- Ag markets are weaker at midday on fund selling and the continued concern over demand destruction in ethanol and livestock feed margins. US old crop corn and soybean end stock estimates are growing, and no world importer wants to pay the $0.85/bu premium for old crop Black Sea or European wheat vs new crop bids.
- Chicago has a bearish tone at midday with few end users wanting to take on additional forward coverage ahead of the weekend. Corn, soybeans and wheat have already been through these price areas and they have no reason to add unless new lows form. Research looks for a weaker Chicago close with the outlook for early next week to be determined by how the US and world economy gets back to work. US/world economic data looks to worsen in the months ahead, even as the US Covid-19 data improves. States that are keeping closed during May will not produce a big jump in the miles driven for the ethanol industry.
- Chicago brokers estimate that funds have sold 3,100 contracts of wheat, 5,900 contracts of corn, and 3,400 contracts of soybeans. In soy products, funds have sold 3,200 contracts of soymeal and 1,200 contracts of soyoil. The funds have been active sellers since the opening.
- USDA announce the purchase of 136,000 mt of US soybeans to China and 589,395 mt of corn to Mexico. For the week, we estimate that China has booked 650-800,000 mt of US soybeans for August/September. US exporters report that they expect most of the old crop US soybean purchases by China to be pushed into new crop.
- Moreover, we doubt that China wants to secure large amounts of US old crop corn. The corn crop quality coming out of the PWN is so poor that high foreign matter and store-ability are being questioned. China would be better advised to secure new crop corn which is likely to be of better quality for their reserve. Most Chinese believe that if China is securing US soybeans or corn for their reserve that it will be held/stored for several years.
- The Brazilian Real fell to an historic low overnight vs the US$ at 5.7:1 as Brazilian President Bolsonaro sacked the head of its federal police which caused the resignation of one of Brazil’s favourite politicians, Sergio Moro, the 47 year old judge that tried the carwash cases that jailed the former Brazilian President Lula. Moro was loved by the Brazilian right and political clashes are likely heading into the next election. Moreover, Brazil is expected to lower lending rates to 3-3.25% next week. With inflation running at 3.5% this means that Brazil will have negative lending rates.
- Brazilian farmers seeing record prices/profit margins for the 2021 soy harvest have been active sellers this morning. The weakness in the Real is spurring Brazil farmers to expand intentions for 2021 Brazilian soy and grain production.
- The midday is drier in the Mid-South and slightly wetter across MO/ IL. One system is pushing through the Midwest today and this weekend with another due mid next week. Rain totals are estimated in a range of 0.5-2.00″ for the E Midwest with 0.25-1.50 for the W Midwest. Considerable warming starts Tuesday and the outlook warmer than normal for the first full week of May. The warmth and coming rain will favour seeded crops with the extended 11-15 day forecast calling for average rainfall.
- US ethanol demand remains in retreat while livestock feed margins will struggle for months ahead as the US packing industry works to restructure fabrication lines and provide spacing for its employees. US miles driven will not be increasing through May while US export demand is seasonally subsiding. We maintain a cautiously bearish outlook. Corn remains the downside leader as a larger share of the US crop is seeded on a timely basis.