- Ag markets have rebounded from overnight losses as for the first time in days. FAS announced that US exporters have sold 130,000 mt of beans to Argentina, of which 60,000 is for old crop delivery. Spot crude is flat at midday, and updated weather forecasts maintain complete dryness across nearly the whole of Brazil’s safrinha corn belt over the next 10 days.
- There is talk that US trade representatives are considering a trip to China to discuss ongoing barriers in person. Not much else is known about this trip, but in the meantime ample concern persists regarding the pace of new purchases of soy made by China over the next several months. Trade remains a serious issue, and will keep new buying limited until progress is made or unless another round of cool/wet weather develops mid/late May.
- Australian cash wheat prices this week have found yet newer seasonal highs at $231/mt out of South Australia for nearby delivery. Still no rain is advertised in any part of the Aussie wheat belt in the next two weeks. Rainfall in South Australia, New South Wales and Queensland (roughly 60% total wheat production) since January rests at just 10-50% of normal, and now there is some concern over a slow transition to a weak El Niño by late 2018. The loss of HRW production in the US, and an ongoing tight wheat balance sheet in Australia will push yet more consumption to the Black Sea, and likely keep fob offers there well supported on breaks. We also note that HRW basis in Kansas City this week is even with KC futures, and positive basis is very possible just after harvest. This reflects a noticeable change from recent years. HRW basis in KC on this week a year ago was a negative 45 cents. Our point is that chasing breaks in wheat is not advised at current prices. Seasonal price pressure in Russia is not due until early summer.
- Key on Wednesday will be whether US crude stock levels shrink yet again, and another week of solid US ethanol consumption is expected. Futures-based blending margins have now exceeded the levels of Hurricane Harvey, which is impressive, and ethanol futures below $1.50 are cheap. There is talk that the US and France are close to reaching a deal with Iran, possibly avoiding new sanctions, but fundamentally we doubt that OPEC will ramp up production in the near/medium term. Crude is, in our opinion, fairly priced above $60/barrel.
- The midday GFS weather model update hints at regional shower activity in the Central Plains late next week and into the following weekend, but so far no other model has followed this trend, and amid last week’s fine-tuning of Plains rainfall, confidence beyond 6-7 days is limited. In the meantime, mostly dry weather and steadily warming temperatures will be established across the whole of the Central US into May 1. High temperatures next Tuesday/Wednesday are forecast in the 60s and 70s as far north as NE, IA and IL, and as far east as IN. Soil temperatures in IL continue mostly in the upper 40s, but excellent seeding progress will be made beginning early next week.
- The markets’ back and forth price action continues, and is expected to remain as such into the release of the May WASDE report, because there is just no compelling evidence to support large new positions. Longer term, however, a heavy burden has been placed on N Hemisphere yields, and Brazilian weather needs very close watching.