• It has been a big morning of volume in Chicago with grain futures rising to sharp gains on technical buying and spread unwinding. Long soybean/short corn and long wheat/short corn spreads are being unwound as fund managers are looking at the end of the month (and they’re not getting paid for being short corn).

• Wheat is following corn upwards with soybeans holding in the red on US/China concern. The Trump Administration promised to place sanctions on China now that Hong Kong is being nationalised. Traders long of soybeans are getting to the sidelines. We look for a mixed close, but work suggests that corn and wheat are both stretched to the upside. In fact, Wednesday’s daily Chicago volume was the lowest since Christmas while today’s volume eclipsed yesterday’s total by 9:30am.

• Chicago traders report that funds have bought 22-25,000 contracts of corn, 5,500 contracts of wheat, and 4,100 contracts of soybeans. In soy products, funds have bought 1,300 contracts of soymeal while selling 2,900 soymeal.

• In checking with US/world grain exporters, we cannot find any interest from China for US corn. China stopped checking US corn prices about a week ago.

• This is not to say that China can not return for a purchase of US corn, but with rising tensions between the US/China, we doubt that the Government is interested in making new US corn purchase until it is clear what sanction steps the Trump Administration will be applying related to Hong Kong.

• EIA indicated that US corn ethanol production expanded by 18 million gallons to 213 million gallons last week. This was down 32% from last year and well below the weekly corn grind needed to justify the existing USDA May WASDE forecast. US ethanol stocks fell to 973 million gallons, down 19 million gallons which is up 2% on last year. Research argues that WASDE will need to cut US corn ethanol grind for 2019/20 by another 50-100 million bu in its June report. Our work argues for a total US 2019/20 corn ethanol reduction of 300-350 million bu by August.

• The US midday GFS weather forecast model is struggling with an early seasonal tropical storm that is forecast to develop in the Gulf around June 7. Warm/dry weather follows with rains noted on the weekend across the NW Midwest as warm air builds northward. A tropical system is forecast to make landfall over NOLA on June 12. This is way too far out for any confidence, but we would suggest monitoring early June tropical storm development. We see no evidence of any hot/dry pattern that looks to be locking in for the summer. The upcoming warm/dry weather will aid corn/soybean crops by allowing farmers to complete their planting and getting crops to root down.

• Funds became too short of corn/wheat and are covering a portion of those shorts. We see no evidence of China corn demand or a lasting/hot dry Midwest weather pattern.

• It must stop raining first before you can have a drought. This is a corn rally to sell with the autumn supply outlook burdensome (over 4 billion). Wheat prices are also nearing their pre harvest peak. We would not chase this rally, and work doubts it continues.

• Dull/listless is the midday Chicago trade as an early rally effort failed to garner any buying interest. End users see no reason to chase rallies while speculators appear comfortable with their existing market positions. All eyes are on Central US and European/Black Sea weather as spring seeding is wrapping up.

• Chicago traders are closely watching weather forecasts to gauge 2020 crop yield potential. We look for a mixed close with both the bulls and bears showing frustration with range bound markets.

• Chicago brokers estimate that funds have bought 3,200 contracts of corn and 4,800 contracts of soyoil, while selling 1,200 contracts of Chicago wheat and 900 contracts of soybeans. Funds are flat in soymeal. Interest in new positions is relatively low in midday activity.

• China is said to have purchased 10-14 cargoes of Brazilian soybeans for Sept/October, and even 1 cargo for November. The purchases are surprising US exporters as Brazil appears to have more soybean supply available than expected. China is bidding for additional Brazilian cargoes this morning which indicates either than Brazil’s 2020 soy crop is understated or that Brazil’s soy crush rate is sharply lower to due Covid-19 reduced soymeal demand.

• It was expected that the US would be able to garner Chinese demand from late August into early 2021. The US will still dominate China’s purchases in this timeslot, but totals will be cut from prior expectations. Even with Brazilian soybeans being more expensive this autumn, China is securing this origin via what they see as the political risk in US soybean/grain sales.

