- HEADLINES: Chicago sags as corn, wheat bump against chart resistance ahead of USDA reports.
- World grain futures are mostly lower at midday as spot corn, and KC and European wheat bump against chart-based resistance, which is unlikely to be breached until NASS stocks and seedings data is published. Wheat markets have been the bearish leader on Tuesday as nearby Russian fob prices stabilise at $205-206/mt, up $8/mt from mid-March’s low but still somewhat aggressive when measured against comparable EU, US and Australian origin. We estimate existing Russian wheat stocks today at 34-35 million mt, and key is whether tension between RIF and Moscow pulls weekly Russian exports below 1 million mt. We note RIF was not awarded any of Russia’s remaining 2.4 million mt worth of Apr-Jun export quotas. Overall, the spark for large new positioning is absent today. The next 48 hours will be defined by the lack of a clear trend.
- China’s latest auction of reserve soybean stocks featured purchases in the domestic market of just 82,000 tons, half the auction’s total, which follows a retreat in spot crush margins amid weakness in Dalian meal and oil values this week. China in late spring isn’t yet willing to chase rallies, with soy cargoes in S Brazil quoted $0.20-0.30 under spot Chicago, which compares to briefly positive premiums in early March.
- Otherwise, there is just not much for the trade to sink its teeth into two days before USDA publishes benchmark US planted area estimates and fine tunes corn, wheat and soy disappearance via March 1 stocks data. Residual disappearance is always uncertain, and key on Thursday is the sum of US acreage intentions. Previous years of deflated prices have triggered corrections in total area. Combined corn, wheat, soy, and cotton acres at/above 240 million, like in 2022 and 2023, is unlikely.
- The European/Black Sea climate pattern attracts more attention beyond early April. It is far too early to adjust yield from longer term trends, but over the next two weeks a rather stark split between heavy/excessive rainfall in W Europe and lingering warmth/dryness in Ukraine and Southern Russia remains projected. 10-day precipitation accumulation in France and the UK is projected in a range of 2-5”. 11–15-day guidance stays wet in France, and it has been too much water that has been the issue in W Europe since autumn. A correction in EU wheat production worth 5-7 million mt is anticipated. Meanwhile, little/no precipitation is advertised in key areas of Romania, Ukraine and Russia.
- We would maintain that large Northern Hemisphere crops are needed to sustain bearish trends into late 2024, and weather in late winter/early spring has been far from normal in a host of areas.
- Spot WTI crude has extended Monday’s recovery as EIA data Wednesday is expected to show a third consecutive week of lower stocks. Ethanol swap prices, RINS and California carbon credits have followed US/world crude prices higher since early March.
- The midday GFS weather forecast is drier in Argentina and a bit drier in Mato Grosso do Sul in centre-west Brazil but is otherwise consistent with morning output. The coming lengthy period of warmth/dryness in Argentina boosts the speed of harvest into early April. The Brazilian monsoon continues normally in Mato Grosso and Goias, 60% of safrinha corn area, into April 10, but net soil moisture loss persists in Mato Grosso do Sul and Parana, which account for a third of safrinha production. It is not a bullish S American forecast, but assuming CONAB’s safrinha corn acreage numbers, continued dryness in MGDS/Parana keep total 2024 Brazilian production at/below 115 million mt, vs. 137 last year.
- There is no reason for either the bulls or bears to gain meaningful leverage until stocks/seedings data has passed and more is known about N Hemisphere soil moisture on June 1.