gallons with the weekly consumption of US unleaded gasoline being 8.91 million barrels/day, down 1% from last year. US ethanol profit margins are soaring on the corn price decline to $0.29/gallon.
- The midday GFS weather forecast is like the overnight run with widely scattered showers across the Plains with rain totals of 0.4-1.50” but mostly dry weather for the Midwest/Delta into May 27. A few showers are also forecast for Alberta and Manitoba, Canada. The EU and GFS forecasts 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 N American concerns stay confined to the Canadian Prairies for now.
- One year after last year’s emotional rally high Chicago could be forming an emotional low based on a 2 month extension of the corridor and expectation for timely seeding of US crops and high yields. The bulk of the 2023 growing season is ahead and already there are areas to be flagged for drought including the Canadian Prairies, spring wheat areas of Russia, a weak Indian monsoon, and a dramatic dry down in Central and Southern Brazil. This is no place to make new sales as seasonal and potential annual lows are being scored.