• There has been considerable discussion on 2020 US corn seeding totals (like last year) with North Dakota just 54% planted through Sunday. Research would argue that farmers will continue to seed a few days after their PP insurance date (May 25) such that 65% of the North Dakota corn crop will be seeded at the end of this week.

• NASS indicated that 3.2 million North Dakota acres were intended to be planted to corn in March, thus 800,000-1.1 million acres could be enrolled in the Prevent Plant program. Yet, we all know that you cannot deduct one states PP acres from the US March Intentions to forecast the June Final US corn seeding total.

• We would hold to a 2020 US corn seeding estimate of 96.0 million acres based on some western US states seeding more corn via favourable weather while others such as ND, IL and PA placing acres in the PP corn program. Historically, the US has some 2.5-4.5 million acres enrolled in PP each year.

• EIA will be out with their weekly ethanol report on Thursday due to Monday’s US Government holiday. Moreover, the US weekly export sales report will be pushed back to Friday. Argentine FOB corn for June/July is offered $0.32-0.34/bu below the US Gulf which is impacting the current and future US corn sales pace.

• The midday US GFS weather forecast model is struggling with an early seasonal tropical storm that it is forecast to develop in the Gulf around June 7. The models are very erratic with the storm’s positioning and impact on the flow of Gulf humidity northward. Confidence in the US GFS forecast beyond the next 7 days is low. We suspect that the GFS is under forecasting rain for the Western Midwest amid “ring of fire” rains that start this weekend. The next 48 hours will produce scattered showers across the E Midwest including a portion of Eastern IA. Rain totals are estimated in a range of 0.15-1.00″ with coverage of the area pegged at 65%. Warm/dry weather follows with rains noted on the weekend across the NW Midwest as warm air builds northward. A tropical system is forecast to make landfall over NOLA on June 12. This is way too far out for any confidence.

• Soaring palmoil futures is supporting gains in Chicago soyoil. US/China tensions are likely to worsen into the weekend as China’s Parliament passes the National Security Law which will spark US sanctions. Advice is not to chase Chicago rallies. E Midwest farmers report that the recent heat is aiding corn/soy crops.

• Rising macro-financial markets have sparked some modest short covering in the summer row crops with funds active early buyers of corn. The bears have not been rewarded over the past 3 weeks and with values not cracking to the downside following the long US holiday weekend, the shorts are losing patience. Amid seasonal price trends that normally peak in early June, Chicago traders are taking some short risk off the table.

• We see nothing that would change the longer-term fundamental view, but with US energy markets in recovery and a few more US ethanol plants opening this week, Chicago appears to be waiting on summer weather/yield prospects before taking their next price cue. We look for a mixed CBOT close.

• USDA/FAS reported that China booked 264,000 my of US soybeans with an unknown buyer (strongly rumoured to the Philippines) took 216,000 my of US soymeal. The China sales were split into 66,000 mt for 2019/20 with the remaining 198,000 mt going into the 2020/21 crop year. We hear that the demand was filled on Friday and being reported today.

• Further, we also hear that Chinese crushers are bidding for 3-5 cargoes of US soybeans. No new US soybean purchases can be confirmed by China this morning, but it is heartening that China is bidding for US soybeans (again) amid the political tensions that exist. China is back securing US ag products, but traders are wary that the Trump Administration will apply new sanctions on China for their takeover legislation of Hong Kong that was announced on Friday. There is no sign that Sinograin is securing large amounts of US soy for China’s reserve.

• US export inspections for the week ending May 21 were; 43 million bu of corn, 12.2 million bu of US soybeans, and 16.8 million bu of wheat. The sales were all in line with trade expectations.

• For their respective crop years to date, the US has shipped out; 1,077 million bu of corn (down 442 million or 36%), 1,289 million bu of soybeans (up 50 million or 4%), and 896 million bu of wheat (up 7 million or 1%). Research maintains that the USDA is overstating US 2019/20 soybean exports by 50-150 million bu.

