• HEADLINES: Grains sag on spread unwinding; Soy oil extends recovery; Black Sea, Mexican droughts to worsen.

• Chicago ag markets are mixed at midday with the wheat market unable to hold an overnight rally. The drop in wheat has caused a sag in corn futures and an unwinding of recent long grain/short soybean spreads. Wheat futures rallied overnight on dry weather forecasts for the Russian winter wheat areas and an attack by Ukraine against Crimea, and a Russian military installation.

• Soy futures are higher on Chinese pricing and the strength of Brazilian cash soyoil which is firming on strong demand. Brazilian soyoil is trading at a 2-cent discount to July futures with the US Gulf offered 0.5 cents under. This is as a tight a spread between Brazilian fob soyoil and the Gulf looking back to 2021. US soyoil export opportunities are increasing while US soymeal export demand is strong as Argentine meal is sold out through June as the new crop harvest stays well behind normal. July soybean futures will close the week higher on firming S American basis bids.

• Chicago brokers estimate that funds have sold 5,800 contracts of corn and 2,800 contracts of wheat, while buying 2,800 contracts of soybeans. In the products, funds have purchased 3,200 contracts of soyoil while selling a net 900 contracts of soymeal.

• The Russian Grain Union estimated that Russia could export 47.9 million mt of wheat in the 2024/25 crop year, down from this year’s 53.5 million on declining crop production due to frost/drought. No crop forecasts were offered, but the Grain Export Union will offer export estimates on a weekly basis until production normalises. We estimate that 47.9 million mt of exports would come from an all-wheat crop of 84-86 million. Russian weather stays parched, and a deepening of the drought is feared heading into June. Russian fob wheat prices gained $0.38/bu this week to $241/mt. Further gains are forecast next week to narrow the spread between Russian and French fob export offers. North Africa has limited forward wheat coverage due to the recent world price rally.

• Nutrien, the largest US fertiliser supplier, reduced their estimate of 2024 US corn seeded acres to 87 million, down 3 million acres from the NASS March 1 intentions report. CEO Ken Seitz indicated that the corn acre loss was switched into soybeans, cotton, and other grains. The smaller US corn harvest area will cut the firm’s nitrogen sales. The smaller seeded area would drop 2024 US corn production by 550 million bu using WASDE’s 181 bushels/acre yield. Such a crop loss would be dramatic to the 2024/25 US corn end stocks with our estimate of stocks at 1,800 million bu using an export forecast of 2,300 million bu.

• The midday GFS weather forecast is drier in IN/OH but otherwise consistent with the morning run. Open weather persists into Sun/Mon, with warming temperatures to accelerate drying/aid fieldwork. Near daily showers return next week, with soaking precipitation to target NE, MO and the Upper Great Lakes. 10-day totals of 3-5” are offered to MN, WI, northern IL, and northern IN. Near normal temperatures are forecast into late month. Unfortunately, zero rain is forecast in the HRW Belt, where windspeed of 20-30 mph and high temperatures in the 90s develop late in the coming weekend.

• Soyoil’s finding of export demand is important, while end of week profit taking plagues corn and wheat values. We would caution against chasing breaks in grains as the US corn export outlook remains bright as a Russian crop at or below 80 million mt becomes reasonable if the Black Sea weather pattern fails to change in early June. Black Sea forecasts are trending progressively warmer beyond May 25. We would also note drought is building rapidly in Mexico amid extreme heat there.

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