HEADLINES: Bull spreads rule on cash strength and forward Chicago wheat roll; Snows again for IA/MN this weekend; China swaps for US soybeans from Argentina.

• Chicago futures are mostly higher with soyoil being dragged to the downside on oil share spread unwinding. Strong cash basis bids are underpinning nearby May corn/soybean futures while wheat values rise on the potential closure of the Black Sea export corridor and the deepening drought across the C and S Plains. The market has been choppy, which is limiting trading volume. We look for a mixed to mostly higher Chicago close with open planting weather and bull spreading pressuring new crop corn/soybean futures. The battle is between tight old crop supplies and bearish new crop planting weather.

• The US Labor (sic) Dept showed the US Consumer Price Index rising 0.1% in March, with an annualised rate of 5%. Excluding food and energy, the core CPI rose 0.4% in March and 5.6% annualised. The March 0.6% gain in housing costs was the smallest since November. The modest rise in the CPI implies that the US Central Bank could raise its lending rate by 0.25% in early May or wait for the annualised rate of the CPI to decline in coming months. The point is that the US Central Bank is nearing an end of its rate hiking cycle, which is bearish for the US$. The US dollar is in a bearish trend which should accelerate.

• Spreading in wheat has been massive overnight and during the day session. Funds are moving their short position forward as the Goldman roll is ongoing. Funds have spread at least 14,000 contracts of May/July wheat. The bull spreading in Chicago wheat has spilled over to corn and soybeans amid the strong cash markets. Today’s Chicago price action has been more about spreading than flat price trade.

• Chicago brokers report that funds have bought 2,400 contracts of Chicago wheat, 2,700 contracts of corn, and 4,200 contracts of soybeans. In soy products, funds have bought 1,000 contracts of soymeal and sold 4,300 contracts of soyoil.

• The weekly EIA Biofuel report showed that 282 million gallons of ethanol were produced last week, which is down 4% from last year. The US needs to produce 299 million gallons of ethanol per week to achieve the USDA annual usage forecast of corn. US ethanol production margins have surged and are at their best levels since May of 2022. US ethanol production seasonally gains into July. US gasoline demand is holding strong at 8.94 million barrels/day with US gasoline stocks down 5% from last year at 222.2 million barrels. The driving season is ahead with energy prices tending to rise into early June.

• There are rumours that soybean sellers to China are swapping Argentine soybeans for old crop US soybeans due to quality. A cargo sold yesterday, and another has this morning. Argentine crop quality issues abound with soy crop estimates in decline due to disappointing early yield data. China is importing the soybeans for their reserve and there is a timeline on when these imports must arrive.

• The GFS weather forecast at midday is colder/wetter for the NC US with 2-12” of snow projected to fall across portions of IA/MN this weekend. Snow amounts lessen into WI with low 30’s to produce a frost southward into S IA and C Il on Sunday/early Monday. Warming and dry weather follows which will produce a rapid snowmelt. A second potent storm is due late next week which produces 0.5-2.00” of rain across IA/MN/N IL/WI. Temperatures stay seasonal through April 25t with limited precipitation for the Central and Southern Plains HRW wheat.

• It has all been about bull spreading in wheat/corn and soybeans. The Brazilian Real has fallen to 4.94:1 US$, the strongest level for the Real in years. This has shut off Brazilian farm sales as cash soybeans in real terms are down 20 cents/bu vs the recent day Chicago rally. The falling US$ has fund managers looking at commodities once again for new investment.

• HEADLINES: WASDE disappoints and says low trust in NASS stocks data with no change in US corn/soybean end stocks; US wheat stocks raised on feed cut; US cash markets stay strong.

• The USDA April Crop Report held little market fanfare with WASDE holding US 2022/23 corn/soybean stocks steady with March, while raising US wheat end stocks by 30 million to 598 million bu. WASDE was willing to lower the US wheat feeding rate by 25 million bu and increase imports by 5 million, but it did not have the same confidence in NASS stocks data to raise the 2022/23 corn feed/residual use or the soybean residual per the March stocks report. WASDE has decided to wait until the last quarter of the crop year to make domestic demand adjustments based on crop size and feeding rates. It is possible that recent year adjustments in soybean residuals and corn feed/residual use have made them “gun-shy”. However, tightness of the cash market is noteworthy.

