• HEADLINES: Wheat leads Chicago rally; Dryness in Canada, Eastern Russia need monitoring; NOPA soy crush record for April but shy of expectation.

• Chicago ag markets are sharply higher at midday as the rest of the world fully digests bullish USDA wheat data, and as S America’s cash soy market, which had been the bearish lynchpin in March and April, is shifting rapidly. Corn is following. Weather issues linger in Canada and Central Russia, which become highly important to wheat price discovery if they continue into early June. Our general thesis is that the chance to build global grain/soy stocks does exist, but it is entirely up to Mother Nature to prove USDA forecasts correct. Expect volatility moving forward.

• The rapid addition of premium in Brazil’s fob soybean market, with basis there for August delivery now quoted at $0.30 over, vs. $0.15 under last week. Basis for Sep arrival have soared to $0.90 over and suddenly the Brazilian market is working to slow late summer/early autumn demand, which will be funnelled back to the US in bulk at harvest. Additionally, US exporters sold a rare 100,000 mt of meal to Poland for 2022/23 delivery. The recent boost in meal export demand, and to a lesser degree oil, is at least correlated with the ongoing decline in Argentine soy crush rates. Board crush margins are rising.

• We expect Argentina’s meal shortage to be more pronounced during the summer months. Additional US meal and oil demand is anticipated. Argentine farmers will be tight fisted with newly gathered supply amid screaming inflation, with the official Peso likely to test the black market’s value at some point in 2023. Argentine drought/politics remain a big deal for the soy complex.

• NOPA member soy crush in April totalled 173.2 million bu, 1 million below expectations but a record for the month. Capacity utilisation has risen since February. USDA’s annual crush forecast of 2,220 million bu is viewed as accurate. Additional crush expansion lies ahead into 2026.

• Soyoil disappearance last month was disappointing, however. We calculate oil consumption at 1.96 billion lbs, vs. 2.16 billion in March and vs. 2.11 billion in April 2023. NOPA member oil stocks on April 30 totalled 1.96 billion, vs. 1.81 billion last year. We do note soyoil at current prices is competitive with other feedstocks in biofuel production. A demand-led market is still anticipated amid growth in renewable diesel production in the US and sustainable aviation fuel elsewhere.

• There is still no official word on the Black Sea corridor’s renewal or elimination, though the halting of vessel traffic this week has effectively closed off maritime Ukrainian exports. We doubt clarity emerges prior to Turkey’s run-off election on May 28, which compounds the issue of waiting times and demurrage costs.

• Little to no rain is forecast across the northern part of Russia’s winter wheat belt or in the entirety of the Ural and Siberian spring wheat areas into May 25. A blocking pattern will sustain dryness and abnormal warmth in Canada nearby. Both must be monitored as the calendar moves closer towards June, and as the exporter wheat balance sheet cannot tolerate additional supply dislocation.

• The midday GFS weather  forecast is like the overnight run in projecting needed rainfall across the TX/OK panhandles and pockets of CO, KS and NE. Mostly arid conditions persist elsewhere, which in the short run allows row crop planting to be completed nationally prior to May 30-25. Rain will be desired in the E Midwest beyond the next two weeks.

• This week’s tour of the KS wheat crop will better define the rationing chore that lies ahead for high protein wheat markets. Otherwise, daily/weekly price discovery becomes a function of weather and forecasts exclusively. Coming volatility likely provides better pricing opportunities.

• HEADLINES: Wheat soars and soybeans sag with corn caught in between; USDA report is mixed with shocking decline in US HRW wheat crop.

• The USDA May Crop Report held something for everyone with US 2023 HRW wheat production down sharply from last year with the Kansas wheat crop at 191 million bu with total US HRW crop pegged at just 514 million bu, down 15 million bu from last year’s drought ravaged crop. WASDE decided to hold US corn and soybean old crop stocks nearly unchanged, while estimating 2023/24 US corn stocks at 2,220 million bu and soybeans at 335 million bu. The report was seen as bullish for wheat and neutral to slightly bearish for corn/soybeans.

• WASDE estimated the 2023 US corn crop at 15,265 million bu on planted acres of 92 million and harvested at 84.1 million. The USDA used a record corn yield that follows trend at 181.5 bushels/acre. The prior record US corn yield was set back in 2021 at 177 bushels/acre. This year’s record corn yield forecast is 4.5 bushels/acre higher. WASDE cut 2022/23 US corn exports by 75 million bu to 1,775 million bu and made no other changes to the balance sheet arriving with an end stock total of 1,417 million bu. Based on the March Stocks report, we maintain that USDA is still 100-150 million bu too low on 2022/23 US corn feed use.

