• HEADLINES: Chicago falls on “sell the fact” trading on US corn export sales; Dry season starting early for Brazilian winter corn; Dow falls sharply.

• Chicago futures are lower shrugging off bullish demand news (new US corn sales to Mexico/China) to trade lower into midday. Soyoil futures has been able to hold opening gains, but corn, wheat, soybeans, and soymeal are trading in the red with double digit losses occurring in corn.

• Chicago corn/soybeans had become overbought and subject to bouts of profit taking as seed enters the ground. The shift in the market’s focus from old to new crop is ongoing, and the chance for another sizeable harvest at high April price levels causes corrections.

• However, as the world’s largest palmoil producer/exporter (Indonesia) showed, it is price/supply for consumers that pushes politicians to make harmful trade decisions. Unfortunately, we anticipate that other exporters will fear food inflation and try to boost their own food security through restrictive trade policy. Indonesia worries about spot palmoil shortages for its population, which is strange when its domestic consumption falls short of exports by 9 million mt. The Indonesian palmoil export ban will be short lived lasting between for between 3 weeks to 3 months, but its damage to its trade reliability will be lasting. We look for a mixed to lower Chicago today with selling extending into next week with Midwest seeding pace to gather steam. Chicago should bottom right before or after the May WASDE report as USDA stays conservative.

• Chicago brokers report that funds have sold 9,500 contracts of corn, 1,200 contracts of wheat, and 6,600 contracts of soybeans. In the soy products, funds have bought 6,200 contracts of soyoil while selling 5,300 contracts of soymeal.

• FAS/USDA reported that Mexico/China were buyers of US corn. China booked 1.35 million mt of US corn split between 735,000 mt for delivery for the 2021/22 crop year and 612,000 mt for new crop. Mexico booked 281,000 mt with 90,200 mt for old and 190,800 mt for new crop. The combined sale of 1.631 million mt marks one of the biggest daily sales in months. However, additional old crop US corn sales to China could be limited with their future demand positioned in new crop. We calculate that China has now purchased 15.5-16.0 million mt of US old crop corn including what is being held in an unknown destination category.

• The dry season appears to have started 2-3 weeks early across Northern and Central Brazil which is causing Brazilian farmers worry over winter corn yield potential. 65% of the Brazilian corn crop is in the formative reproductive stage of development (pollination) which is likely to cause yield losses of 5-15%. A 5% yield loss amounts to 3.0 million mt with a 15% loss equating to 8.5 million mt. We are now using a Brazilian winter corn crop range of 79-85.5 million mt. From existing analysis, the best that Brazil can expect is a total corn crop of 108 million mt which is down 8 million from the WASDE April estimate. A crop fall of 8-15 million mt is highly important to the world corn market when Ukraine corn is mostly locked out from the world importers.

• The US stock market (DOW) has declined over 600 points as the market thinks ahead to May 4 and the next Fed meeting where a 0.5-0.75% rate hike is expected. Rising rates and the Russian war against Ukraine is slowing world economic growth. We doubt that slowing GDP rates will cause world food demand to subside, but there is a risk to high end foodstuffs like the middle meat cuts in beef/pork. The last time that the US Central Bank has raised its lending rate 0.75% was back in 1994.

• The midday GFS weather forecast is further south and further north with rain/snow (Dakotas/MN/WI) than the overnight run. The forecast is also cooler with North Dakota to endure several episodes of snow. The Plains hold in an arid trend with limited rainfall and a deepening drought. Cold air is indicated during the 11–15-day period which will slow germination rates. The forecast allows seeding across IA, IL, and IN, but the Delta and Northern Plains will be challenged.

• May Chicago options expire at the close while the rain/snow across the N Plains produce challenging seeding conditions. Soyoil futures have pushed to record highs on the Indonesian ban of palmoil. However, Russia appears intent on capturing E and S Ukraine, which could be problematic for Ukraine exports longer term. Our Chicago stance stays bullish on sharp corrections.

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