- HEADLINES: Soybeans rally continues on Midwest drought worry: Corn futures add weather premium ahead of weekend; chart pattern improves; late June weather to drive price: Wheat short covering continues; heat in Canada, Northern US Plains needs watching.
- Soybeans rallied to end the week, leaving July up 15.25 cents after trading as much as 66 cents lower early in the week. Soyoil marked strong gains on Friday and for the week, while soymeal was slightly lower. Soybeans scored a key weekly reversal.
- The weekly US Export Sales report showed soybean sales increased to a 4-week high of 4.5 million bu, with exports of 8.5 million. Total commitments are down 312 million bu from this time last year, and the USDA is expected to make cuts to the export forecast in upcoming WASDE reports.
- Soymeal held the most bullish data, with exporters selling 446,831 short tons. This was the third largest weekly sale of the year, and there have been just 6 weekly sales that were larger in the last 3 years. Cumulative exports are now 3% larger than last year and are record large at just over 9 million tons. More importantly, outstanding sales are up 2%, the third largest on record. A strong summer export rate is expected to aid crush margins and keep crush demand elevated.
- A Chicago soy recovery is underway amid hot/dry Midwest conditions. Soybeans will remain well supported by strong old crop basis and the need for weather risk premium. US good/excellent conditions are expected at 64-66%.
- Chicago corn futures rallied sharply on Friday, with both July and Dec scoring 5-week highs. Short covering has been featured since mid-May, and managed funds on Tuesday were short a net 51,000 contracts, vs. 98,000 the previous week. Fund’s current short is a bit smaller than expected, but the covering of this position will continue if Midwest warmth/dryness is extended into the second half of June. Nearby forecasts are threatening. A Midwest rain is needed immediately. July is targeting an open chart gap left in mid-May, and also the contract’s 20- and 100-day moving averages, and $6.20. Next major resistance in Dec lies at $5.55-5.60. Corn chart patterns are turning supportive, but we expect an increase in already-high volatility. There is little doubt premium will be added/subtracted daily based on latest weather model forecasts. This will be exacerbated by a lack of resting orders above & below the market. We see support at $5.10-5.20 Dec with the upside determined by expanding Central US dryness. Recall pollination lies just ahead in 30 days. December corn futures closed above a neckline of a head and shoulders bottom, which could be a significant chart indicator.
- US wheat futures ended higher, led by spring contracts, as ongoing heat and dryness is most probable across the Northern Plains and important areas of Southern Canada. Net soil moisture loss will also persist across the spring wheat areas of Russia and Kazakhstan through mid-June, and overall focus appears to have shifted from cheap Russian wheat to new crop production threats. Like corn, it is weather that drives price into late July. We also view downside in the Russian market as limited as exporter margins get compressed.
- Funds in Chicago on Tuesday were short a net 127,000 contracts, a newer 5-year high. This position has been pared down only slightly. The funds’ position this evening is estimated at 115-118,000 contracts. It is the risk of rapid short covering amid adverse weather that leans bullish at current prices.