- HEADLINES: Soybeans lead Chicago on commercial demand, Wheat recovers from deep overnight losses.
- Chicago grain futures were sharply lower overnight but are recovering. Chicago wheat had been down as much as 35 cents overnight but has turned that into a 4+ cent gain at midday. Corn followed wheat lower overnight but has been positive at midday. Overnight selling of wheat was tied to hopes that Ukraine grain could start moving. We would highlight tremendous logistical challenges. The Chicago soy complex has traded sharply higher this morning. Soybeans have traded up as much as 30-50 cents this morning, meal has $4-6/ton higher, and soybean oil is tracking soybeans and has traded above $0.80 after marking a new monthly low overnight. Commercial interest is driving soybeans as C IL basis reaches $0.60-1.00 over.
- The USDA announced this morning that farmers that are in the final year of their CRP (Conservation Reserve Program – contracts for land enrolled in CRP are from 10 to15 years in length. The long-term goal of the program is to re-establish valuable land cover to help improve water quality, prevent soil erosion, and reduce loss of wildlife habitat) contract will be allowed a one-time option to terminate contracts early without penalty. This looks to have the greatest impact on 2023 wheat, where some producers in the Western Plains could be enticed to pull acres out early. But even that impact will be minimal. It will have virtually no impact on 2022 corn and soybean acres. The latest FSA CRP Contract report shows 4 million acres of contracts set to expire on Sep 30, 2022, and 2 million acres in 2023.
- The USDA’s weekly export sales report did not offer any real surprises. Old crop wheat sales saw net cancellations of 85 million bu as the old-crop marketing year draws to a close. New crop wheat sales amounted to 9 million bu. Old crop wheat sales are down 19% from a year ago, and new crop sales of 110 million bu are 35 million or 24% less than last year.
- Old crop corn sales fell to a marketing-year low of 6 million bu, but weekly exports were at a 3-week high of 72 million bu. This resulted in a 66 million bu drawdown in outstanding old crop sales. New crop sales were just 2.3 million bu, and outstanding sales rose to 223 million bu. Outstanding new crop sales are down considerably from last year due to reduced Chinese sales but are still the second largest since 1995 and the third largest on record for this time of year.
- Old crop soybean sales were light at 10 million bu, and exports amounted to 20 million bu. However, new crop sales reached a 5-week high of 16 million bu. Combined old and new crop outstanding soybean sales now stand at 810 million bu on near-record old crop sales and recover large new crop. We expect that US soybean exports over the next 12-months (old and new crop combined) will top 2,500 million bu.
- The midday GFS weather forecast is similar to the overnight run in that Central US temperatures will be highly variable over the next 10 days and meaningful precipitation will be confined to portions of the Dakotas/MN and a narrow swath of the Central Plains stretching across E KS, E NE and far W IA. Extreme heat returns to TX, OK and KS this weekend and early next week, but this will be displaced by widespread below-normal temperatures in the 6-10 day period. Drought across the W Plains will stay intact. Seeding delays will be ongoing across the Northern Plains/Upper Midwest. Otherwise, weather across the primary Midwest will be non-threatening into the early part of June.
- All eyes will be on extended range forecast beginning next week. A shift to warmer/drier weather in June is forecast, and it is the duration of dryness that will be important in the long run.
- Markets continue to chop ahead of a three-day weekend, after which each/every weather model release will have a measurable impact on price discovery. We continue to maintain that breaks are buying opportunities. Strength in US/world cash markets cannot be ignored, and the creation of an export corridor in the Black Sea seems highly unlikely.