• WASDE left US corn 2022/23 end stocks at 1,342 million bu, the same as March with a stocks/use ratio of 9.7%. The March Stocks data argued that WASDE should raise its corn feed/residual use rate by 125-175 million bu, but it decided to wait.

• Recent China purchases of US corn argue for a bump in 2022/23 corn exports of 25-50 million bu. Here too, WASDE decided to wait for additional sales data. WASDE did lower their 2023 Argentine corn crop estimate by 3 million to 37 million mt and hold the Brazilian corn crop estimate unchanged at 125 million mt.  World 2022/23 corn end stocks fell by 1.1 million to 295.35 million mt, down 11.6 million from 2021/22.

• US 2022/23 soybean end stocks held at 210 million bu, unchanged from March with the Argentine soybean crop falling 5 million to 27 million mt, while the Brazilian soybean crop was raised 1.0 million to a record large 154.0 million mt. World soybean crush rates were lowered 5.0 million mt with world trade holding steady. WASDE cut the Argentine soybean crush rate by 2.25 million to 32.0 million mt while raising Brazil’s by 500,000 mt to a record large 53.25 million mt.

• US soybean end stocks held at a historically tight 210 million bu with WASDE making no change in either their crush or export forecasts. The surprise was that WASDE kept last month’s residual use at 19 million bu deciding to ignore the NASS March Stocks estimate that showed that the 2022 crop was overstated by 60-70 million bu. Huge premiums for Central US soybeans will maintain the fear that the 2022 US soybean crop was overstated. We would argue that WASDE should have adjusted its soybean residual upwards. Also, WASDE kept China’s soybean imports at 96 million mt when vessel counts, and pace analysis argues for a total that is 8-12 million mt larger. We strongly doubt that a soy break can be sustained.

• USDA wheat data leans slightly bearish as combined Russian and Ukrainian exports were hiked 2.5 million mt. Russian exports were lifted 1.5 to a new record 45 million mt which allowed for EU stocks to be raised a full 1 million mt despite larger projected domestic use. US wheat feed/residual use was lowered 25 million bu following bearish Dec-Feb disappearance. US imports were lifted 5 million bu, and US all-wheat end stocks are pegged at 598 xm, vs. 568 million in March. Total world wheat end stocks were lowered 2 million mt amid enlarged feed disappearance.

• The cut to US wheat feed demand was centered entirely on the HRS and white wheat balance sheets. 2022/23 domestic use for those classes was lowered a combined 51 million bu. HRS stocks were boosted 31 million bu; white wheat stocks were increased 21 million. HRW stocks were lowered 9 million to 262. SRW stocks were lowered 14 million to 88 million. HRW stocks will be the lowest since 2013/14 and another year of contraction is guaranteed if soaking rain fails to develop across the Southern Plains in the next few weeks. SRW stocks in 2022/23 will be the second lowest since 2007/08.

• The April WASDE is surprisingly dull. We maintain that total 2022/23 US corn use must be raised by 100-150 million bu, with USDA’s US soybean residual too low by 30-40 million bu. This is being reflected in cash markets, and we note that some major markets this week are bidding $7.00 for corn delivered this week. Underlying themes are unchanged, namely extreme old crop supply tightness and the need for ideal Central US weather. Breaks provide opportunities for buyers. The Great Plains Drought will worsen which underpins Dec corn below $5.50. It is too early in the crop year to be bearish. It is surprising that with US March 1 corn/soybean and wheat stocks 680 million bu less, that WASDE did not adjust US domestic demand upwards. We guess that there must be a trust issue with NASS Quarterly Stocks estimates.

• HEADLINES: Chicago values pressured on favourable Midwest weather forecast; Brazilian soybean premiums weigh; Egypt’s GASC secures 600,000 mt of Russian wheat.

• Favourable warm/dry weather for Central US summer row crop planting has produced pressure on Chicago values as traders expect that farmers will be sitting tall in their tractors planting corn on a timely basis next week.

• The open weather and the steep discount of Brazilian fob soybean offers to the US Gulf has continued the correction which started on Monday. The markets are complex, 1) Historically tight old crop stocks with a higher than normal percentage of those stocks on farm, 2) Cheap Brazilian basis offers as their export and storage system strains as the soybean harvest reaches past 80%, 3) A dire drought in the Plains and high odds that 2-3 million acres of Northern Plains and Upper Midwest acres will be enrolled in the Prevent Plant program.

