- HEADLINES: Soyoil limit down/soymeal limit up on oil share spreading; GFS weather forecast slightly wetter next Wednesday; Dec corn reaches $6.26.
- Chicago futures are sharply mixed with corn, soybean, soymeal, and wheat futures sharply higher with soyoil futures down their 4 cent limit. Massive oil share spread unwinding is occurring which sent soyoil futures to limit losses and soymeal to limit gains. The EPA finalised the blending mandates for 2023 at 20.94 billion gallons, 21.54 billion gallons in 2024, and 22.33 billion gallons in 2025. EPA cut their ethanol inclusion from December, but biodiesel use rose 7% annually. The RVO amounts were less than the industry had hoped for and soyoil futures have declined sharply. We see the soyoil break as overdone, as renewable diesel credits in California and other states will sharply increase production. We caution against turning bearish soyoil following the EPA decision, for the next few days it is about the oil share spread. Longer term, it is the lower production of US soybeans (soyoil) which will rally futures.
- Chicago corn, soybeans and wheat are sharply higher on threatening weather and reduced US corn/soy yield potential. We have adjusted our US corn yield estimate down to 174.5 bushels/acre and soybeans down to 50.4 bushels/acre and trimmed harvested acres due to additional abandonment and extra corn acres needed for silage. The result is US 2023/24 corn end stocks circa 1,600 million bu and soybean end stocks at 225 million bu. And US wheat end stocks are also in fast retreat.
- Chicago brokers estimate that funds have bought 21,000 contracts of corn, 11,000 contracts of soybeans and 10,600 contracts of Chicago wheat. In the products, funds have sold 4,700 of soyoil while buying 7,100 contracts of soymeal.
- Soymeal futures have traded limit up while soyoil futures are limit down in a US drought bull market! RIN prices dropped 10-12 cents following the EPA biofuel announcement this morning. With imported used cooking oil now being tested for compliance for not containing tropical oils, the usage outlook for US soyoil is strong. Support should be found under $0.53/pound basis July.
- India is asking Russia daily for fob wheat export offers. The Indian Government estimates that 2023 Indian will harvest a crop of 112.7 million mt, while private trade groups place the crop at 101-103 million according to a newswire. The private harvest crop estimates would mandate that India become a sizeable net wheat importer or endure domestic price rises that would curtail use. USDA estimates that India will consume 109 million mt of wheat in 2023/24 following demand of 110 million last year. India has been a world wheat exporter for years, but with domestic prices rising sharply in recent weeks, the worry is that India will need to import wheat in 2023/24, it is just a question of when.
- US double cropped acres from the March Intentions report are being questioned as farmers cutting SRW wheat in the Southern Midwest will avoid taking the financial risks of planting beans into dry seedbeds. We have trimmed our US 2023 US soybean seeding estimate by 500,000 acres due to the Midwest producers cutting back on double cropped soy acres. The loss of double cropped acres only adds to the woes of reduced yield via drought.
- The midday GFS weather forecast is slightly wetter than the overnight run in breaking out a ridge riding storm a week from today on June 28 which produces 0.25-1.00” of rain across IA and far Western IL before croaking. Otherwise, the forecast offers limited rain for the drought areas of IL, IN, MI, WI and MO. The Gulf is closed via a dislocated Bermuda high pressure cell. The big fear is whether the South Central US high pressure ridge builds northward into the Midwest in early July. Seasonally, there will be some northward shift in the ridge during mid-summer. Midwest crops are in no position to endure any lasting heat with soil moisture in sharp decline.
- July soyoil is trading 50-60 points below limit in synthetic options while July soymeal is trading just off its upside $30/ton limit. The bull demand story for soyoil is alive and we doubt that the break is anything but a correction. Otherwise, it is all about US supply/weather into July. A below normal rainfall trend sets up corn/soy for reduced yield potential, it is a question of amount. Don’t sell breaks.