• The Brazilian Real has rallied to 5.38:1 vs 6:1 just 2 weeks ago. The macro market risk on mentality due to America and much of Asia and Europe reopening has spurred the selling of the US$. What is unknown is whether a second wave of the virus returns to Europe and the US, and its impact on GDP recovery forecasts. The Argentine Peso has not rallied and is trading at 68:1 while the Russian Ruble is priced at 71:1. The Ruble bottomed out in mid-April at 79:1.

• Notes that the cheap Argentine Peso is keeping their fob corn offers at a hefty $0.34/bu below the US Gulf. Research forecasts that over 87% of the 2020 US corn and over 65% of the US soybean crop were seeded as of May 25. There are pockets of problems in Central IL and North Dakota, but for the most part the 2020 start of the growing season is highly favourable.

• The midday US GFS weather forecast is wetter across the upper Midwest with rainfall totals of 0.75-2.00″. The moisture is well placed and deemed as favourable with most of the 2020 corn/soybean crop already planted in this area. A tropical system in the Gulf could push northward into the SE US that ends their soil moisture shortages. Temperatures stay warm over the next 2 weeks which should enhance growth rates. The tropical system must be watched, but it would dislodge any Central US high pressure ridge.

• Today’s Chicago rally is based on the rise in macro financial markets and that the US did not impose new sanctions on China (yet?). We doubt that soybeans or corn can sustain a rally amid favourable Central US weather. US corn crop ratings next Monday should be high which will start to exert downward pressure again with US farmers.

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Weekend summary 22 May 2020

• Chicago values are mixed at midday with soybeans lower while the grains trade either side of unchanged. The selling in soybeans is based on China’s absence as a US buyer this week ahead of China’s biggest political gathering of the year in Beijing. The worry is that China hawks could prevail in political discussions (about the US), that could limit China’s ag purchase pace. We remains hopeful that China can/will perform and look past political sabre rattling from the US. A key USTR review of China’s purchases to date will take place in July, just 5 weeks away. China needs to get “on pace” in securing US soybeans and other ag products. The soybean market will be closely monitoring China’s purchase pace of US soybeans into July.

• We anticipate a mixed Chicago close today with future rallies in corn/ soybeans being capped by improving Central US weather. The NWS long range 30/90 day forecast was released today which indicated near normal temperatures and near to above normal precipitation. Such a forecast would be favourable to summer row crop yields. The average US farmer is undersold on old and new crop production and after June 1 will have to become a larger cash seller.

• Chicago brokers estimate that funds have sold 3,500 contracts of corn and 6,300 contracts of soybeans, while being a net buyer of 2,900 contracts of Chicago wheat. In soy products, funds have sold 2,100 contracts of soymeal and 1,200 contracts of soyoil. Chicago soymeal has fallen to a new contract low with July priced at $282/ton. A weekly close below $280/ton would set the 2016 lows at $260/ton as being the next downside price target. Spot Chicago soymeal has not closed the week below $280/ton for the past 4 years.

• US export sales for the week ending May 14 were; 15.8 million bu of wheat (both crop years combined), 34.8 million bu of corn and 44.3 million bu of soybeans. The sales of wheat were disappointing while corn/soybean sales were supportive.

• For their respective crop years to date, the US has sold 976 million bu of wheat (up 31 million or 3%), 1,554 million bu of US corn (down 309 million or 16%), and 1,525 million bu of soybeans (down 156 million or 9%). We believe that WASDE will continue to adjust their old crop US soybean export estimate downward by 50-100 million bu over several monthly reports. WASDE is too low on US soyoil exports as the sales pace remains historically large.

• China has purchased 14.5 million mt of US soybeans for the 2019/20 crop year with known new crop purchases of 1 million. There are total unknown 2019/20 purchases of 2.2 million mt which an estimated half could be to China with new crop unknown purchases clocking in at just 500,000 mt. US new crop soybean sales are running well behind prior years due to Covid-19 demand uncertainty and China.

• Several key groups of US farmers feel left out with HRW wheat/prevent plant producers not seeing any revenue from the CARES pay-outs announced on Tuesday. And producers that are holding corn/soy from multiple years will try to play the system saying that all bushels are from 2019. Moreover, producers that rightly sold bushels ahead of the Covid-19 break are complaining that the USDA is rewarding bad business behaviour. It is probably correct to suggest that the USDA financial aid is never fair, but it was needed. And producers are getting the message that if there is a CARES 2, they need to have crop to participate.

