- HEADLINES: Chicago mixed with wheat rising on dry Plains weather forecast; CONAB out Thursday; China for more US corn.
- Chicago values are lower at midday in a back-and-forth type of day. Following two days of sizeable gains, traders are banking profits ahead of CONAB/WASDE on Thursday and Friday. And the Goldman Index fund roll starts Thursday and runs for 5 business days. The bear spreading in May futures and profit taking is capping rallies while end users/importers are there to secure breaks. We doubt that any Chicago break will carry very far either in price or time.
- The bullish fundamental outlook of Chicago has not changed. The big topic being discussed today is the duration of the Russian war against Ukraine. US General Milly suggested that the Russian war could last for years, while others including US National Security Advisor Jake Sullivan suggests through the end of 2022 or potentially into 2023. The point is that US military intelligence does not see Russia’s war against Ukraine as ending in coming months. Sure, there can be times when the cease fire talks appear positive, but Russia’s aggression and history in war argues for a protracted conflict. The problem is that Chicago has not priced in a protracted conflict or that Ukraine/Russian supplies will be limited in the coming months. One must wonder if at some point, a repricing of grain/soy values is required.
- The USDA announced that 132,000 mt of US soybeans was sold to China. We hear that additional Chinese buying is working for July-August and new crop positions. China is record short of soybeans and will remain a significant buyer on breaks. In fact, the US will single handedly fill the world soybean market from July onward which will continue to raise USDA soybean export estimates. We notes that COFEED, the supplier of China’s domestic crush and cash prices ceased operations nearly 1 year ago and are still not publishing as the Government tried to crack down on speculation. Existing domestic crush estimates within China do not correlate very well with imports. Through March, China’s soybean imports are down just 1 million mt, and tight stocks argues that the WASDE estimate is understating soybean imports from the world.
- Chicago brokers estimate that funds have sold 2,300 contracts of wheat, 4,400 contracts of corn, and 3,100 contracts of soybeans. In soy products, funds have sold 2,100 contracts of soyoil and 900 contracts of soymeal. The volume all day has been exceptionally slow, and it does not take much volume to push the market around. This is one of the slowest volume days that the market has endured since late February, when the Russian invasion occurred.
- There are also rumours that COFCO has switched more old/new crop corn on their books to Sinograin, which could produce another daily sales announcement of US corn to China before the weekend. We estimate that China has secured 3.5 million mt of old crop corn including the 1.0 million mt that was confirmed on Tuesday.
- US weekly ethanol production was 295 million gallons. The production was down 10 million gallons from the week prior, but up 3% from las year. This was the first week in 4 that US ethanol production did not exceed the 300 million gallons/week needed to reach the USDA annual US forecast.
- The midday Central US GFS weather forecast is consistent with limited rainfall for Southern and US Central Plains. The Midwest will endure rain every 4-5 days with a potent system due during the middle of next week producing widespread heavy snows across South Dakota, Minnesota, and Northern Wisconsin. The cold and wet forecast offers little chance to seed spring crops. The Delta is targeted by the midday run with 5-7.00” of rain.
- It is a low volume market pause following 2 days of solid gains. The fears are growing that the Russian war against Ukraine could carry on for months and potentially years. Chicago values are not pricing in such an extended period of military activity in Ukraine. The spring planting season has started across Ukraine and activity is subdued. Amid the widening loss of infrastructure and deepening sanctions on Russia, the Chicago outlook stays bullish. China remains active in securing US soybeans and corn.