- HEADLINES: Paris wheat futures to new highs and test €400/mt September; E Midwest soybean basis soars; DOW falls to 3% loss.
- Chicago futures are mixed at midday with the sharp fall on the US DOW sparking profit taking by grain bulls. Chicago corn, soybeans and wheat were higher on the opening, but the DOW has caused worry about a slowing US economy later this year and in 2023. The DOW has traded down 1,100 points, a loss that exceeds 3%. US worker output fell 7.5% in Q1, the largest decline in US productivity since 1947. The decline in per worker output and rising raw material prices (inflation) is stoking concern about stagflation and future corporate profits. If the US GDP stays negative and the cost of goods keep rising, stagflation would be the result, the worst result for the US consumer/economy.
- For consumers/employers, declining output/rising costs are not the ingredients to boost quarterly corporate returns or share prices. Chicago corn/soyoil pulled back at midday, but the worry on world wheat/corn supplies is real which will underpin any break. Ongoing dryness is elevating the worry over a sub 105 million mt Brazilian total corn crop while the wheat market is pricing sharp falls in Indian/Pakistani production. India was to save the world from the Black Sea shortfall with wheat exports of 8.5-12 million mt which are now in doubt. India’s ban would leave the EU/US as the only reliable world wheat suppliers into October.
- If India/Pakistan become net wheat importers of 2-4 million mt, instead of net exporters of 10-12 million mt, the difference for early expectations will equal 2021/22 Argentine wheat exports which are estimated at 14.5 million mt. The loss of Black Sea supply and now India/Pakistani wheat are BIG deals to world wheat millers/importers. Therefore, world wheat futures are rising to new highs (Paris wheat) or looking to retest prior historical highs.
- Chicago brokers report that funds have bought 3,600 contracts of wheat and 2,600 contracts of soybeans, while selling 5,300 contracts of corn. Funds have bought 3,200 contracts of soyoil and 5,100 contracts of wheat. Funds have been active buyers of wheat on any correction.
- US export sales for the week ending April 28 were 4.4 million bu of old and 1.6 million bu of new crop wheat, 30.8 million bu of old crop and 29.0 million bu of new crop corn, and 27.0 million bu of old crop and 15.0 million bu of new crop US soybeans. The old crop US soybean export sales were larger than expected, which has helped narrow the difference with last year. US unshipped and sold soybeans are record large over 800 million bu which suggesting massive demand for US soybeans from late Summer into January of 2023. The US is facing record large US corn and soybean exports from July onward, should US export logistics allow.
- An E Midwest (N IL) soybean processor is in the hunt for old crop supplies. The crusher raised their bid to 75 cents over July to keep the plant operating at full crush capacity due to near record large margins estimated at $2.70/bu.
- The US crush industry is facing farmers that are nearly sold out of old crop beans. Crushers will keep bidding cash higher and higher to maintain plant operations. Amid record May crush margins, the risk for a US crusher is running of cash beans. The fight between the domestic crusher/US exporter will worsen with final US 2021/22 soybean end stocks pegged at just 150-170 million bu, the bare minimum needed heading into a delayed Delta soybean harvest.
- A final potent storm system will be pulling across the East Central US in the next 48 hours. Rainfall totals are estimated in a range of 0.25-1.25”. Then, a lengthy period of warm/dry weather returns. Farmers report that when the last rainfall falls, it will take 3-4 days of drying before soils firm enough to hold large machinery. This means that E Midwest farmers should start to seed spring crops in earnest on either late Tuesday or Wednesday, May 11/12. The jet stream shifts north with showers/storms over the N Plains and the NW Midwest with totals of 0.5-2.50” into May 15. Crops will be late seeded.
- Stock market falls of more than 1,000 points in the DOW is not producing Chicago selling. And the hunt for old crop US corn/soybeans is on while importers/end users hope for a bearish May USDA Report to make new forward purchases. Stay bullish. Any 2–3-day corrections offer new purchase opportunities.