• And it is also difficult to understand why only 61% of the US renewable diesel plants are operating. If plant operations were 90%+ like they are in crude oil, North American veg oil and animal fat supplies would be quickly exhausted. The point is that for today, the bulls and bears both have talking points and first notice day against May futures is still several weeks off. The Chicago choppiness could persist next week.

• Chicago brokers estimate that funds are flat in wheat, while selling 6,600 contracts of corn and 5,500 contracts of soybeans. In the soy products, funds have sold 4,800 contracts of soyoil and bought 1,200 contracts of soymeal. Commercials are doubtful that Argentine farmers will be active cash sellers following their Dollar Peso program at 300 Pesos vs the US$ rate.

• For the week ending March 30, the US sold 7.1 million bu of wheat, 49.1 million bu of corn, and 5.7 million bu of soybeans. For their respective crop years to date, the US has sold 667 million bu of US wheat (down 37 million or 5%), 1,465 million bu of corn (down 678 million or 32%), and 1,834 million bu of soybeans (down 226 million or 11%). The US soybean sales pace is expected to slow dramatically, while US soymeal sales stay strong due to the dire Argentine drought. US cash crush margins are well above Chicago, and we forecast future gains as Brazil’s crush capacity is near its maximum which shifts demand back to the US.

• Egypt’s GASC secured 600,000 mt of Russian wheat at tender for May delivery. Russian wheat was the cheapest at the tender with values holding above $270/mt basis FOB. The Russian Government hinted several weeks ago that it did not want to see Russian fob wheat prices falling below their benchmark at $270-257/mt. Today Viterra was the low-cost Russian wheat seller at $272.00. Egypt is now harvesting their own new crop, but due to a lack of private buyers in the Egyptian market, GASC will continue to be a large importer.

• The midday weather forecast is bone dry for the Plains over the next 9 days with showers forecast to break out across the drought-stricken Plains on April 16. The US and EU models have been fighting over the correctness placing showers across the Central Plains, but it is encouraging to see the GFS/US models pull it forward into the 10-day run.  The EU model remains arid for the Plains and is our model of choice, but the GFS forecast is not yet backing down in its shower forecast.

• Next week’s warmth allows the Central and Southern Midwest corn seeding to start on a timely basis. Widespread snowmelt in the N Plains and Upper Midwest will produce regional flooding. The 11–15-day forecast added to the rain chances across the C Plains with 1-2.50” totals.

• Improved Midwest and Plains weather forecasts are applying pressure to Chicago today. We doubts that December corn will slide below $5.50 or November soybeans too far below $13.00 with the growing season right ahead. World wheat values have stabilised which argues that May Chicago wheat has support below $6.50. This is no place to turn bearish.

• HEADLINES: Correction is running its course; Weekly export sales due Thursday; Chicago closed on Friday; KC/Chicago wheat spread.

• Chicago grain futures are mixed at midday with May corn/soybean futures reflecting independent strength on firming cash market bids. US cash markets stay strong and could strengthen further as US farmers head to the field for spring planting. End users were able to secure a few days of needs on Monday when Central Illinois cash corn bids reached near $7.00, but with natural gas prices low and the US driving season dead ahead, ethanol producers are looking to extend their forward coverage well into summer.

• The May/July corn spread pushed out to $0.27/bu with May/July soybeans trading out to a $0.36/bu premium. Both spreads are at fresh highs with cash soyoil basis starting to firm as biodiesel and renewable diesel producers start to seek additional feedstocks.

• The USDA announced the sale of 276,000 mt of US old crop soybeans and 125,000 mt of US corn sold to unknown destinations. The US soybean sale is likely to China as it swaps out Argentine for US soybeans due to the poor quality of the Argentine new crop soy crop. China’s soybean reserve buyer, Sinograin, prefers US/Argentine soybeans to Brazil due to their storability.

• Chicago brokers estimate that funds have sold 3,000 contracts of wheat, 2,600 contracts of corn, while being flat in soybeans. Fund product sales are estimated at 1,200 contracts of soymeal and 2,800 contracts of soyoil. May soymeal appears to have uncovered support against $450/ton.