• WASDE estimated the average 2022/23 US cash corn price at $6.60 and $4.80 for 2023/24. The lower new crop corn price would translate into a harvest low of $4.75-5.00 for December futures. July corn below $5.70 appears undervalued.

• 2023/24 US total corn use was forecast at 14,485 million bu with exports of 2,100 million bu, domestic feed/residual use of 5,650 million bu and the US ethanol grind at 5,300 million bu. We maintain that 2023 US corn seeding will decline 800,000 acres with favourable weather needed to achieve a 181.5 bushels/acre final yield.

• US 2022/23 soybean end stocks were forecast at 215 million bu, up 5 million from April due to 10 million bu increase in exports and 5 million bu boost in trade. The boost in trade is a surprise based on the competitive position of S America. However, WASDE did boost Chinese soybean imports to 98 million mt, up 2 million on a growing purchase pace from Brazil.

• USDA forecast the average 2023/24 cash soyoil price at $0.58/pound amid crop year biofuel use expanding 900 million pounds. We see this as a too conservative US 2023/24 soyoil stocks are forecast to decline to 1,836 million pounds.

• The 2023/24 world soybean end stock total of 122 million mt is decidedly bearish with Brazil producing a 163 million mt and Argentina a 48 million mt crop. Such crops are monsters and set a longer-term bearish price trend if realised. However, the focus in coming months will be on the 2023 US soybean crop. There will be weather scare rallies that offer new sales opportunities. Based on margins, we see a 163 million mt 2024 soy crop as excessive.

• USDA wheat data was bullish. Old crop US stocks were left unchanged at 598 million bu, but 2023/24 end stocks were trimmed 42 million bu to a new 16-year low 556 million bu. NASS in its first official estimate pegged US winter wheat production at 1,130 million bu. Yield was down 7-22% year on year in TX, OK and KS. Yield loss is also forecast across the PNW amid lingering drought and weak crop ratings there. SRW yields are projected steady to slightly lower.

• We note that US wheat end stocks in 2023/24 will be near pipeline, and this assumes exports of just 725 million bu, with the US’s share of world trade dropping to a newer record low 9.4%, vs. 9.8% in 22/23. There is little to no tolerance for supply dislocation in any other major exporting country. Wheat must stay out of feed rations with HRW end stocks in 2023/24 now projected to be 150-160 million bu, vs. 269 million in 2022/23 and the lowest since 2007/08.

• 2022/23 major exporter wheat stocks were raised 3 million mt amid a slashing of domestic use in Europe and Russia, which was not unexpected. New crop exporter production is pegged at 382 million mt, down 12 year on year, with stocks falling 7.6 million mt to just 55.7 and stocks/use also estimated at a new 16-year low 13.8%. This assumes normal weather and even a modest contraction in global wheat consumption.

• The USDA’s move to publish larger new crop corn and soy stocks and adjust EU/Russian wheat stocks higher allows focus to shift to actual old crop stocks and summer weather. Extreme volatility is expected in the coming months. Dryness in Canada and C Russia and developing dryness in the E Midwest need to be closely followed. And surprisingly, WASDE has yet to cut Argentine corn and soybean crop estimates.

• HEADLINES: Argentine financial worry emboldens farmers to hold tight to crops: US weekly export sales slow; Ukraine grain corridor confusion.

• US weekly export sales were as slow as feared; CONAB raises 2023 Brazilian soybean and corn crops slightly to new records; Fear is growing that Argentina is in a financial “pickle” due to soaring inflation and a sharp decline in hard currency as Argentine farmers hold fast to this year’s harvest with the Soy Dollar Program yielding few cash sales; Traders convinced that USDA will release a bearish report on Friday based on slowing world demand; Any bullish surprises could be tied to US HRW wheat production and that demand does not fall as much as traders fear. Sub $5.10 December corn and sub $12.25/bu November soybeans have already built in considerable amount of demand bearishness. A N Hemisphere growing season is ahead and world ocean temperatures are record warm which adds to market volatility as a “supply” focus returns.

• Midday Chicago futures are mixed in preparation for what traders expect to be a bearish WASDE report on Friday. Corn, soybeans, and wheat gapped lower on fresh short selling. End users and closet bulls are waiting for the report to be released before taking a stab at ownership. By our count, fund managers have now liquidated most of their soybean ownership but are still holding a modest 16,000 contract long in soymeal. Speculators are heavily short Chicago wheat, corn, and soyoil. Commercial pricing underpinned July soybeans.

