- Ag markets turned lower after the normal opening, with US wheat and soybean futures finding new contract lows. There is no real spark to the decline, but rather it is just more of the same. Better rains will fall across the wheat belts of Eastern Europe, Ukraine and Russia through the next 5 days. Ample soil moisture will keep heat absent from the US Plains into the middle of May. Northern Hemisphere production potential has improved.
- US Gulf wheat is chasing aggressive new crop Black Sea offers, and whether Russian origin at $185/mt for Jul-Aug is too cheap will be determined by May/June weather. $185/mt, ex Black Sea, reflects the lowest world cash fob price since late summer 2017. $185 seems cheap amid depleted Russian carry-in stocks and domestic prices that continue to sit near record highs.
- Chinese soybean crush margins remain negative despite the collapse in US and world prices. Gulf soybeans this morning are actually offered at a modest discount to Brazilian origin through August. But weakness in Chinese soy products has weighed.
- Iowa Senator Grassley has stated the USMCA (US, Mexico and Canada Agreement) won’t be approved by Congress unless tariffs on non-US steel and aluminum are lifted. The real frustration is that no new US trade deals have been approved, and clearly Chinese compliance is taking longer than originally expected. Better US exports and overall world trade is needed to clear excess supplies, which are building following record corn production in S America and improved rainfall across Europe and the Black Sea.
- There is talk that US-Chinese negotiations will be completed this week, or possibly next, but the market has grown weary. The lack of a deal by mid-May will extend negotiations into summer, when S America will have attracted yet more global market share.
- Other news is lacking. Energy markets have been very back and forth this morning, but current sit in positive territory as Venezuela’s crisis deepens. US biofuel margins continue to improve. Another boost in US ethanol production is expected in Wednesday’s EIA report. Margins argue for a sustained recovery in production into the end of summer.
- The EU/Black Sea weather forecast at midday maintains solid regional shower activity in Ukraine and key areas of Southern Russia. Soaking rains lie ahead for Eastern Europe, which has been a growing producer of corn and wheat.
- The Central US GFS weather update at midday is much wetter across the Southern Midwest and Northern Plains. An outright excessively wet pattern lies ahead, and guidance in the 11-15-day period keeps showers rolling across the Plains and Midwest into May 15. Heavy precipitation will be stuck across the E Plains, Midwest and Delta throughout the next 72 hours. Another frontal system blankets the Plains and Midwest during the second half of next week. Cumulative rainfall totals upward of 5-8″ are offered to LA, AR, MO, IL, IN and OH. National fieldwork/planting will be halted for the next 10- 12 days. Flooding returns.
- Implied 2019/20 global stocks are rising, which has kept short covering limited/brief. But US weather concerns are growing, and we would be extremely careful holding onto short positions ahead of any US-Chinese agreement.