• The spot KC/Chicago wheat spread has posted a record high premium of $1.82/bu yesterday. Remember that it was back in late 2019 that KC HRW traded $1.00 under Chicago due to the US surplus and lack of export demand for US HRW wheat. This was due to the Russian wheat onslaught that continues today. It is difficult to assess value in the KC/Chicago wheat spread based on the growing domestic nature of the US wheat market (US wheat exports in 2022/23 forecast at 4 decade low) with millers needing hard wheat for flour milling. Price is not producing any demand rationing. And any loss of the US HRS wheat crop will only make matters worse, but determining HRW abandonment rates and yield of the drought plagued Plain’s crop is a work in progress. Preliminarily it appears that harvested HRW wheat acres could be cut by 900,000-1.0 million acres with yield falling 5-6 bushels/acre from trend. 2023/24 HRW stocks will near 210-240 million bu, historically tight by any measure.

• Argentina’s soybean/dollar program will run from Saturday through May 24 according to sources with the Peso conversion rate yet to be announced. The official Peso vs US$ rate is 210 with rumours that the offer will be 270-290 Pesos or a bump of 27.5-30% from what is offered currently. The hope is that farmers will sell 5-7 million mt of soybeans to domestic processors.

• The midday weather forecast is bone dry for the Plains over the next 10 days with strong winds forecast this weekend before temperatures rise to the 80’s to lower 90’s next week which adds to HRW wheat stress. The coming warmth allows the Southern Midwest corn seeding to start on a timely basis. Widespread snowmelt in the N Plains and Upper Midwest will produce regional flooding. The 11-15 day forecast has pushed the rain chances north into the Upper Midwest and N Plains where drier weather is desired.

• HEADLINES: Chicago grain markets correct; Except for wheat due to coming Plains dryness. Two steps forward, one step back price action.

• Chicago ag markets are mixed at midday with wheat trying to hold onto overnight gains while corn/soybean futures sag in a correction of the recent rally. The volume of Chicago trade is well below recent days as a 3-day weekend looms and traders are adjusting their risk downwards. July corn has fallen into support below $6.30 with July soybeans also testing support below $14.80.

• Adding to the selling is the macroeconomic background with JP Morgan Chase CEO Jamie Dimon hinting that the world banking crisis is not over, and it will cause repercussions for years to come in an annual letter to shareholders.

• However, Dimon also stressed that that this is not the 2008 global financial crisis. The worry over shrinking lending has sparked selling across a host of asset markets. The war against inflation produces a choppy Chicago trade, even with US corn/soybean stocks historically tight with heady ethanol/soy crush margins. We look for a lower Chicago close today with short covering late in the day. Threatening weather for HRW wheat and expanding biofuel demand underpins Chicago wheat and old crop corn on weakness. It is the wrong time of year to sustain a downtrend in Chicago, but the macroeconomic outlook keeps traders from chasing rallies.

• The USDA did not announce any daily gain sales for the first time in over 2 weeks. China has finished its corn purchase program (for now), but questions abound on the quality of the 2023 Argentine corn/soybean crops that were acutely stressed by weeks of drought. Argentine crushers are hoping that Wednesday’s soy dollar announcement comes at a time when farmers will sell old crop supplies, not new crop. Crushers are not pleased with the new crop quality and desire the old crop to blend it off.

• Chicago brokers estimate that funds have bought 1,000 contracts of wheat, while selling 7,600 contracts of corn, 6,400 contracts of soybeans, 5,400 contracts of soyoil, and 4,300 contracts of soymeal. The fund selling was active in the opening minutes of the morning trade.

• US HRW crop estimates will continue to decline amid the forecast of hot/dry weather into mid-April. High temperatures in the 80’s to lower 90’s will further stress HRW wheat and boost abandonment. The combination of wind, drought and heat is exactly the wrong set up for Plains HRW wheat. Producer sources indicate that the N Texas/Oklahoma crop will start to head in 10-14 days. Rains are desperately needed or US all winter wheat yields could fall to levels like last year. And Plains feedlots booked wheat for feed a few weeks back, questions abound whether that feed wheat will be available without a dramatic change in the weather forecast. An ongoing drought will push July KC wheat up to their winter highs at $9.25-9.50. The lack of wheat for Plains feedlots suggests stronger feeding demand of US old crop corn.

• The US Plain’s drought increases the importance of keeping open the Ukraine Grain Export Corridor in mid-May. We have concerns over recent Russian actions in the exodus of multinational firms from Russian grain trading and what it implies for the corridor. Our concern is that Russia will not renew the pact.