• The midday US GFS’s weather forecast is wetter across E Texas and Oklahoma with rain totals of 2-5.00″. The moisture is excessive and would produce low level flooding and quality concern for ripe HRW wheat. Otherwise, the warm/wet weather is favourable for summer row crops. Temperatures stay warm over the next 2 weeks.

• There is one more trading session ahead of a long US 3-day weekend with position squaring remaining the feature. Black Sea/European June rainfall will key cash wheat price direction. China demand controls daily Chicago soy prices.

• Chicago wheat values have surged on a combination of fund short covering amid rumours that the 2020 Russian wheat crop may only be as large as last year. This may raise pressure on the Government to maintain an export quota system for the new crop. A 2020/21 export quota would make the EU dryness much more important for nearby world wheat availability.

• KC July wheat futures have forged a bullish key reversal off a weekly trendline which has the attention of technical traders. A weekly close above $4.525 July KC would produce a weekly reversal, which would signal that wheat has scored an early seasonal low with all eyes on whether the EU wheat crop receives a needed rain during June, the key heading and filling timeframe.

• We look for a mixed Chicago close as corn stays the laggard. China interest for US soybeans persists and weekly export sales of US soybeans are expected to reach nearly 1 million mt in combined old/new crop positions. Funds have not been paid for being short of corn for several weeks which could produce fresh short covering. Chicago brokers estimate that funds are net buyers of 7,000 contracts of wheat, 3,000 soybeans while selling 2,200 contracts of corn.

• Weekly US ethanol production showed further recovery with 195 million gallons produced last week vs 181 million gallons last week. It is estimated that 40-41% of the US ethanol industry is still shut down, but we expect that additional plants will be coming on-line in June. US ethanol stocks have plunged in the past month as blenders pull from their stores and ethanol producers shed stock before coming back online.

• We estimate that WASDE will cut its 2019/20 US ethanol production further in June by another 50-75 million bu to account for the ongoing production cut. US gasoline consumption fell last week to 6.79 million barrels per day, which was down 8% from the prior week and down 28% from a comparable week last year.

• China announced that it will start its weekly corn auction on May 23 with an offer of 4.0 million mt. The price will be the same as last year at 1,650 RMB/mt. The pending auction has pressured cash corn/Dalian futures in recent days.

• The midday GFS weather forecast is farther north with rain next week into the NW Midwest and Northern Plains. The moisture is not excessive and would be ideal for newly planted corn/soybeans. Heavy rains will stay confined to the OK/TX and the Delta where the rain can help established crops. Warming temperatures and near to above normal rainfall is favourable to 2020 US summer row crop potential. The rains come too late to aid TX/OK HRW wheat yields.

• The ongoing dryness across Europe and portions of the Black Sea will become more important to wheat export availability during June. World wheat crops are made or lost from the opening days of June into mid-July. China’s buying of 3-5 cargoes of US soybeans is offering support to Chicago futures. Corn holds in a fundamentally bearish trend. Corn’s more bullish statistic is that funds are already short 215,000 contracts.

• Midday Chicago values are mixed at midday with spread unwinding/covering dominating the morning. Corn has been the short leg of most spring spreads with covering noted of long soybean/short corn and long wheat/short corn positions. The covering has pressured soybeans and KC wheat, while corn futures have been able to bounce, even in the face of improving Central US weather. We look for a mixed close with few traders having any passion to push their bullish or bearish view too hard.

• Chicago brokers report that funds have bought 2,200 contracts of wheat and 7,700 contracts of corn while selling 2,900 contracts of soybeans. In soy products, funds have bought 1,200 contracts of soyoil while selling 700 contracts of soymeal.

• The USDA/FAS did not announce any new sales of US grain or soybeans this morning.

• US President Trump was joined by farm leaders to announce the release of $16 billion in coronavirus relief payments to producers. Program details are awaited with most watching to see if payment limitations are reduced/lifted.

