- HEADLINES: Grains build on overnight rally; US forecast favourable near-term; Heat/dryness probable mid/late June.
- Chicago futures are steady to higher at midday, with corn and wheat expanding overnight gains. Paris milling wheat has soared €18-20/mt ($0.50-0.60/bu) as the market is again forced to exclude Ukrainian surpluses from trade matrixes. And we maintain that Russian wheat exports are overstated by 7-9 million mt amid the difficulty of sourcing freight there. We would again remind that Egypt’s tender last week did not paint a bearish picture of the world wheat market into the latter part of 2022. Wheat markets worldwide are forging harvest lows. July KC wheat is perched just above its 50-day moving average and a settlement above $11.63 would turn its chart pattern more supportive.
- Private estimates of Brazil’s safrinha crop have been higher than expected in the last week, but some work maintains that final Brazilian corn production will be no larger than 108 million mt. IMEA in Mato Grosso will release its updated production estimate after the close. CONAB in May pegged safrinha corn production in Mato Grosso at a record 40 million mt. An estimate from IMEA this afternoon below 38 million mt will confirm additional cuts must be made to CONAB and USDA Brazilian production forecasts. Sep corn in Brazil at midday sits at $7.90/bu.
- US export inspections in the week ending June 2 featured 56.5 million bu of corn, vs. 55.6 million the previous week, 13 million bu of soybeans, vs. 15 million the previous week, and 13 million bu of wheat, unchanged from the prior week.
- For their respective marketing years to date, the US has inspected for export 1,722 million bu of corn, down 17% from last year, 1,832 million bu of soybeans, down 12% and 8 million bu of wheat, up 16%. The pace of corn/soy inspections is in line with current USDA forecasts, but April Census (official) export data on Tuesday is expected to show an ongoing rather wide gap between actual corn exports and FGIS inspections. Recall Census corn exports through March were down only 4% year on year. And near record large outstanding soybean sales (365 million bu) suggest the pace of physical soy exports will above year ago levels throughout the Jun-Aug period. Additional Chinese soy demand is anticipated on breaks.
- The Central US forecast is void of threats into mid-June, but a significant and possibly lengthy pattern shift lies ahead. Longer term climate guidance has been consistent in shifting the mean position of the jet stream into the N Plains/Canada during the second half of June, with abnormal warmth and dryness most probable. Extended range forecasts throughout this week will be monitored with interest.
- The GFS forecast for Europe at midday has added rain to France but not until June 20, and confidence so far out is low. Soil moisture loss will also spread into Ukraine/Southern Russia over the next two weeks. Weather outside the US is far from ideal.
- The midday GFS weather forecast is slightly wetter in IA but is otherwise unchanged from the overnight run. A pattern of light but lingering precipitation will be in place throughout this week, with cumulative rainfall of 0.25-2.00” to blanket all but the Northern Plains and MN. Totals in excess of 2” will favour portions of the Delta and far eastern Midwest.
- Expansive high-pressure ridging will be anchored aloft the S Plains in the 6-15 day period. This change in the North American upper air pattern will fuel the return of heat and dryness, with highs in the 100s projected across TX, OK, KS and CO at mid-month. A transition to summer is imminent.
- Technical healing is needed in US/world corn and wheat markets. But following the Russian shelling of major export/rail terminals over the weekend, establishing any food corridor is even more unlikely. European wheat and corn markets will take over bullish leadership in the near-term.