- HEADLINES: wheat extends losses but fills chart gaps; Old crop US demand intact; US forecast stays wet.
- Chicago futures are mixed at midday, with July soybeans up 30, wheat futures down 20-30 and corn unwilling to move. Better than expected weekly soybean and meal export sales are cited, and the US Gulf soy market maintains a sizeable discount to Brazilian origin for mid/late summer delivery. We hear of additional Chinese interest for new crop US beans, and pace analysis suggests USDA’s old crop US soy export forecast is understated by upward of 60 million bu.
- US wheat futures at all exchanges have fallen to close open chart gaps left on Sunday night, but uncertainty over near-term Indian exports along with the UN’s aim to open a sort of humanitarian food corridor have prevented large-scale new buying. The Indian government is mulling over the idea of allowing some 1.8 million mt of wheat currently trapped in ports to ship. Previously, of India’s unshipped exports, only 400,000 mt had lines of credit attached. There are no details available as to whether this 1.8 million mt will ship or not, but uncertainty abounds with respect to Indian wheat exports over the next 30-60 days. However, India will not be a large net exporter of wheat 2022/23 and net imports may be needed if final production there falls below 98-100 million mt. India this morning cut its wheat production estimate to 106.4 million mt, vs. 111 previously.
- And establishing safe passage for Ukrainian grain and vegoil exports makes good sense, but to establish this Russia is demanding the lifting of current economic sanctions. This will not happen and negotiating with Russia will be fraught will issues of trust. Unfortunately, boosting the monthly pace of Ukrainian grain exports will be incredibly challenging.
- Old crop export sales through the week ending May 12 totalled 17 million bu, vs. 8 morning the previous week and at the upper end of trade expectations. New crop wheat sales totalled 12 million bu, vs. 5 morning the previous week. Old crop soybean sales were an impressive 28 million, vs. 5 million the prior week and the largest since late March. Old crop soy sales to China were 14 million bu. Additionally, weekly soy sales in May 21 averaged just 2.2 million bu, and ongoing strong demand reflects this year’s rapid exhaustion of S American surpluses. Simple pace analysis places final 2021/22 US soybean exports at 2,190-2,200 million bu, vs. USDA’s projected 2,140 million.
- And new crop soybean commitments sit a record large 448 million bu, vs. 273 million last year and 20% of the USDA’s 2022/23 US soy export forecast. New crop commitments are also record large at 220 million bu vs. 192 million a year ago.
- The Brazilian corn market is up $0.05/bu at midday, with Sep Brazilian corn’s premium to the US widening to $0.75/bu. The sum of state government safrinha corn production estimates are 5-6 million mt below CONAB’s latest number, and similar to soybeans Brazil’s corn surplus will be consumed quickly, likely by the middle of autumn.
- The Wheat Quality Council at this week’s tour conclusion pegged KS wheat yield at 39.7 bu/acre, vs. NASS’s 39, but pegged production at 261 million, vs. NASS’s 271 million. The tour’s estimate leans neutral, but we maintain that it is yield loss in TX, OK and across the Northern Plains that ultimately lowers final US HRW production by 20-30 million from USDA’s current estimate.
- The midday GFS weather forecast is consistent with the morning run in projecting soaking rainfall of 2-5” across the S Plains, Delta and Eastern Midwest in the 5-10 day period. Fieldwork/seeding will be only regionally disrupted into the weekend, but an outright halt occurs in MO, IL, IN, OH and KY next week. NASS planting progress data on Monday will be critical in estimating the number of acres to be seeded in June.
- Bull markets must be fed and wheat futures at contract highs will be highly sensitive to any modest loosening of supplies in exportable positions. However, it remains that wheat importers are very poorly covered beyond early summer, and additional downside risk is limited. Soy stays in a demand-led bull, while Midwest forecasts in June drive daily/weekly corn price direction nearby. We maintain a strategy of using corrections to extend supply coverage into autumn.