- Fund selling is pushing Chicago/French wheat futures lower amid the prospect of rain for a broad area of the EU/Black Sea starting late in the weekend and for the next 10 days. KC July is holding just above its 50-day moving average at $5.755, while July Chicago wheat futures are below all key moving averages including the 50, 100 and 200 day. A close below the July KC 50 day moving average would suggest that a top has been formed, unless adverse weather returns to a major Northern Hemisphere production area. Rains for the Black Sea and Europe (yield) will determine the US wheat export outlook for 2020/21.
- Chicago corn and wheat futures opened with short covering which sparked an opening rally. December corn returned near Sunday’s opening high at $3.36 which provided fresh selling. Soybeans tried to follow the bounce in crude, but with there being no indication of new China demand heading into their week long Labour Holiday, new selling emerged. End users are not willing to chase a Chicago corn/soybean rally until there is clear indication of a coming crop problem. We looks for a mixed Chicago close with wheat the downside leader.
- Chicago brokers estimate that funds have sold 4,200 contracts of wheat, 2,800 contracts of corn, and 1,400 contracts of soybeans. In soy products, funds have sold 2,400 contracts of soymeal and bought 1,900 contracts of soyoil.
- EIA weekly ethanol data showed a further decline in production, though the fall was slower than prior weeks. And US ethanol stocks declined on a modest rise in gasoline consumption. We estimate that nearly 50% of the US ethanol industry is shut down and that a sizeable rise in gasoline consumption is needed to change existing trends. The US produced 158 million gallons of ethanol last week, down 51% from late February. Amid ethanol production margins that are negative, we doubt that the ethanol industry will bring closed plants online until mid to late summer. Managers must be assured of profitability and rising US/world energy values, before workers are called back.
- The US’s Q1 GDP rate was a negative minus 4.8%, the worst since the Great Recession of 2009. The Q2 GDP rate could be as large as minus 20 to minus 25%. Although, the opening of the US economy will be slow, it will be late 2020 before the US unemployment rate drops much below 7-9%. The US and world economic outlook is grim, and the opening of the US economy will be a modest process.
- The midday weather forecast is drier across the Eastern Midwest and Delta. Two weak storm systems will pass across the Central US over the next 10 days with planting opportunities opening with warming temperatures. Planting will be active across the Plains and W Midwest over the next 2 weeks with corn/soybean seeding to be completed by May 15. Cool temperatures in the 10-15 day period will slow germination in the E Midwest.
- Improving weather, both in the US and Europe/Russia, will cap Chicago rallies. Funds are selling wheat on liquidation with a close above the 50 day moving average ($4.745) needed to prevent a deeper decline. China has not shown up for US soybeans.