- Chicago futures have extended the overnight rally as China’s decision to drop anti-dumping duties on US sorghum is digested. Sorghum sales have been rather weak since China’s inquiry was first announced. But a return to weekly sorghum sales of 3-6 million bu could turn out rather bullish given the lack of sorghum acreage expansion this spring. The USDA in its May WASDE already predicted a sharp decline in US sorghum exports, from 245 million bu to 165 million, and still the balance sheet is fairly tight. New crop US sorghum stocks are estimated at 27 million bu, vs. 29 million in 2017/18. Yet more pressure is being placed on trend/above trend N Hemisphere grain yields this summer.
- FAS this morning announced that unknown destinations (very likely China) cancelled 829,000 mt of previously sold old crop soybeans. These cancellations will appear in the weekly sales report in two weeks. Cancellations aren’t all that unusual in May, but this does underscore ongoing disputes between the US and China, which don’t seem to have been resolved.
- Black Sea sources also confirm drier than normal weather in important pockets of the winter wheat belt there. Simultaneously, wheat stocks have been nearly exhausted in S Russia amid this year’s record export program. This further heightens the need for better rainfall in late May/early June if there is to be any measurable break in Black Sea cash prices. New crop Russian wheat is now offered at $197/mt, vs. $199 a week ago, but we expect values to stabilise between $195-200 until more is known about crop size.
- World weather forecasts at midday are mixed. The GFS forecast is drier in Central Russia than this morning’s run. Some areas of the Black Sea wheat belt will benefit, but the concern is the spotty nature of coming rainfall. Australia remains dry save for a corner of the West. Rain improves Brazil’s crop this weekend, but the full establishment of the dry season arrives thereafter. Safras in Brazil has pegged Brazilian corn production at 79 million mt, vs. the USDA’s 87. This may be a bit too low, but significant changes are forthcoming.
- WTI crude is slightly weaker at midday, but RBOB gasoline is perched at rally highs. There is talk that even at current prices fracking operations struggle for profitability. US crude stocks will erode further over the next 10-12 weeks. Already US crude stock levels are down 17% from last year. Weather leans supportive, but the issue of weakening currencies (despite rising crude value) remains.
- Note that soybean prices in Argentina are just marginally below all-time highs. Amid weakness in the Real, and this year’s crop problems, profitability has returned to the Brazilian corn farmer. The midday GFS N American weather pattern is a shade drier in WI and IL but is otherwise unchanged. An active flow of moisture will persist into late month, with cumulative totals projected as high as 3-5” in NE, IA and N MO. It remains that Southeastern dryness will be eased further amid a rich flow of Gulf moisture. Normal/above normal temperatures will continue. Our only contention is that the EU and Canadian weather models are much drier in the Central Midwest. Model disagreement looks to be significant going home.
- Markets in recent weeks, if nothing else, have been volatile. This will likely continue through summer. It feels as if seasonal highs should be scored by early to mid-July.
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