• Spot Chicago corn futures reached $3.00 in the closing days of April with July corn futures recovering to $3.25 today. Spot Chicago corn will struggle to rise above $3.25-3.34 resistance without a dire Central US weather problem. With the Midwest weather forecast being favourable, July corn will struggle to rise above $3.30.

• Russian domestic wheat flour prices are holding at record highs which must be concerning to the Government officials as the Ruble has strengthened (along with the rise in crude oil). The stoutness of Russian wheat flour prices and tightness of domestic wheat supplies has some wondering if the Russian’s could continue to the new quota system or work to restrict wheat exports early in their new crop campaign. World wheat importers will be closely following the Government’s intentions for Russian new crop exports in the weeks ahead.

• Indian farmers have harvested a big wheat crop which local/private analysts peg at 103-104 million mt. However, as Covid-19 has struck India, moving the wheat from farm to storage and milling facilities has been difficult amid lockdown and movement restrictions. The fear is rising with each passing day, that monsoonal rains will soon cause wheat quality deterioration. India is at risk that its wheat crop will be damaged by excessive water as Covid-19 ravages the country.

• China’s annual corn auctions are rumoured to be starting in early June which should help ease tight domestic supplies, and lower rising internal prices.

• China seasonally starts to auction off its massive Government corn stockpile each spring to bridge the supply gap to new crop and offer a means to support its farmers. It is unknown if the auction will impact China’s potential import of US corn into SE China livestock areas.

• The US midday GFS’s weather forecast is drier across the Central Plains and Upper Midwest with heavy rain stretching from the Southern Plains eastward into the SE US. To the north, 10-day rain is estimated in a range of 0.25-1.00″ with temperatures warming into Friday and the rest of the 14-day forecast. The forecast leans favourable for the final seeding effort and early crop growth.

• July corn has been the leading the rally on short covering as price is trying to spur enlarged cash corn movement. USDA has been adjusting its ethanol corn grind based on actual monthly losses, which means that future cuts in US 2019/20 ethanol corn use are still forecast. Soybeans need to see actual Chinese demand while KC wheat tests a long-term weekly uptrend line at $4.39-4.41/bu. This is no time to turn bullish of corn or bearish of wheat/soybeans. The EU midday weather forecast stays arid which is concerning for reproducing winter wheat/barley crops.

• Midday values are mixed with soybeans firmer, wheat lower and corn caught in between. Chicago appears to be trading technicals (charts) with fresh fundamental news lacking ahead of a pending long US 3-day weekend. Funds have been sellers of wheat/corn while securing modest amounts of soybeans/soyoil.

• The volume of trade is diminishing at midday. Research suggests that US and EU wheat prices are getting close to scoring their seasonal lows (early). KC July wheat futures circa $4.40 will be testing a weekly uptrend line that extends back to 2016. We expect that this support will hold amid the ongoing dryness that is trimming supplies in Europe and the Black Sea. A mixed Chicago close is forecast with traders positioning into the close looking for a turnaround on Tuesday.

• Chicago brokers report that funds have sold 3,200 contracts of wheat, 2,600 contracts of corn, while buying 2,400 contracts of soybeans. In soy products, funds have bought 3,200 contracts of soyoil while selling 1,900 contracts of soymeal. The fund’s buying of soybeans/soyoil has slowed from opening levels.

• US export inspections for the week ending May 14 were; 45.3 million bu of corn, 12.9 million bu of soybeans, and 16.2 million bu of US wheat. The corn inspections were better than expected while China shipped out 2.6 million bu of US soybeans.

• For their respective crop years to date, the US has shipped 1,032 million bu of corn (down 443 million or 30%), 877 million bu of wheat (up 8 million or 1%), and 1,277 million bu of soybeans (up 57 million or 4.5%). We believe that US 2019/20 soybean exports will be cut another 25-75 million bu in the June WASDE report. We cannot statistically argue with the WASDE old crop wheat and corn export estimates.

