- HEADLINES: Chicago mixed at midday; More Ukraine corn to China; GFS weather forecast wetter for central Midwest. Wheat is a drag; corn is the coming story; soybeans caught with soyoil sagging on oil share profit taking.
- Chicago grain futures are mixed at midday with corn holding in the green, while wheat futures follow Paris futures lower as Russian 12.5% wheat sags to $209/mt. The Russians have been aggressive in shedding old crop wheat and trying to boost export demand. Shipping from the Black Sea is accelerating amid favourable weather and large interior supplies are pressuring values. A new crop Black Sea weather threat is needed to turn the market as the Russian Government is willing to let cash prices sag. However, the downside price risk for fob Russian wheat appears to be $205/mt fob which is several standard deviations below fair value based on Russian stocks/use analysis. Russia is single handedly constraining world wheat valuations, much as it has been doing for months.
- Corn futures are higher at midday with May holding support and looking to test last week’s high at $4.34, which is the next level of resistance. A push above $4.34 would produce a key reversal on the charts and start to produce some pause to the algo/AI trading systems. Monitor $4.34 May corn closely.
- December corn futures rallied above last week’s high and created a reversal. The initial money flow appears to be heading to the back end of the corn futures market. We would note that China continues to book Ukrainian corn with a few additional cargoes sold today. In total, Ukraine has some 12-15 cargoes of corn to China which can come in via their free trade zone. The profit margin on Ukraine corn imports to China is estimated at 20-23% to an importer. We note that Chinese corn prices keep rising which is strange if last year’s harvest was record large as reported by the government. TRQ’s are being released slowly, which could translate into US corn demand off the PNW.
- We are having trouble confirming rumours that US soybean sales that are being shifted to Argentina.. There may have been a few cargoes shifted, but we doubt any swapping is widespread. This rumour started yesterday and we would suggest that the news is following the market.
- US weekly ethanol production was 319 million gallons, up 7% from last year and continuing a stretch of far better than needed weekly grinds to achieve the USDA annual estimate. Favourable weather has aided US ethanol producers, but it is the profit margin via cheap corn that is driving production. US ethanol stocks rose to 1,093 million gallons, up 5% on last year. We argue that WASDE will raise the 2023/24 US ethanol grind by another 25-50 million bu.
- Chicago brokers report that managed money has sold 4,100 contracts of wheat and 1,000 contracts of soyoil, while buying 9,000 contracts of corn, 4,200 contracts of soybeans, and 2,900 contracts of soymeal into midday.
- The midday GFS weather forecast is slightly wetter across North Central Brazil with 10-day rainfall of 0.75-1.75”. The rain will be enough to satisfy the early moisture needs of corn, but soil moisture levels are in retreat and the forecast must be closely watched. The southern third of Argentina is also in need of moisture, but it is not critical based on last week’s rain. No lasting extreme temperatures are forecast with highs ranging from the 80’s to the mid 90’s.
- It is a choppy day in Chicago with the exceeding of yesterday’s high in May corn causing a fund buying flurry of 5,000 contracts which pushed values against $4.30. First notice day against March futures is ahead and deliveries will be modest.