• News surrounding the Ukraine Grain Corridor is confusing, and maybe confusing with a cause to delay any decision until after the weekend Turkey Presidential election. Russia claims that the Istanbul talks have ended while the UN and Ukraine holds out hope for some sort of short-term extension. However, Russia holds fast its request that all of its demands be met by May 18, or the corridor will close. We believe that the US/EU are opposed to opening SWIFT to Russia and a host of other demands. Four-way technical talks may continue, but Russia appears unmovable following the Istanbul negotiations.

• We note that a significantly smaller Ukraine corn/wheat crop is expected due to the ongoing war and the negative margins that farmers are enduring. Diesel fuel is priced at $34/gallon while financing for operating farm loans is unavailable. Labour is tight and there is no indication that the war will end soon. Our point is the smaller corn/wheat/sunseed harvests can be pushed out through Eastern Europe at 2-2.5 million mt/month. Although the cost of transit may be higher, there are options for Ukraine to export crops out of country.

• US weekly export sales for the week ending May 4 were 1.0 million bu of old crop and 12.3 million bu of wheat, 10.1 million of old and 3.3 million bu new crop corn, and 2.3 million bu of old crop soybeans. The sales were as bad as feared.

• Argentine sources claim that the Government could be facing a dire liquidity crunch that will prevent them from supporting their Peso. A dramatic fall in the Peso could cause hyperinflation, today’s inflation seems hyper already at 104%. The risk for Argentine exporters and crushers is getting farmers to sell their new harvests. Yields are well below farmer expectations and amid the financial problems of the Government few have any desire to sell their only hedge, grain. We would argue that Argentina will be a significantly smaller exporter of soy products which is why the soymeal market has caught a bid.

• The GFS midday weather forecast is consistent with prior runs. A series of systems passes east in a zonally flowing jet stream to produce a combined 0.5-2.00” of Midwest rain into May 21. The heaviest rain targets Texas, the SE US and North Dakota with 2-4.00” totals.  These areas will endure heavy bouts of rain that produce localised flooding. The only area of concern remains the Canadian Prairies.

• The USDA May Crop Report is tomorrow, and traders are adjusting their risk. Argentina lurks in the background as a financial market risk due to illiquidity and a possible run on the Peso. Buying new crop Argentine corn/soy will be extremely difficult into September, when farmers need funds to seed the next crop. After the USDA report, it is all about weather/crop assessments.

• HEADLINES: Algeria books Russian wheat at $275/mt basis CIF; Turkey says Black Sea grain deal could be extended for 2 months; Chicago mixed on low volume.

• Chicago is mixed with tight cash markets offering support to July corn and July soybeans while the wheat market swings back and forth on the Algeria tender. The USDA May Report looms on Friday and a mixed close is forecast.

• Russia held its wheat sale price at $275/mt to Algeria today, but the purchase was completed on a CIF not a FOB basis. This means that the actual FOB wheat price dropped to $245/mt (estimated $30/mt freight). Russian exporters once again acted in tandem with each seller having the same price  which further points towards a Russian Grain Board. This is why multinational sellers were expelled in March. The fall in Russian fob wheat price pressured Chicago/Paris wheat futures, but prices have recovered at midday in a bottoming process. Russia and the EU still have old crop wheat to move.

• Chicago corn/soybean prices are mixed with December corn futures finding support at last week’s low at $5.10/bu. July appears to be leading the rally without any additional Chinese cancellations. Cash connected sources suggest that China has now switched 1 million mt of US corn sales (known and unknown) from the US to Brazil in the July/August timeframe. China will ship out the remainder of its US corn purchases due to requirements into SE Chinese livestock areas. July Chicago corn appears cheap with Central Illinois cash bid at $0.70. Cheap Brazilian corn will NOT move into the US due to high import tariffs but could find a buyer in Mexico if Brazilian corn premiums keep declining.

• US weekly ethanol production averaged 965,000 barrels/day vs 976,000 last week. The decline was due to seasonal maintenance. The weekly US ethanol grind rate is right at USDA’s annual forecast. We anticipate no change in the US ethanol grind rate on Friday.

• China used the morning break to secure 5-7 cargoes of Brazilian soybeans for August. The break to $14.00 July entices world end users to extend their coverage. The Chinese are active on breaks adding to forward coverage.

• Brazilian dryness is adversely impacting the winter corn crop with crop ratings in decline in Parana/Mato Grosso do Sul. Several good rains are needed or the total corn crop will slip below 120 million mt (vs 125 million). The Brazilian corn market should start to catch a bid from importers on further declines.