• World exporter wheat stocks are declining via ongoing dry weather. Private estimates for the European all wheat crop have declined to 139-141 mt vs 155 million last year (including durum). With another 2 weeks of dry weather, EU exporters report that EU wheat production could drop below the 2018 harvest at 135 million mt. This looks to severely reduce EU wheat exports at a time with growing North African demand due to their own dryness issue from January through March. French wheat futures fell on lacklustre end user demand, but the crop outlook for EU wheat is becoming a concern with the crop either in the heading or just entering the heading stage of production.

• And, sporadic rain across the Black Sea and developing drought for Siberia look to trim the Russian/Ukraine wheat crops. Crop concern is growing which could produce an early seasonal low with Russian flour prices at record highs.

• The developing loss of EU/Black wheat crops is likely to produce an early seasonal fob low with US wheat crop quality becoming important to world importers. The US has a developing export opportunity of the EU/Black Sea continues with its arid weather profile into June.

• The midday GFS’s US weather forecast is like its overnight solution which raises confidence in its correctness. Soaking rain will be positioned from the Central Plains into the SE US later this week. Showers will dot the Northern Plains next week. Thankfully, the Central IL forecast is drier which will aid the drying and reseeding effort. Temperatures warm from west to east with highs by Thursday ranging from the 70′s to the mid 80′s. The warmer temperature profile aids seed emergence.

• Fund selling and sagging world wheat prices ($194/mt ex the Black Sea) is keeping pressure on Chicago wheat. A seasonal low is forecast to develop with fresh downside price risk limited to 3-7 cents. China did not show up as a buyer of US soybeans over the weekend, but moderate interest is noted today. This is no place to be selling wheat or soybeans. We would look to sell corn on rallies as US new crop supplies will overwhelm.

• Funds bought 24,000 contracts in soybeans, lifting their net long to 26-week high of 32,500 contracts. Funds bought 6,900 in live cattle and 1,200 in feeder cattle. Across all 3 wheat exchanges, funds sold 5,600 contracts.

• The heaviest selling for the week was in corn, where funds sold 24,000 contracts, taking the net short to a 52-week high of 214,000 contracts. Funds net short Ag position is heavily concentrated in corn, making it the most vulnerable to a major short covering rally.

• Chicago corn futures ended steady to higher. Talk of select ethanol plantings resuming production in the next two weeks is noted. Cash production margins are at/above break-even across the far Eastern Corn Belt, and amid ongoing boost in weekly gasoline consumption, ethanol production on the margin will be rising. Yet, note that production margins remain negative across in SD, NE and IL. The widespread return of closed plants is not expected in the near-term.

• Research continues to suggest that the USDA will ultimately reduce its old crop ethanol demand draw forecast to 4.50-4.60 billion bu, vs. its May estimate of 4.95 billion. This is important as rising old crop stocks raise the burden on Northern Hemisphere yield loss if one is to be bullish of corn. And while European dryness will stress wheat there in the next two weeks, key EU/Black Sea corn producing regions, including Ukraine’s primary Corn Belt, have seen normal/above normal precipitation in the last 30 days.

• Funds on Tuesday were short a net 214,000 contracts, up 24,000 on the prior week. A pause in the break was due. But there’s nothing available to spark meaningful fund short covering.

• US wheat futures ended mixed but little changed. Paris milling wheat ended €1.50-1.75/MT higher as weather premium continues to be added amid the return of lasting dryness to France, Germany, Poland and the UK. EU/Black Sea weather is now critical with yield loss or gain to be determined by rainfall and temperatures over the next 30 days. Funds on Tuesday were long a net 3,000 contracts in Chicago. We estimate that funds this evening are net short 7,000 contracts.

• The midday EU weather model added needed rain to Ukraine and Southern and Central Russia. This rain will be welcomed but the forecast needs to verify. And supply concern is shifting from the Black Sea to Europe. Complete dryness is forecast in Western Europe into the very end of the month. European temperatures will be rising as soil moisture is lost. This will exacerbate crop stress. There is also growing concern over ongoing dryness in W KS, WOK and ECO.

• Weak new crop demand will provide a buffer against EU dryness in the near term. But this is no place to add to sales. We believe that Chicago’s premium to KC will weaken over time.

• Limited news at the end of the week had soybeans trading in a narrow range before closing steady.

