- HEADLINES: Chicago weak but off session lows at midday; Midwest stays cold next 10 days; Macro market input leans negative.
- Chicago ag markets are lower at midday, but wheat, corn and soy have recovered moderately from morning lows. The collision of needed rainfall in the Southern Plains, which is imminent, the collapse in Brazilian corn prices and ongoing weakness in Brazil’s cash soybean market have triggered the rapid liquidation of length added since late March. Recent price action highlights clearly that amid tight US/global stocks and elevated prices, even small changes to market perceptions will have an outsized impact on daily and weekly price discovery.
- But it remains that record or near record US yields are needed to allow global balance sheets to loosen adequately, and it is just premature to shed the entirety of weather/risk premium. The growing season has just begun, and threats still exist in the form of latent spring wheat seeding in the US and Canada and the need for even more rainfall across the southern and western Plains over the next 45-60 days. Expect volatility well into late Jul/Aug. July wheat, corn and soybeans are all approaching oversold tech territory, and wide-swinging back and forth markets are expected into the release of the USDA’s May WASDE.
- Other breaking news is absent. The US dollar index is up 0.7%, with weakness noted in currencies in China, Russia, Brazil, Canada, and Australia. The Dow at midday is down 155 points. Spot WTI crude is down $1.40/barrel at $77.40. Spot Paris milling wheat is down €2.25/MT. Spot corn in Brazil is up a sizable $0.20/bu at $5.60.
- Radar maps show light/moderate rainfall working across KS & OK, with totals of 0.40-0.50” already recorded across small but important areas of E CO & W KS. This system intensifies in the next 48 hours, and the midday GFS weather forecast maintains widespread rainfall of 1.0-2.5” across the TX/OK panhandles, E CO and western KS into the weekend.
- Turkey will implement at 130% tariff on grain imports, including wheat and corn, from May 1, which will be in place until Turkey’s Presidential election on May 14. There are expectations that Turkish ag production will be up year on year, validated by current vegetation health. Polls still show that victory for current President Erdogan will be challenging, and import tariffs aside, the results of mid-May’s election will raise uncertainty surrounding Turkey’s role in EU-Black Sea geopolitics. Odds of an extension of the export corridor remain low, but like in recent months, until the deal is actually extended or terminated, markets will assume normality. Russian wheat exports in April look to be a record 4.5-4.7 million mt. Other wheat exporters will be left to fight for seasonally eroding import demand.
- The midday GFS weather forecast is similar to the early morning run in projected heavy rainfall across the Southern Plains, Delta and mid-South into Sat/Sun. However, the GFS forecast is drier in TX/OK in the 6-15 day period, and follow-up heavy Plains rainfall is no longer projected. Coming rainfall is incredibly important, but the degree/coverage of Plains drought is critical in measuring odds that a record national corn yield is feasible in 2023. Additional soaking rain is desired prior to late June when rainfall amounts being to weaken seasonally across the spine of the US. Dry but cold weather persist elsewhere, and below-normal Midwest temperatures have been extended into May 6-7.
- July Chicago corn, wheat, soy, meal and oil contracts have neared oversold technical levels, and a tradable bottom is due by mid-week. We doubt that a lasting trend can be found until N Hemisphere weather patterns are better understood. Cash market strength underpins breaks.