- Russian winter wheat crop concern due to hot/dry weather forecasts and the excessive rain for US winter wheat later this week sparked a sharp rally in US wheat futures, which pulled corn/soy futures (temporarily) this morning. The wheat market is worried about lower wheat supplies in two key exporting regions, but what is not being discussed is the potential for a record large EU wheat crop that would buffer those losses. We look for a mixed Chicago close going home with US corn/soybean planting progress to provide additional market fireworks on Tuesday.
- Fund short covering in soybeans/wheat remains a key market theme, but as US summer row crop seeding expands, the risk of sharply higher Chicago prices is being diminished. Chicago option volatility measures have started to retreat.
- US weekly export inspections for the week ending May 30 were; 29.2 million bu of corn, 18.3 million bu of soybeans, and 21.8 million bu of wheat. The wheat and soybean exports were in line with trade expectations.
- For their respective crop years to date, the US has exported 1,548 million bu of corn (down 10 million or less than 1%), 1,257 million bu of soybeans (down 463 million or 27%), and 910 million bu of wheat (up 35 million or 4%). China shipped out 9.8 million bu of soybeans last week or 54% of this week’s total. If China rolls forward late summer US soy purchases to new crop or washes out existing sales due to the worsening US/China trade rhetoric, US 2018/19 soybean exports could slide below 1,700 million bu, down another 75 million bu from the May WASDE forecast. This would raise US soybean stocks to well over 1,000 million bu.
- Questions abound on what another two weeks of warm/dry weather might mean for the 2019 Russian wheat crop. Most producer and crop observers estimate that 2-3 weeks of hot/dry weather could drop Russian winter wheat yields 3-9%. A steeper yield decline is not expected amid the advanced maturity of the crop. We need to remember that around 50% of the Russian crop year each year is winter and 50% spring. The 2019 Russian spring wheat crop is in good to excellent early condition. It is the winter wheat crop where recent heat/dryness issues have emerged. Thus, a cut in 2019 Russian winter wheat crop by 9-10%, would drop Russian wheat production by 3-4 million mt or a 2019 all Russian wheat crop of 78-81 million mt. The USDA has the crop in May at 77 million mt and is unlikely to change this forecast in June.
- The midday GFS weather forecast remains the wettest model of the day, and we would argue that midday GFS has been too wet for weeks, and such is the case again today. Yet, the GFS forecast is farther south with late week rainfall and is more like the EU model overnight. There remains a window for US farmers to advance corn/soy and spring wheat seeding this week from the N Plains into the northern half of the Midwest. The rains start on the weekend with some help from a potential tropical disturbance. This tropical disturbance would increase rain potential for the SE Plains and the Delta if it is correct. The 11-15-day forecast is wetter than the overnight, but our confidence this far out is low.
- US planting progress will be key to Tuesday’s price direction with a June 1 corn seeding estimate above 74% deemed as bearish and a number below 67% being bullish. Soybean seeding will advance this week with producers reporting that they will expand their seeded soy acres from March intentions. USDA is likely to remain quiet on MFP payments on Prevent Plant acres. It looks doubtful that that any decline can be sustained until 85% of the US corn and soy crop is seeded.