- Chicago grain/soy futures are mixed at midday with the wheat market trying to recover as July KC wheat futures hold their 50-day moving average. Corn and soybean futures are weaker on active planting progress in the W Midwest and the hope that planters will roll in the next 10 days across the E Midwest. And some will debate as to the benefit of Black Sea rain following weeks of dryness. We would note that wheat is still rather immature in SE Russia and Ukraine and historically, any moisture in late April/ May benefits yield. We look for a mixed Chicago close with traders positioning for another week of solid US seeding progress.
- Chicago traders estimate that funds have sold 2,400 contracts of corn and 3,900 contacts of soybeans, and buyers of 3,100 contracts of wheat. In soy products, they have sold 2,100 contracts of soymeal and 1,900 contracts of soyoil.
- We are raising our corn seeding estimate to 45-48% and 21-24% for the US soybean crop. W Midwest seeding has pushed ahead quickly with corn nearly completed. The bullish story for US seeding pace is fading and the focus on the crop will be on NASS condition ratings in late May or early June. The 2020 crop will be rated well above last year, and potentially one of the best of recent years. The strongly rated crop should produce a bottom in Chicago markets in early June.
- The Brazilian Real is sharply lower vs the US$ as their struggle with Covid-19 worsens and politicians try to work through tightening cash flow and budgetary considerations. The Real is likely to keep weakening in the weeks ahead which will further incentivise new crop seeding and 2021 soybean production.
- The USDA announced the sale of 115,800 my of corn to an unknown buyer for the 2019/20 crop year. The USDA has delayed its weekly export inspection report.
- US/China political tensions are rising amid the US discussion that the virus came from a Chinese Wuhan lab and was covered up for weeks. Chinese buyers must be worried whether a US purchase will execute or be charged a higher tariff if China retaliates to a US move. It is a question that keeps being brought up today. Political trade uncertainty was diminished with the US/China Phase One agreement in January, but that uncertainty is returning.
- One coming bull market looks to be natural gas as US frackers that are shut down due to low crude oil prices. Gas is a by-product of fracking for crude oil. US ethanol production margins depend on cheap natural gas. Should gas prices rise too much, it could delay any return of production to the autumn, a time when US domestic natural gas demand seasonally ramps up. It is the question of how fast/how much that US natural gas prices rise beyond the summer.
- The midday weather forecast is slightly wetter for the S and W Midwest over the next 10 days. The midday model has added about 0.5″ of rain. The rain is welcomed where crops are seeded, but it could produce some delays for the SW Midwest. Cool temperatures are now pushing southward across the Eastern US which will limit highs in the 40′s, 50′s and low 60′s. Any sub 32-degree temperatures will be confined to the N and E Midwest. No frost or freeze is expected for the C Plains.
- US planting progress will be solid as concern for getting the 2020 crop in the ground is pushed aside. Amid a full profile of Midwest soil moisture, dire heat during pollination is the biggest risk for 2020 corn yields. We have no way of knowing how US/China politics will play out, but if Phase One demand does not occur, the outlook darkens.