• The US inflation rate for April was 4.9% with the monthly gain (excluding food and energy) being +.4%. The rate is double what the US Central Bank is willing to tolerate, but the movement of inflation is down which will cause a pause in further rate hikes through the summer and the autumn.

• Turkey has indicated that Black Sea Grain Corridor could be extended for 2 months; Russia and UN confirmation is lacking. Details are awaited.

• The GFS midday weather forecast is consistent which raises our confidence. A series of storm systems in a zonally flowing jet stream will produce a combined 0.5-2.00” of Midwest rainfall over the next 10 days. The heaviest rain targets Texas, the SE US and North Dakota. These areas will endure heavy bouts of rain that produce localised flooding.

• Canada holds in an arid/warm flow with soil moisture quickly being depleted. The persistence of a low-pressure trough off the NW US Coastline keeps a high pressure ridge anchored across N Canada. It is this high-pressure ridge that could produce a “flash drought” in late May.

• Volatility remains the Chicago theme. Neither rallies nor breaks are sustained, which produces a choppy Chicago market that is difficult to trade. The USDA report looms on Friday which is likely to produce a sizeable price reaction. Our bet is that a bearish or bullish report will not be able to be sustained. This leaves summer weather conditions/supply that will direct Chicago prices during June and July. Canada, Argentina, and the spring wheat areas of Russia are too dry today. Pay close attention to each area’s respective forecast in the weeks to come. Spring seeding is active across Canada.

• HEADLINES: China cancels US corn purchase; Fund selling accelerates on the charts; Brazilian export premiums rally; Stats Canada bullish canola.

• Chicago futures drop on Chinese corn cancelation; Rain across the KS/NE and bearish charts; Stats Canada March Stocks data bullish on canola/durum wheat; Brazilian soybean basis roars higher into September as logistical woes are cleared. Chicago market volatility stays the theme heading into late May.

• Midday Chicago futures are sharply lower on renewed speculative selling. News that China cancelled 272,000 mt of US corn added to the bearish mentality. November soybeans have traded back to $12.50 chart support while December corn tests its old lows at $5.10-5.15. The July KC/Chicago wheat spread pushed out to a record $2.06 KC premium as the May/July corn spread tested the 2013 high at $0.60 over. Cash basis bids ex Central IL are holding firm with corn at $0.70 over soybeans bid at $0.75 over July futures. Cash movement is nil.

• China cancelled 272,000 mt of US old crop corn which added to last week’s cancelations totalling 730,000 mt. China has 2.9 million mt of US corn that has been purchased, but not shipped with another 1.0 million held in the unknow destination category. Chinese corn cancellations appear to be due to cheaper Brazilian offers from July forward vs the US Gulf.

• The US continues to ship corn to China, but with Brazilian offers $0.95/bu cheaper in July/August, late summer business is being moved. Brazilian corn was added by China as an origin in December to make sure that it had more than one supplier following the Russian war against Ukraine. Please be aware that due to the Ukraine/Argentine corn supply shortfalls, the US/Brazil will be fighting for Chinese/world corn demand going forward. The US Gulf cannot match Brazilian offers due to the huge basis premiums being paid by US domestic corn users (ethanol). Central IL corn is bid at $0.70 over which makes US corn non-competitive in world feedgrain trade.

• The UN announced today that outbound grain vessels from Ukraine have resumed. The clearing of outbound boats waiting to get out the Black Sea is growing. With just 9 days remaining in the agreement, it is an exodus to exit the Black Sea on the fear that waters could be mined to prevent a Russian assault.

• Chicago brokers estimate that funds have sold 5,100 contracts of Chicago wheat, 10,500 contracts of corn, and 6,500 contracts of soybeans. In the soy products, funds have sold 4,200 contracts of soymeal and 5,000 contracts of soyoil.

• Stats Canada surprised with lower-than-expected March 31 stocks of wheat and canola. All wheat stocks were 13.26 million mt against an average trade estimate of 14.00 million, with canola stocks pegged at 5.9 million mt vs estimates of 6.9 million. The lower stocks explain the big rise in cash basis bids of late. And for canola, the lower stocks make favourable new crop weather a must.

• Brazilian fob soybean basis has been rising sharply as logistical issues are resolved and farmers are tight fisted with new crop supplies. Paranagua fob soybeans are offered $1.00/bu under July and $1.00 over by September for a $2.00/bu basis rally in 3 months. Such a basis rally is unheard of in recent years with US soybeans competitive in the world market in September.