• The latest weather forecast is bone dry for the Plains over the next 10 days with strong winds forecast this weekend before temperatures rise to the 80’s to lower 90’s next week which will add HRW wheat stress. The coming warmth allows the Central US corn seeding on a timely basis across Iowa/Illinois and Indiana. However, the active snowmelt in the N Plains and Upper Midwest will produce regional flooding. The 11–15-day forecast offers rain of 0.5­-1.50” into the W and C Plains.

• A correction was needed, but today’s decline is an overachiever. Ahead of a new Northern Hemisphere growing season, it is too early to be overly bearish. Cash basis is rising on the decline suggesting that end users would take on new ownership. The May/ July corn spread is back pushing out to a 23.5 cent premium, which is telling you to buy the break. May-July soybeans are trading at a 30 cent premium.

• HEADLINES: US farmer sells, cash corn pulls spreads and May corn off their highs; LDC exits Russian grain trade; USDA reports largest soyoil sale of the year.

• Chicago ag markets are mixed at midday with a modest correction from an early morning rally occurring in nearby May corn futures and the May/July corn spread on more active producer marketing. The rally in May corn and premium of cash corn basis ($0.33/over Central IL) pushed cash bids back near or above $7.00 which triggered a solid round of producer sales before the onset of spring planting. The farmer had the time and was waiting to reward a new chance to sell $7.00 cash corn in the Midwest. The morning cash selling sparked profit taking in the May/July corn spread which reached out $0.23/bu May premium. And the profit taking extended to May corn futures with the day’s trading range at $0.10 which also pulled soybean/wheat futures off their highs.

• Soymeal futures have been lower from the opening bell on oil share spreading with crude oil futures forecast to reach above $90/barrel by mid-year on tightening supplies as OPEC+ lowers daily production by 1.16 million barrels starting on May 1. The energy rally will underpin the bio-crops of corn and soyoil on corrections. It is not the time to chase a rally with the spring planting season in clear view. Yet, the new crop balance sheet cannot tolerate any supply disruption without sudden upside price adjustment.

• The USDA reported the sale of 20,000 mt of US soyoil sales to an unknown destination and 150,000 mt of US corn to Mexico. For now, it appears that the daily purchases of US corn by China have ended. Yet, the 20,000 mt soyoil sale is a bit of a mystery with US fob values well above S American offers by at least 11 cents/pound. There are reports of Argentine new crop soybeans being of poor condition with tiny green beans producing chlorophyll in crush operations. Some wonder if the US soyoil demand is due to worry over the quality new crop Argentine soybeans.

• The USDA reported that for the week ending March 30, the US shipped out 43.2 million bu of corn, 18.3 million bu of soybeans, and 6.2 million bu of wheat. For their respective crop years to date, the US has exported 762.5 million bu of corn (down 441 million or 37%), 1,670 million bu of soybeans (up 46 million or 3%), with wheat at 619 million bu (down 13 million or 2%). US soybean exports remain strong with China shipping 11 million bu or 61% of the US weekly total. Combined US corn, soybean and wheat stocks on March 1 were well below recent years with the US corn export program to China kicking into a higher gear from mid-April onward.

• LDC will halt its Russian grain export program as of July 1, joining other multinationals that will no longer be originating/elevating Russian grain. Four multinationals have left the Russian grain export business within a week. Russia has always wanted to be in control if its grain, and that is where this ends. The Russian ag ministry is going to great lengths to reassure buyers that it will remain a reliable world grain exporter.

• There are rumors that two 25,000 mt of Baltic/Polish wheat was sold into the Ardent Mills facility in Florida. The wheat is reported to be high protein 13.5% which will be milled for domestic consumption.

• Chicago brokers estimate that funds have bought 3,000 contracts of wheat, 3,500 contracts of soybeans, and 3,000 contracts of soyoil, while selling 3,400 contracts of soyoil and being flat in corn.

• The forecast is drier for the Plains over the next 2 weeks with limited rainfall for the drought-stricken areas. Snow totals were also diminished and pushed further north with the heaviest totals to impact E North Dakota and NW Minnesota. Much warmer temperatures arrive following the Easter weekend.

• It is not possible to get a sustained bearish price trend until trendline or above trend yields are confirmed in mid to late summer. Yet, with some timely spring seeding to be accomplished, this is a market that is taking 2 steps forward and 1 step back. Soyoil/KC wheat are upside leaders.