- HEADLINES: End users use Chicago weakness to extend forward coverage; Russia rejects Ukraine grain for Russian fertiliser corridor.
- Chicago grain futures were sharply lower on the opening and are in recovery on end user pricing. Funds are sizeable early net sellers, but end users are finally getting their chance to extend forward coverage into July/August. The scale down buyers includes soybean crushers, ethanol grinders and wheat importers/millers. The end user pricing has been in old and new crop, but their most aggressive demand has been focused on July futures based on cash basis levels that are on fire. Basis bids for both corn/soybeans have been rising sharply and are sitting at record or near record levels. Yet, the huge premium basis bids are not sparking movement from the farmer. US farmers have gambling stocks remaining in the bin and see no reason to make sales until they know more about 2022 US row crop seeding and weather conditions globally and heading into the mid July corn pollination. Chicago lows appear to be in for the day, and it does not take much volume to move the market with resting orders absent.
- Chicago brokers estimate that funds have sold 7,600 contracts of wheat, 6,700 contracts of corn, and 4,500 contracts of soybeans. In soy products, funds have sold 1,500 contracts of soymeal and 3,400 contracts of soyoil. The fund selling has been easily absorbed by the early end user pricing.
- News from Russia’s INTERFAX quoting a deputy minister that Russia is willing to consider grain export corridors is just propaganda. Russia wants to blame Western World leaders for the coming food crisis. Russia will say that they are happy to open humanitarian grain export corridors if NATO drops its economic sanctions. This was a nonstarter last week and a nonstarter again this week. Nothing has changed other than the UN keeps asking Russia to find a way to feed the world’s impoverished.
- We would remind that Russia agreed to humanitarian corridors for civilians out of Mariupol which always collapsed at the last minute. Allowing Ukraine to export grain would be a relief to the Ukraine farmers and Government officials, which Russia is totally against. Russia knows the importance of Ukraine grain which is why they are now targeting Ukraine grain storage facilities. And no western nation will use their own naval ships to move into the Black Sea as it will be seen as an act of war. We doubt that Turkey would allow non-Russian naval vessels to pass through the Bosporus. Turkey does not want to get ensnarled in the Russian war.
- There are also rumours flying that Argentina is getting close to raising export taxes on grain/soy, and that Indonesia is making it extremely difficult to register for palmoil export licenses with some suggesting that exporters must be domiciled in Indonesia (not Singapore). And widening demands for export documentation is slowing or halting Indian wheat that had LC’s open prior to the announcement of export restrictions. Grain suppliers are worried by their own rising food prices and are countering gains with reduced trade.
- World fob wheat, corn and even soybean markets are not fully following the futures break which is frustrating to buyers/importers. Futures gap up and down due to the lack of resting orders and acute market volatility. However, cash markets whether they are export or domestic are reluctant to follow the Chicago/Paris wheat lower which is speaking volumes about supply availability.
- The midday GFS weather forecast is drier for the E Midwest. Heat returning to the S Plains next week (and into mid-June). A ridge of high pressure holds across the East Central US which pushes excessive rains back into North Dakota and the S Canadian Prairies.
- It is a holiday in most of Catholic Europe on Thursday, and the US Memorial Day Weekend follows with the end of the month on Tuesday. Fund managers are selling commodity gains to pay for their losses in equities. However, strong US and world cash markets with Mother Nature unkind to EU, Canadian, Brazilian, and Chinese crops will underpin Chicago values. Early June is often the time for a Central US weather pattern change, it will be interesting to monitor what the new pattern will be. We see limited downside price risk and we doubt any Ukraine grain corridor will be approved by Russia. Seasonal lows appear to be forming in July futures.