- The latest US weekly crop condition report shows corn to be 86% planted compared to the five year average of 85%, soybeans are 56% sown compared to the five year average of 52%. Winter wheat is rated 62% good/excellent, above last year’s 45% whilst spring wheat is 76% good/excellent above last year’s 69% (the best since 2010). The crop is 95% planted above the five year average of 77%.
- With favourable Plains harvest weather, the US could post a record combined US wheat yield amid the strong ratings for both winter and spring crops. This morning’s Central US weather forecast offers a nice combination of rain and warmth over the next few weeks. More rain is desired over the SE US, but otherwise, the forecast is favourable. The rains will hold off for another two or three days across the E Midwest, which should allow farmers extra time to seed corn and soybean crops. The W Midwest has virtually completed seeding with Delta activity picking up strongly starting last Sunday. The three week Midwest forecast shows limited concern with a lack of extreme heat or dryness. The EU crop monitoring unit, MARS, left the EU wheat and corn yield estimates unchanged on the week. Favourable weather looks to benefit EU and Russian grains into mid-June. The US$ was firmer this morning with the Brazilian Real encroaching resistance at $3.60 as new corruption allegations are levelled against the new Temer Administration that may force new high level investigations. Amid a lack of fresh demand news, the markets appear to have have set their seasonal highs with the question being the depth of the correction and whether the much discussed heat/dryness will arrive before the Midwest crop reaches maturity?
- We saw early trade lower as Chicago grain/soybean futures eased with China’s Dalian soymeal closing sharply lower in record volume. The speculative unwind is underway in China with metals and now agri commodity futures coming under liquidation pressure as the losses mount for speculators. The Chinese liquidation is expected to spill into Chicago trade with the soybean complex trading moderately lower this morning. Funds are heavily long with the 50 day moving average in November soybeans noted at $9.80/bu. China’s Dalian soybean futures closed sharply lower with the last trade at $419.50/mt, down $21 from the prior day. A record 7.458 million contracts of soybean meal traded with futures posting limit losses at one point. China’s record large soybean imports are leading to a record large crush rate and an abundance of cash soybean meal. The pipeline expanded as sellers absorbed stocks, but now these cash longs are looking to cut their losses and unload it to livestock producers. Often record hog production margins were cited for China’s soymeal rally, but historically there is no relationship between feeding margins and feed consumption. It now appears that much of China’s soybean and meal appetite was due to speculation and a fall in the value of the Yuan.
- Something of a turnaround Tuesday was noted in soybeans and wheat as spec demand once again reared its head in early trade despite Chinese trade (see above). US crush closures for maintenance helped firm spot basis levels but this would appear to be a very short-term issue. The recent soybean and corn “correction” seems to have provoked a “buy the break” mentality by funds, as technicals point higher at this time. Funds appear to have the desire to add to longs in corn, soybean and product positions, although our own technical analysis suggests we are very finely balanced right now.
- The market is currently divided with funds adding to length at the same time that northern hemisphere weather forecasts remain very favourable. Only one will be correct in the longer term!