• It has been a mixed/low volume session at the Chicago. Wheat prices have slipped which has pulled corn lower, while soy futures rise on the exodus of long corn vs short soybean spreads. The new crop soybean/corn ratio has come into 2.2:1 which is prompting speculative profit taking with 2019/20 US soybean end stocks expected to decline. Our lean is for a mixed Chicago close with values finishing near their highs as heavily short traders/funds fret about reduced US crop production and next week’s US/China trade talks. We look for next week’s Chicago trade to be much more volatile as weather and planting progress hold a much larger influence on seeding/yield/supply.

• Old time traders lament that the Chicago has become “less anticipatory” in terms of weather/politics. Amid delayed seeding Midwest progress (May 3) and wet 10-day forecasts, Chicago would be much more aggressively adding weather premium (into price to account for supply losses) in previous years. And if US/China could reach a seminal trade event next week that would focus a larger share of China’s ag imports on the US, the stage could be set for a big demand rally with managed money holding a record net short position.

• The market no longer anticipates, but “flat out” reacts when it is sure that crop losses are occurring or that new China demand has arrived. Our point is that next week, the calendar is far enough advanced, and the Trump Administration argues that it is either deal or no deal with China, that Chicago volatility will be heightened. It is an important week with a May WASDE report as well. As such, 2019/20 US corn, wheat and soy balance sheets are in dramatic flux.

• Illinois, Indiana, Ohio, Missouri, Wisconsin, Minnesota and Dakota farmers have scored limited progress in spring seeding this week. We expect that US farmers may have seeded another 6-8% of the US corn crop and 5-7% of the soy crop compared to Sunday. HRS wheat seeding advanced, but cold temperatures are slowing or preventing germination. In years of diminished yield potential, its temps during May that make a difference. Last year a record cold April was followed by a record warm May. That won’t occur in 2019 with combined temperatures into mid-May looking to be one of the top ten coldest on record. Initial US corn crop conditions will be well below last year when released in early June.

• Chicago brokers estimate that funds have sold 3,100 contracts of corn and 2,400 contracts of wheat, while buying 1,900 contracts of soybeans. In soy products, funds have sold 1,800 contracts of soyoil and bought 900 soymeal.

• Frosty temperatures are likely across European crop areas this weekend and through Wednesday. Traders will be watching minimum temperature readings for any crop damage. To date, EU grain crops are advanced in maturity due to lasting spring warmth.

• The midday Central US GFS weather model continues to struggle with the exact placement of rainfall in the next ten days. The midday model has pulled rain northwards from the SE Plains north into the W Midwest late next. Heavy rains are still slated to drop across the E Plains and through the Delta, but the GFS offers a break from the heavy rains for the E Midwest. Cool to cold temperatures will hold across Canada, the N Plains and Upper Midwest for the next ten days. The flow of cold air southward from W Canada shows no sign of ending, in fact the overall North American pattern is static. The weekly EU model called for cool/wet weather to persist across the Central US into early June. Confidence in this forecast is increasing based on pattern stability.

• It is a corrective/tentative Chicago trading session. Market volatility will be increasing next week amid the importance of Central US weather and US/China trade negotiations. The US$ is weakening which is placing a bid under Chicago. US/S American farmers have slowed their cash selling. There is a risk of a frost/freeze for the German/French wheat crop areas this weekend while snows continue across the Canadian Prairies. Our lean is bullish corn and bottoming wheat/soy.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 3 May 2019

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions disaggregated data

• An overnight Chicago rally uncovered fresh selling amid weak Argentine fob offers from Tuesday. Most EU, Russian, Chinese and S American markets are closed for the May Day holiday. Volume from overseas for the rest of the week is limited by those taking an extended holiday. The May Day holiday is being felt with Chicago volume anemic at midday. This allows funds the ability to push values around. We look for Chicago choppiness into Friday with next week’s trade more volatile as Central US weather forecasts and along with US/China trade talks taking on more meaning.

• Chicago traders estimate that funds have sold 4,300 contracts of soybeans, 2,100 contracts of meal and 1,600 contracts of soyoil. In the grains, funds have bought 2,200 contracts of wheat and 1,200 contracts of corn. Funds booked 4,000 contracts of corn early, but have sold most of that back out at midday.

• Argentine corn/soy fob offers are cheap relative to the US Gulf. Tuesday’s fob corn offer for Argentine May corn at $144/mt was the lowest in a decade!

• Argentine corn and soybean yields are reported to be fantastic and private crop estimates are rising. Commercial traders peg the Argy corn crop at 48-51 million mt with the soybean crop at 56- 58 million mt. The soy yields are so good that protein content is being adversely impacted. Yet, farmers are aware that the forward Peso rates are likely to fall sharply which means that they must store as much of the crop as possible to beat inflation. Argentina is unlikely to be able to repay its foreign debts leaving the chance for their October election up for debate. A prior Argentine President, Christine Fernandez released a book Monday called “Sincerely” which immediately sold out. It is expected that the book is a precursor of her entering the Argentine Presidential race. Argentine farmers will see a return to a sizeable export taxes with (if) her re-election.

• US farmers are sharpening their pencils and often finding that taking the Prevent Plant option is the best profit option for acres that have not laid down fertilizer. Farmers never like to let soils lie idle, but this year there is enough discontent, that taking a year off seems like a good option. If a corn farmer has a 200 bushels/acre APH (actual production history), taken the 85% revenue policy with a 55% PP (prevent plant)  option, the payment would be over $370/acre. The payment looks more attractive that switching the acres over to soybeans at today’s low price. The point is that from a crop risk perspective, farmers need to calculate their PP option if mother nature does not turn around quickly. Switching to soybeans via todays depressed new crop bid is not the best cropping option. Most new crop Midwest soybean cash bids are between $7.80-8.40/bu.

• The midday central US GFS weather update stays wet across the Midwest, the E Plains and the Delta over the next 10-14 days. And cold temperatures will hold across Canada and much of the N Plains and Upper Midwest next week. These northern areas will be drier than the C and S Midwest, but the relative coolness will not allow seeding progress. The midday forecast is slightly drier across the E IA and NIL, but rains here of 1-3.00″ will still prove to be too much amid saturated soils. The 11-15-day period offers flooding rains for the S Midwest and the Ohio Valley. The excessive rain will further slow seeding and call into question that quality of SRW wheat.

• Amid the cheapness of Argentine corn/soybeans, US weekly export sales are not expected to be very good on Thursday. Traders are hoping for tepid levels to secure a break if the Midwest weather forecast is wet for the Midwest, Plains and Delta into mid May. US farmers are not willing sellers amid static planters and cool/wet weather. Mudding in corn is not yet an option, which may change next week. US seeded corn acres are in decline with yield to follow if 50% of the US crop is not planted by May 15; Prevent Plant is being widely discussed.