- HEADLINES: May soymeal drops below 200 day moving average; Stats Canada calls for 1.3 million extra acres of spring wheat; US weekly ethanol production sags.
- Chicago ag markets are lower at midday with May soymeal futures falling below its 200-day moving average for the first time since October. The drop below the 200 day has produced additional long liquidation with July soybeans already trading well below their 50/100/200 day moving averages. The breaking of a key soymeal support level sparked additional selling with managed money estimated to be long just over 100,000 contracts. The decline in soymeal has pulled soybeans/corn lower in sympathy. Soyoil futures have rallied since funds are holding a sizeable net short estimated at over 33,000 contracts as of Tuesday’s close. Wheat futures continue to sag on the Plains rain but notice that Paris May wheat futures are higher (marginally) and bucking the US trend. Spot Paris wheat futures are holding above a downtrend line that extends back to 2019. Whether this support will hold will key the next price move in world wheat.
- Technically, Chicago is oversold on the charts, but few are willing to stand in front of the market until the 2023 corn/spring wheat and soybean crops are well along in their seeding pace. The warming weather forecast suggests that US farmers will be active in their spring seeding activities into mid-May.
- Chicago brokers estimate that funds have sold 5,400 contracts of corn, 1,500 contracts of soybeans, and 3,400 contracts of Chicago wheat. Funds sold 9,900 contracts of soymeal while buying 4,200 contracts of soyoil.
- It appears that few countries are willing to take cheap low quality Ukraine grain. Turkey has placed 130% import tariffs on imported grain due to the potential that cheap Ukraine grain could flood the Turkish market, much like it has done across Eastern Europe. Recent corn exports are done at $0.50/bu under Chicago July or $217/mt. This is below the cost of production in Eastern Europe and Turkey which adversely impacts local farmers. Ukraine milling wheat will not be available for export in volume until late July/August.
- Stats Canada released 2023 Planting Intentions today. Canadian farmers intend to seed 19.3 million acres of spring wheat (up 1.3 million acres), 5.50 million acres of soybeans (up 200,000) and 21.6 million acres of canola (up 200,000). Oat acres fell to 3.0 million acres, down 900,000 acres. Total seeded acreage was similar to last year, it is just that Canadian farmers seeded fewer other grains and lentils. The data was seen as bearish for Minneapolis wheat futures as it curtailed the need for large US HRS seeding this spring.
- US weekly ethanol production fell to 284 million gallons vs a weekly average estimate of 299 million gallons to reach the USDA annual forecast. US ethanol stocks fell 20 million gallons to 1,021 million gallons via the lower production.
- The ethanol production decline was twice what was expected. However, US gasoline consumption roared back by 9%. The fall in US ethanol stocks and sharp rise in gasoline use does not speak of a looming US recession.
- The midday GFS weather forecast is like the overnight EU model solution which raises our confidence. Additional showers of 0.25-1.50” will drop across Southern Kansas and over most of Oklahoma into the evening. Some of that rain leaks into Northern Texas. A secondary front produces showers Friday/Saturday before the entire Plains dries out. The next chance of a Plains rain is not obvious in the 12-day forecast. The N Plains and NW Midwest holds in a dry weather flow with warming temperatures. It is the E Midwest that will see the unsettled weather/rain into the weekend with another system mid next week.
- The Stats Canada data was bearish of wheat and Minneapolis futures are down accordingly. Chicago wheat has reached long term downside price targets at $6.35-6.45 basis July. It is the speculative selling in soymeal/soybeans that is not completed with additional downside price risk that drags corn along. Livestock buyers look to secure Dec corn at $6.40 for forward feed coverage. Dec meal below $390 is also cheap. We believe that the US will import 50-600,000 mt of Brazilian soybeans and zero Brazilian corn through the summer.