• The GFS weather forecast is like the overnight run with a series of storm systems to move across the US over the next week producing 0.5-2.00” of rain. The heaviest rain targets Texas/Oklahoma late this week. Canada holds in an arid/warm flow which is concerning. The week 2 US forecast calls for a new round of dryness to boost the spring seeding effort.

• Volatility remains the theme in Chicago. There will be summer US weather threats, but for now, weather is a nice mixture of rain/sunshine/temperatures. Chicago new crop futures have digested a large amount of bearish news with December corn at $5.20 and November soybeans at $12.50. An Algerian wheat tender tomorrow should be closely followed to determine if Russia is willing to cheaply sell old crop wheat to gain demand. Vegoils are the bull story longer term on smaller canola, palmoil and soyoil supplies/stocks.

• HEADLINES: US employment accelerates calming demand fears; Black Sea grain corridor deal elusive; Falling Argentine crop sizes cause world soy product shortages.

• US job growth accelerates in April as the unemployment rate falls to 3.4%; Chance of US recession dims with a chance of soft landing; Commodity markets rally sharply on “recession off” thinking; US HRW wheat futures rise on low US HRW wheat crop estimates and fear of the Ukraine corridor closing as today’s Moscow meeting has ended without resolution.

• Midday Chicago futures are sharply higher with soyoil/wheat leading the advance with corn/soybeans following in active trade. The DOW jumped 400 points with regional bank stocks the day’s biggest percentage gainers. And US Treasury yields are up 0.10% in the 10 year note as the US Central Bank will likely hold rates higher for longer. A cut in rates is not expected in 2023 amid the rise in US employment. Job and wage growth keeps demand elevated with the gloomy economic forecasts of recent weeks overdone.

• Commodity markets have been trading a mixture of fundamentals, fund flows and gloomy economic forecasts with several economists calling for outright deflation. The US economic outlook has slowed, but if regional bank contagion does not get out of hand, commodity values look like they are too cheap.

• Chicago brokers estimate that funds have bought 5,600 contracts of wheat, 6,800 contracts of corn, and 5,500 contracts of soybeans. In soy products, funds have bought 8,500 contracts of soyoil and 1,800 contracts of soymeal. It has been a bulldozer trade in one direction with funds really coming to cover short soyoil positions early in the day.

• Russia, the UN, and Turkey have ended talks and they failed to reach an agreement authorising new vessels into the Black Sea. All parties will allow ships to exit, but the de facto ban on new vessels offers a gloomy assessment for the continuation of the corridor beyond May 18. We hear that Russia argues that its finance demands are not being met. Unknown is whether Ukraine shipping channels will be mined to prevent Russia from a seaborn attack. Time is running out for an extension of the Black Sea Grain Corridor Deal.

• The Markit Survey of US winter wheat estimated the US HRW wheat crop at 588 million bu with US SRW wheat at 387 million. A year ago, the US HRW wheat crop was 531 million bu with the US SRW crop at 337 million bu. Traders fear that the final US HRW wheat crop will fall under last year due to additional abandoned acres. NASS has been surveying US winter wheat fields all week, with the Crop Quality Tour occurring in the third week of May.

• It is shocking that Argentine soybean/corn production totals keep falling to the degree that harvested yields suggest. An 18.5 million mt soybean and 30 million mt corn crop are down 8.5 million and 7 million, respectively from USDA’s April forecast. It is at a point where Argentina logistically cannot import enough Brazilian soybeans to fill world product demand. This should cause a sharp rally back in soy crush margins/soy product prices. And Argentine corn exports will not be made up by the larger Brazilian harvest. Note that Brazilian soybean (and soy product) premiums keep rising with September offers at $0.70 over Chicago.

• The GFS weather forecast is drier across the W Plains/NW Midwest and further east with rain across the Delta with heavy rain totals 6-8.00” projected along the western side of the Mississippi River. Such rain would add to the heavy river flow that is underway. Also note that unwanted rain drops across the Northern Plains where farmers are struggling to seed spring crops. If the active pattern persists, seeding will be pushed into the last half of May. Please note that the GFS forecast has been dynamic on a new split jet stream flow.

• Traders are considering whether early seasonal lows were scored amid the early week economic gloom surrounding regional US banks. And new pessimism regarding the Black Sea Grain Export Corridor has added to the upside volatility. We have previously warned that Chicago volatility will stay high amid the lack of resting orders. World grain trade has held up better than the bears expected and adverse weather for a major exporting nation this summer could create a lasting bullish trend.

• HEADLINES: Chicago mixed as risk reduction is the theme; Russian wheat board developing; Central US weather forecast pulls rain eastward.

