- HEADLINES: Rumours of China buying 500,000 mt of world corn; Spot midwest cash soybean basis on fire; Planting progress important on Tuesday.
- Chicago grain futures are sharply higher at midday with July soybean futures pushing to new contract highs at $17.44. Corn/wheat futures posted strong gains as the news spread that Russia will not back down from its demands that western sanctions be dropped in return for corridors of grain exports out of Ukraine. Traders are back to adding risk knowing that Russia has decided to prevent Ukrainian grain from being exported out of the Black Sea.
- World wheat/corn should be the upside leaders on tightening world supplies with Ukraine grain not in the mix. We look for a strong Chicago close with world weather being closely watched after the US holiday. Will additional rain fall across the Northern Plains/Southern Canadian Prairies that could lead to additional prevent plant acres. And the long-range EU weather model did add warm/hot and much drier for the next 30 days across the Midwest and the Central Plains. Remember that USDA’s corn balance sheet incorporates a record yield of 177.0 bushels/acre which we believe to be optimistic with the spring offering less than optimal planting conditions. Midwest farmers report good stands, but the crop is late and subject to the extreme heat of mid-July.
- Chicago brokers estimate that funds have bought 3,000 contracts of wheat, 7,600 contracts of corn, and 6,500 contracts of soybeans. In the products, funds have bought 2,000 contracts of soymeal and sold 2,300 contracts of soyoil.
- There are rumours that China has booked 500,000 mt of either US or Brazilian corn for September. Our bet is that China has booked another 500,000 mt of Brazilian corn since its landed price/mt is $20/mt cheaper than the US Gulf. Yet, others argue that the US Gulf corn was purchased. Either way, what is interesting is that China continues to secure world corn ahead of their own harvest which starts in October. China’s newfound corn demand hints of their growing need for feedgrains. China is acting in the world corn market just like it did back in the early 2000’s for world soybeans.
- US soybean processors and exporters are elevating their fight for nearby cash supply. A Central Illinois processor is rumoured to have paid $1.10 over July soybean futures or an incredible $18.50/bu for spot cash beans. Data shows that this is a record high for Central Illinois soybeans. The problem is that the rising futures and basis market is not sparking needed cash movement. It is almost like NASS overstated last year’s soybean crop and old crop supplies are exhausted. Record strong cash basis bids make it tough for the back end of the soybean market to reflect any weakness.
- Tuesday’s NASS Crop Progress Report will be highly important to Chicago prices. In focus will be North Dakota, South Dakota and Minnesota on Tuesday and their corn, soybean and spring wheat seeding progress through Sunday. The lack of seeding progress will be digested by the market as farmers wanting to enrol additional acres in the 2022 Prevent Plant option.
- The EPA must announce by June 4 what it has decided on biofuel mandates for the calendar year of 2022. The industry has split expectations on whether the EPA will adjust downward from the initial announcement due to rising food costs. We lean towards the EPA holding fast to its prior promises to US farmers and the green fuel industry.
- The midday GFS weather forecast is like the overnight with soaking rain for the Dakotas and South-Central Canadian Prairies. A ridge of high pressure across the southern half of the US will produce drier weather/warmth into June 7.
- Record US and the 2023 S American crops are needed to sustain a bearish Chicago trend. Any US/Canadian or EU weather adversity will produce a sharp demand rationing rally in world values. We maintain a bullish view with the Russian war against Ukraine ranging on. Market risks are to the upside, with world wheat demand to step forward in early June due to what we see as the extremely short bought position.