- Slow/mixed with limited interest best describes midday Chicago price action. Corn, soybean and wheat futures have not changed much from the 8:30 opening with a new US soybean sale to China and corn sale to Mexico offering only background support. Traders will be watching closely to see if China steps up their US ag/energy purchases beyond their Labor Day holiday which ends on Friday. Traders are also trying to balance out the improved outlook for 2020 US crops along with the additional 19.7 million acres of seedings as Prevent Plant optionality will be sharply curtailed by favourable spring weather. The sizeable new crop outlook will cap Chicago rallies while the downside will be defined by the arrival of (or lack of) Chinese demand for US ag goods. We anticipate a mixed Chicago close in uninspiring volume.
- Chicago brokers estimate that funds have bought a net; 800 contracts of wheat, 1,900 contracts of soybeans, and 2,100 contracts of soybeans. In the soy products, funds have sold 1,100 contracts of soymeal and bought 700 soyoil. The sharp rise in crude oil prices has slowed fund manager grain sales.
- FAS announced the sale of 378,000 my of US soybeans to China in a mostly new crop position. And Mexico secured 109,135 my of US corn that was split between old and new crop years. The US soybean sale is said to be to private crushers that are securing their autumn crush needs.
- The US/EU announced that they will accelerate trade negotiations for a free trade deal that boosts investment and trade with both parties. The talks will be held virtually and will involve nearly 30 different groups. US and UK agriculture are both net exporters of farm goods, and a market changing increase in US grain or meat demand is not expected.
- Canada announced that it will spend $252 million Canadian Dollars to help their farmers and food processors that were hit with a decline in demand due to Covid-19. The funding is likely only an initial step, and Canada will also launch a food purchase program much like the US’s CCC buying. The assistance is needed as Canadian agriculture relies heavily on exports which are fading. The new funding will aid Canadian farmers which are now seeding a new crop.
- There has been much discussion related to EU and Black Sea grain crops following weeks of winter and early spring dryness. The recent rains have provided crop stability and improvement in yield potential. The unknown is whether the more favourable weather pattern last into late May and June. EU/Russian wheat crops are made in June and that is when weather will be critical to yield/ production. Key to world wheat price trends will be June weather conditions.
- The new May EU monthly weather forecast for N America shows no lasting heat or dryness through September. The forecast calls for generally favourable growing conditions for N American crops in coming months. Research agrees that any Midwest warmth or dryness will be limited into late July.
- The forecast is slightly wetter for the E Midwest over the next 10 days. The model has added some 0.5-1.25″ of rain across the E Midwest late in the 10-day forecast. We suspect like prior midday runs, that the GFS is too wet. This model has a wet bias that is not confirmed by either the EU, Canadian or prior GFS runs. And, any sub 32-degree temperatures will be confined to the N and E Midwest. No frost or freeze is expected for the C Plains.
- The surge in crude oil prices has added support to Chicago. Crude has rallied back to $25/barrel on declining OPEC/Russian production that started on May 1. But the USDA May WASDE report looms on the 11th which will likely lower US 2019/20 soybean exports and estimate decade large US 2020/21 corn stocks. US farmers are speeding ahead with seeding, but temperatures are cool under a low-pressure trough.