• US regional bank contagion limits market participation/desire to chase Chicago rallies; Central US weather good for planting/crop establishment; Russian corridor talks set for Friday; CBOT gives back some of Wednesday’s gain.

• Midday Chicago futures are mixed as traders reduce their exposure ahead of next Friday’s USDA Crop and WASDE report. Also, the tightening credit of US regional banks is causing trader “indigestion”. And accordingly, traders are adjusting their risk. The two markets that managed money is short, wheat/soyoil, are witnessing buying while where funds are long, soybeans/soymeal, are enduring selling. Corn is caught in between. Volume at midday has declined with few wanting to add to their market risk ahead of the May 12 USDA Crop and WASDE Report. Looking at December and November soybeans at $5.00 and $12.50/bu respectively, the market has done enough to the downside. It is too early to be overly bearish with a Northern Hemisphere growing season ahead.

• Chicago brokers estimate that funds are net buyers of 6,400 contracts of wheat and 1,700 contracts of soyoil, while being a net sellers of 2,800 contracts of soybeans, 1,200 contracts of corn, and 2,700 contracts of soymeal.

• For the week ending April 27, the US sold 7.8 million bu of wheat, 10.6 million bu of soybeans, and a negative 12.4 million bu of corn. The corn cancelations should have been expected following the daily confirmations of China’s cancelling prior purchases. For their respective crop years to date, the US has sold 1,501 million bu of corn (down 794 million or 35%), 1,863 million bu of soybeans (down 279 million or 13%), while US wheat sales rest at 694 million bu (down 18 million or 2%). WASDE is expected to trim their US 2022/23 corn and soybean exports next week Friday due to the aggressive export pace of Brazil. We would remind that world wheat and soybean trade is record large, it is just that the US’s share has been cut.

• In reflection, following the recent Egyptian GASC tender, a new national grain board is being established called the “Russian Grain Board”. During the GASC tender all Russian sellers initially offered Egypt’s GASC wheat at $275/mt. However, after hearing other lower FOB offers, they consulted with Russian Government officials that allowed them to drop their FOB offer by $15/mt to $260/mt.  Again, all Russian sellers acted in tandem. This means that the Russian Government has the final say in Russian wheat sales, much like a grain board. And should a cargo of Russia fob wheat be needed for spot we are told that the price is back to $275/mt. There is much yet to learn about the new sales strategy from the world’s largest wheat exporter, but it appears that Russia is acting much like Argentina did during its military control some 40 years ago. This is the reason why multinational exporters were thrown out of Russia in late March.

• The GFS weather forecast is drier across the Western Plains and the Eastern Midwest. This is similar to the overnight EU model. Notice that soaking rains of 2-5.00” is offered to E Texas/Oklahoma, but this rain does not fall until late in the forecast period. Nearby a series of storms will trek across the Central US offering scattered showers/storms. Some worry will exist about timely row crop planting in the Dakotas, but Nebraska will welcome the rain following months of dryness. The entire 14-day forecast is warm with 60’s/70’s/80’s. Notice the ongoing and deepening drying trend across Canada. Our biggest weather concern (nearby) is Canada.

• Volatility stays the theme. The trade is fully expecting a bearish USDA May report for US corn/soybean balance sheets. However, don’t forget that Argentina’s corn and soybean production will be lowered again which has implications for world soy product supplies. The US export sale of 14,000 mt of US soyoil is the largest in months, and shows that price has fallen to levels that encourage new trade demand. Who really wants to sell December corn below $5.20 or November soybeans below $12.50 with an entire growing season ahead?

• HEADLINES: Wheat soars following explosion at Kremlin; Row crops follow; GFS weather forecast stays erratic in US.

• Chicago grain futures are higher at midday, wheat sharply so, with soybean well above session lows as the trade shuffles between risk off and risk on. Macro input leans negative amid crude’s $2.90/barrel plunge and as equity markets stagnate amid growing concern over regional banking issues. But top priority in the ag space is an explosion at the Kremlin in Russia this morning and a probable end of the Black Sea export corridor at mid-month. A close above $6.34, July Chicago wheat, and $7.76, July KC, argue for a reversal bottom. Both markets are still oversold/near oversold.

• Ukraine has denied involvement in an explosion in Moscow, but President Zelenskyy also suggested Russia has no incentive to extend the corridor deal on May 18. War persists in eastern Ukraine, and while uncertainty over evolution of counter-offensives and their impact on grain remains, We would remind that funds in Chicago wheat this morning were short a net 130,000 contracts, just 32,000 short of the all-time record, and were short an estimated 1-2,000 contracts in KC. The risk of rapid/intense covering of these positions lingers in the background amid the potential for slowing Black Sea exports and as model guidance overnight eliminated rain chances from the US southern and western Plains.

