- HEADLINES: Chicago futures mixed at midday; Soyoil firm on cash; Russian ag minister calls for smaller wheat crop; Brazilian political woes. Firming cash underpins soyoil futures as US renewable diesel demand grows; Oil share spread hints at a seasonal bottom; May-July corn futures push out to new rally high of $0.375 as cash basis remains strong; Chicago is in a price pattern of 2 steps forward and one step back into May.
- Chicago grains are mixed at midday with new demand underpinning values on the early weakness. The prospect of rain across the Plains with the market looking forward to the Russian Prime Minster Lavrov and UN head Gutierrez meeting early next week to decide the fate of extension to the Black Sea grain export corridor. Additional EU members are looking to seal Ukraine grain at their borders to control its flow. This sealing will slow Ukraine grain trade into the EU, but it will also help manage quality.
- Reports are widespread that the corn coming into Eastern Europe is of very poor quality, which further presses cash bids. The only help is that Ukraine 2023 corn/wheat production will be down substantially on the back of high costs and a lack of finance/capital to seed the new crop. We guestimate 2023 Ukraine corn production at 14-17 million mt which along with a 30 million mt Argentine crop, will focus world demand on Brazilian corn into October. It is Brazil that will be suppling most of world corn/soy trade in the months ahead. Brazil feeds the world!
- Chicago brokers estimate that fund managers have sold a net 900 contracts of soybeans, 2,100 contracts of corn and 3,900 contracts of Chicago wheat. Funds have bought 1,800 soyoil while selling 2,500 contracts of soymeal.
- Brazilian President Lula has been on an international tour trying to boost Brazil’s trade. However, film clips were released this morning show the insurrection that occurred in early January of 2023 (much like Trump in January of 2021) and the chaos that followed. The difference is that the Brazilian film clips show members of the Brazilian military involved, which has the Congress calling for an investigation and potential impeachment trial of Lula. The Brazilian Real quickly declined to 5.05 vs 1 US$ on the news. The Brazilian soybean harvest has reached past 86%, and sales are slowing. April Brazilian soybean exports are forecast at a record 15-16 million mt, a bottom in the record low basis bids of recent weeks is forecast on the record demand that prevails.
- The Russian ag minister estimated that Russia will harvest 123 million mt of grain including 78 million of wheat. The wheat production estimate is well below the 83-86 million mt which many others estimate. The ongoing and more difficult question is what last year’s harvest with the Russian’s claiming a harvest of 104 million mt and USDA at 92.0 million. We see last year’s Russian crop as closer to 96.0 million mt, but there is widespread debate not only on this year’s potential crop size, but also carry in supplies. Russia as of today has exported 40 million mt of wheat, a record.
- The midday GFS weather forecast is drier for KS/NE/OK than the overnight run with the bulk of the rain being pushed further south into Central Texas and the Gulf of Mexico. Snow looks to become more widespread across the Northern Plains targeting North Dakota. The combination of cold, rain and snow will keep US spring planting progress at no better than an average rate. However, ongoing seeding delays are expected across the northern tier of US states on the chill. The prevent plant date for North Dakota on corn is May 20, just 31 days away.
- Soyoil futures will continue in a bullish trend on firming cash and diminished US future crush rate. December corn will closely monitor North Dakota weather as corn planting delays will worsen. Grain loading strikes in Canada and Argentina need to be closely monitored for delays. We hold a statistical bullish view on Chicago corrections into mid to late May.