- HEADLINES: Chicago extends overnight weakness; Midday GFS cool but dry; Vegoil markets bottoming?
- Chicago ag futures are sharply lower at midday as the trade worldwide digests a shift to cooler Central US temperatures in the 6–10-day period. Yet, it is wheat that is leading the ag space lower today as harvests accelerate across the Southern Plains and Southern Europe. Additionally, Algeria is reported to have begun filling its latest tender with optional origin supplies at a price of $440/mt, including costs and freight, which is somewhat aggressive relative to best guesses on EU cash fob prices Friday evening.
- Malaysian palm oil a year ago this week scored annual lows, and the question is whether a similar price trend holds in 2022. There is no end to newly announced soybean crush plants, while end users awaiting a break in global vegoil markets are likely to return at current prices. We note that biodiesel blend profitability has soared, with Midwest cash soyoil falling to $0.77-0.82/lb and biodiesel still perched above $7.50/gallon. Margins are the best in years, and so far, there has been no evidence that US soyoil consumption has slowed despite elevated prices.
- Egypt’s GASC is similarly likely to return to the marketplace for wheat supplies.
- FGIS export inspections were released generally as exported. US exporters through the week ending Jun 23 shipped 47 million bu of corn, vs. 48 million the previous week, 16 million bu of soybeans, vs. 22 million the previous week, and 12 million bu of wheat, vs. 15 million the prior week. For their respective crop years to data, the US has inspected for export 1,817 million bu of corn, down 18% year-over-year, 1,870 million bu of soybeans, down 11% and 36 million bu of wheat, down 22%. We maintain that Census corn exports will stay well above FGIS data amid record demand from Canada and Mexico, but export data excitement will be isolated to the Census Bureau’s monthly report. Canada through April has already imported 4.7 million mt of US-origin corn, which compares to the USDA’s annual Canadian corn import forecast of 3.8 million mt. Recall it is Census data that is used in final US corn, wheat and soybean balance sheets.
- Volatility is the only certainty over the next 2-3 weeks as 6–15-day Central US forecasts dominate price discovery. Volatility this summer will be compounded by extremely lower US/global carryover stocks and as the GFS weather model will continue its transition from IBM to Cray between now and the end of June. The US weather service warned of changeable forecasts during the month of June during this transition. Today’s price action shows just how sensitive row crop markets will be to changes in temperature/precipitation, but our longer-term concern remains that of net soil moisture loss across the Plains and principal Corn Belt, which looks to continue into the first week of July. Weather markets are fast moving and take no prisoners, but the need for soaking Midwest rain becomes immediate beyond the next 10 days.
- The midday GFS weather forecast is broadly consistent with the overnight run in projecting a shift to cooler temperatures beginning late this week. The mean position of high-pressure ridging slides west and southward late this week and into next Tues/Wed. However, the ridge becomes more expansive in the 8-15 day period, which keeps meaningful rainfall confined to ND, MN and Canada. Heat will blanket the E Plains and Midwest today and tomorrow. Moderation occurs by Thursday. Cooler temperatures are needed/welcomed but the lack of projected moisture into July 6 is worrisome.
- The 2022 weather market is in full swing. Wildly swinging markets are guaranteed into the latter part of July as favourable/adverse forecasts reflect the difference between having and not enough supply in crop year 2022/23. This is no place to make new sales as moisture deficits widen, not narrow, across the larger portion of the US corn/soy belt.