• We would note that the European market’s reaction to Black Sea headlines is muted, but our work suggests that EU/Black Sea cash markets must lead US wheat prices lower as all major exporter prices reach parity. Spot corn in Brazil is down $0.05/bu at $5.28. It is the flow of money in the US that has exacerbated today’s move.

• US ethanol production in the week ending April 28 totalled 287 million gallons, vs. 284 million the prior week and up 1% from last year. Production data since early spring has been somewhat unexciting, but normal seasonal trends are being followed. US ethanol stocks last Friday totalled 981 million gallons, down 40 million week on week and down a sizeable 128 million from mid-March’s peak. A further rapid drawdown in stocks lies ahead, and a 5-7% jump in weekly production is anticipated over the next 6-8 weeks. Ethanol production margins are profitable. The US swap market suggests cash ethanol prices so far in May have not followed crude and gasoline lower.

• The GFS weather forecast continues to keep any increase in Central Brazilian rain changes into the 11-15 day period. Rapid soil moisture loss remains probable into May 14. There is also a growing risk that Argentine wheat area is abandoned amid ongoing historic drought conditions in Cordoba, Santa Fe and Entre Rios. Zero precipitation is forecast in Argentina nearby, and rainfall loses intensity seasonally during the Southern Hemisphere winter months.

• Current surpluses of wheat globally erode in 2023/24 if the Southern Hemisphere is negatively impacted by a lack of planted area in Argentina and El Niño-inspired drought in Australia. There remains very little room for error.

• The GFS weather forecast is much wetter across the eastern Plains and Midwest next week, with cumulative totals of 3-5” now offered to E OK, MO, IL, IN, OH and KY. The GFS forecast is struggling with the N American upper air pattern as the spring/summer climate evolves. GFS weather output can’t be dismissed, but 12-hour changes in the model’s solution have been incredibly erratic, recall rainfall of 6-7” was forecast in KS & NE in Tuesday’s midday forecast only to be eliminated overnight. Confidence beyond 5-7 days is low. Rainfall into early next week should favour NE, The Dakotas and far Southern Midwest.

• Volatility remains the theme. The market is beginning its transition to new crop supply and demand, but that old crop stocks remain extremely tight only heightens changes to daily/weekly market perceptions.

• HEADLINES: Chicago mixed/mostly lower; Macros weigh; Midday GFS adds rain to US Plains, Central Brazil.

• Chicago ag markets are again mixed with corn firm, wheat struggling amid cheap supplies offered to Egypt and the GFS’s ongoing attempts to add rain to KS. The soy complex stays choppy, with soyoil sustaining modest overnight gains despite weakness in crude. Overall macro input leans negative.

• Crude is testing the lower end of the recently established range at $72, while US equity markets are trading sharply lower on rising concern over regional bank liquidity, following the sale of First Republic Bank over the weekend, and waning job openings coupled with ongoing sector-based layoffs imply a loosening of the labour market. Consensus still points to a 0.25% hike in US benchmark rates Wednesday, but this looks likely be the last of hikes for this cycle. Index funds in the last 12 months have liquidated 400,000 contracts of ag market length. Commodity indexes remain historically deflated when compared to equity market, and key is whether a plateauing of interest rates changes investment flows this summer. The Dow at midday is down 480 points.

• The cheapest wheat offer made to Egypt for Jun/Jul delivery overnight was Russian at $260/mt, 695,000 mt of Russian origin supply was offered at exactly $260, followed closely by Romanian at $263.

• It is clear Egypt and other major importers will continue to source near-term supplies from regions facing abundance, namely Russia/eastern Europe. Egypt’s last purchase in early April was executed at $275/mt, and so Egypt’s purchase today reflects a new, lower price floor in the Russian fob market. Europe and Russia lack major climate threats today, with stable soil moisture levels forecast in key areas of Western Europe into May 10 and with soaking rainfall of 1-2” probable in southern Russia early next week.

• The GFS weather forecast is also improving in Brazil, where better rain chances are offered to Mato Grosso do Sul and Parana, where safrinha corn seeding was most behind schedule, May 9-10. This is too far out to be overly confident, but mid-May rainfall in Central Brazil would be highly welcomed. The GFS forecast in the US, similar to midday Monday, extends heavy rainfall upward of 3-6” into Western Kansas and Nebraska May 10-11. If realised, drought indicators in W Kansas would be cut in half by late month. We view ongoing deeply negative soil moisture anomalies across the Southern and Western Plains as critical, and very close attention will be paid to whether last week’s rain event marks the beginning of a more lasting pattern shift there. The EU model’s release this afternoon is important.