• NOPA reported an April soybean crush rate of 172 million bu, which was nearly 2 million more than expectations. The monthly figure was 107% of a year ago and by far the largest April crush rate on record. Based on the NOPA figure, we estimate a total US soybean crush rate of 182 million bu or 10 million more than a year ago. This puts the cumulative soybean crush rate at a record large 1,447 million bu, and right on track to reach the May WASDE forecast of 2,125 million bu.

• FAS did not report any soybean sales on Friday, but China has become a regular buyer of US soybeans in recent weeks. However, the old crop sales that have been made are not expected to ship until late in the season and could potentially be rolled to new crop. This week’s ship line-up did not include any vessels headed for China.

• Amid low prices and recent Chinese demand, our short-term outlook is neutral.

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Weekend summary 15 May 2020

• It has been a mixed morning with Chicago grains weaker with soybeans slightly higher at midday. Trade volume remains diminished with few end users desiring to chase a rally without a dire US/world weather problem. China is securing US soybeans daily which is helping underpin the complex. For now, most argue that COFCO is booking US soybeans for their own crush plants. At some point, China is expected to start securing US soybeans for their reserve. We look for a mixed Chicago close as the fund selling abates in soybeans/wheat heading into the weekend. Funds appear willing to add to their growing net short corn position.

• Chicago brokers estimate that funds have sold 3,200 contracts of corn, 2,900 contracts of wheat, while buying a net 1,200 contracts of soybeans. In soy products, funds have bought 1,900 contracts of soyoil while selling 1,500 contracts of soymeal. Fund managers appear to be slowing down on their sales of soybeans and wheat as both test chart-based support.

• Weekly US export sales for the week ending May 7 were; 13.0 million bu of wheat (both crop years combined), 42.2 million bu of corn and 17.5 million bu of soybeans.

• For their crop years to date, the US has sold 838 million bu of wheat (up 24 million or 3%), 1,000 million bu of corn (down 456 million or 31%), and 1,273 million bu of soybeans (up 48 million or 4%). Research argues that WASDE is still too high with its US 2019/20 soybean export estimate by 50-100 million bu. Chinese demand will be focused on the new crop position with August needs covered.

• FAS this morning confirmed that China secured another 198,000 tons of US soybeans and 20,000 mt of soyoil. The soyoil sale was a surprise while China’s soybean purchase was under trader expectations. We continue to hear that China is bidding for September/October US soybeans on basis.

• The CFTC warned the US Commodities Industry should it should be prepared for heightened market volatility and the potential for negative pricing for certain futures contracts in the wake of Covid-19. Last month, the US May WTI crude oil futures contract fell below zero for the first time that a non-electrical commodity was priced at a negative level. The CFTC issued the advisory letter to warn traders and brokers of the potential for negative prices and to combat against the occurrence during the delivery period. Exchanges may seek emergency authority to either liquidate, transfer positions or suspend trading to preserve the integrity of the marketplace if needed during expirations.

• The US Transportation Dept revised rules for short haul US truck drivers allowing them to work 14 hours instead of 12 and expanding the distance limit to 150 miles from 100. The new regulation will salvage $2.8 billion over 10 years.

• The midday GFS’s US weather forecast is wetter than the overnight run with showers/storms to be more frequent following the weekend. Research cautions that the position of Tropical Storm Arthur is causing sizeable run to run model deviations. However, outside of the N Plains, much of the Delta and Midwest would receive 1.50-3.00″ of rain over the next 10 days. Such rain is 50% greater than average. We suspect that the forecast is too wet with downward revisions to come. A warming of temperatures is imminent, with highs across the Plains and Midwest to reach into the 60′s, 70′s and 80′s.

• Wheat and soybeans have limited downside price potential from current depressed levels. This is no place to be making new sales, but rallies depend on enlarged China buying of US soybeans or a continued drying weather pattern across Europe and the Black Sea. We are troubled by the ongoing decline in European soil moisture into June. The 14-day forecast calls for only sporadic rain. A bearish long-term outlook is advised with corn likely to score a short term trading low in early June.