- HEADLINES: Chicago prices sink as longs book profits; US farmers to accelerate seeding in coming days; Argentine corn extremely cheap.
- Chicago futures are lower at midday as new investment inflow slows and farmers start planting summer row crops across the Western and Eastern Midwest. Getting seed into the ground is not particularly bearish, but the Central US weather pattern does not offer lasting seeding or germination delays. 2022 US corn and soybean seeding progress should run slightly behind normal, but such seeding does not suggest any drag on yield.
- Chicago is increasing its focus on new crop production/yield, but you cannot lose a crop until it is out of the seed bag. If you are NOT going to see widespread extreme wet weather, the market risk points to a correction from record or near record high prices with the US Central Bank to raise rates in early May, a bottom could be formed after the May WASDE Report. WE would expect that the USDA will be conservative with their assessment of export flows due to the Russian war against Ukraine.
- We note that a lasting bearish trend is not expected. However, bull markets need to be fed and US export demand for wheat/corn is expected to be modest due to S American fob offers. Argentina is offering May corn at $1.20 under the US Gulf. Even Brazil is offering corn far cheaper than the US well into September. Brazil is offering fob corn at 30 over for July (vs US Gulf at $1.00 over), with August at $.50 over (vs the US Gulf at $1.35 over).
- Chicago brokers report that funds have sold 4,900 contracts of wheat and 6,500 contracts of corn, while buying 2,900 contracts of soybeans. In the soy products, funds have bought 3,200 contracts of soyoil while selling 2,100 contracts of soymeal.
- FAS/USDA reported that for the week ending April 14, the US sold 1.0 million bu of old crop and 8.8 million bu of new crop wheat, 34.6 million bu of old crop and 15.3 million bu of new crop corn, and 16.9 million bu of old crop soybeans and 45.6 million bu of new crop. Wheat and corn sales were less than expected, while new crop US soybean sales were larger than expected.
- For their respective crop years to date, the US has sold 708 million bu of wheat (down 224 million or 24%), 2,230 million bu of corn (down 415 million or 16%), and 2,097 million bu of soybeans (down 137 million or 6%). China was the big buyer of US corn last week taking just over 1 million mt in both crop years combined. 9 million bu of US corn sales were cancelled from an unknown destination. Future US corn sales look to slow on the cheapness of S American corn.
- Exporters report that China booked 3-5 cargoes of US soybeans off the PNW for October/November. Old crop demand has slowed based on price and sliding domestic crush margins within China. Chinese crushers are tepid in making old crop purchases due to the fear of spreading Covid lockdowns and a slowing economic outlook. The Shanghai port is already clogged which accounts for 20% of China’s import/export capacity. Uncertainty of logistics slows imports.
- The US 10-year note has pushed near a 3.0% yield which offers the first favourable return for investors vs. the US stock market. The US Central Bank will be raising interest rates on May 4. The hike in rates will sustain the US$ with financial headwinds for commodity values. We look for the FED to raise US fed funds rate by 0.5% in May and the June meeting.
- The midday GFS weather forecast is further south and further north with heavy rains (AR/Western Dakotas) than the overnight run. The Canadian Prairies will also enjoy some welcome rainfall. The forecast is warmer over the next 2 week with cold Canadian air being lifted northward. Seed will enter the ground, but the dire Plains drought looks to worsen.
- Bulls need to be fed, and there is just nothing that is fresh on export demand or the weather front. S America is offering corn cheaply to world feed importers. The 90-day outlook from NOAA offers a deepening drought for the Plains and the W Midwest, but that is too far out in the future to position for until corn/soybean crops are planted and beyond the May WASDE report. We see a choppy and sideways market, don’t chase rallies. There will be a time to reload long positions on Chicago grain.