• The midday GFS weather forecast projects a nearly cut-off low pressure trough to swirl around the Central US May 10-13, which triggers a stagnant pattern of heavy rainfall across the Central Plains, Delta and far southern Midwest in the 8-12 day period. Heavy cumulative rainfall will impact all but the far Northern Plains and eastern Midwest. The midday GFS forecast leans cooler, but additional freezing temperatures are not indicated into mid-month

Cheap Russian wheat and aggressive Brazilian corn and soy prices along with improved medium-term Central US forecasts are noted. Markets are oversold, corn and wheat deeply so, but the catalyst needed to spark speculative short covering today is absent. We reiterate that volatility will be the theme of 2023 as markets work to transition from historical tightness to adequate supplies. Mother Nature into August determines whether this occurs – or not.

• HEADLINES: Europe closed for Bank Holiday. Wheat tests $6.00 on wetter Plains forecast; US warmth accelerates row crop seeding beyond next 5 days; Crude weak at midday.

• Chicago ag markets are mixed, with soy and old crop corn steady to higher and wheat sharply lower on hints of additional Plains rainfall in the 8–15-day period. The models are at odds with forecast details beyond the next 5-7 days, but both the EU and GFS place some measure of rainfall either in TX/far west OK or KS/NE May 10-12. Key will be whether last week’s rain had a materially positive impact on crop ratings in the southern Plains. Recall poor/very poor reached above 50% last week in KS, OK and TX. Active planting progress expected this week and an eventual warming of temperatures beyond May 5 have broadly limited new bullish enthusiasm on Monday. Spot WTI crude at midday is down $1.35/barrel at $75.40.

• We must expect sizeable volatility throughout the next 3-4 months. The beginning of the growing season and coming release of USDA’s May WASDE are noted. Turkey’s Presidential election on May 14 and the renewal, elimination, or adjustment of the Black Sea export corridor on May 18 follows. All are critical for long term direction. July KC’s drop of $1.20/bu in just 10 sessions speaks to improved weather and a loosening of EU wheat supply and demand, but also shows just how sensitive to changes markets have become.

• Our work maintains that the most important catalyst in recent days/weeks has been the collapse of S American cash basis levels as Brazil struggle to move its record soy crop, with similar challenges expected once safrinha corn harvest begins in mid-June. But it is Northern Hemisphere weather that determine whether global stocks are allowed to build adequately in crop year 2023/24. Threats today are isolated to lingering sizeable moisture deficits in the US Plains and worsening drought across North Africa. Each/every weather model release will be scrutinised by the market moving forward.

• US export inspections in the week ending April 27 included 60 million bu, vs. 37 million the previous week and a new marketing year high, 15 million bu of soybeans, vs. 14 million the previous week, and 13 million bu of wheat, unchanged. For their respective crop years to date, the US has inspected for export 941 million bu of corn, down 35% from last year, 1,743 million bu of soybeans, unchanged from last year, and 670 million bu of wheat, down 3%.

• USDA is likely to trim its old crop US corn and soy export forecasts slightly amid the aggressive nature of Brazilian offers. US wheat sales and shipments remain solidly aligned with USDA’s annual target. Closer attention will be paid to corn/soy domestic processing and margins, with NASS after the close to publish official US soy crush in March and product stocks along with corn used for ethanol production.

• The midday GFS weather forecast is drier in the southern Plains but wetter in NE, IA and WI, and still maintains additional needed precipitation in eastern OK and KS. Most importantly is that the model keeps in place a lasting period of warmth beginning this weekend. Maximum temperatures in IL/IL in the 6–10-day period are projected in the upper 60s and 70s, and this pattern of warmth is forecast to persist into mid-month. Dry weather blankets the Central US Fri/Sat. A series of light/moderate and scattered events return in the 6–15-day period. Confidence in the GFS’s location/coverage details is low, but at midday heavy cumulative precipitation will favour the Northern Plains and Delta/mid-South.

• The extraction of weather premium from wheat has collided with large European stocks and Russia’s ability to fill a sizeable portion of world trade in April. Timely US corn and soy planting keeps buying/short covering limited nearby. But it is the wrong time of year to be overly bearish and coming rampant volatility provides much better selling opportunities. End users should consider extending wheat supply coverage into autumn at current prices.