- HEADLINES: Massive speculative buying of Chicago grains as funds cover shorts; Midday GFS weather forecast adds rain for dry Russian wheat; Flooded RGDS adds to Brazilian supply uncertainty.
- Midday Chicago grain futures are sharply higher in active volume with wheat/soybeans being the morning’s upside leaders. July Chicago soybeans have pushed to their best levels since January while July Chicago wheat reached its best level since late 2023. Corn has followed on the upside, but with less vigour, but non-US corn crop losses look to push 2024/25 US corn exports higher, thereby making corn and upside leader in the weeks ahead.
- Managed money is now holding their largest short position in soyoil, which makes this market vulnerable to further short covering. The oil share spread has fallen to 35% on the soymeal rally which has reached our upside targets.
- Chicago brokers report that managed money has bought 8,900 contracts of wheat, 14,500 contracts of corn, 11,100 contracts of soybeans, 9,100 contracts of soymeal, and 4,500 contracts of soyoil. From the opening bell, fund buying has been active on chart-based considerations.
- Paris wheat futures have ripped to the upside and reached their best levels since September at €244.50/mt. Interestingly, EU farmers are not selling stored wheat as the May-September wheat spread has pushed out to a record €29-30/mt Euro premium. And the EU wheat farmer is concerned by crop quality amid all the recent rain and old crop stocks provide a blending opportunity. Managed money held a huge net wheat short position, which is being liquidated. Also, the Paris/Russian new crop spread has reached a record $34/mt amid a Russian cash market that is reluctant to follow.
- Cash producer selling of wheat/soybeans and corn has been huge this morning. The farmer started to engage late last week, but their cash sales pace has really jumped this morning. We understand that Brazilian farmers have sold more than 1.5 million mt of soybeans with US farmers selling like amounts with the best cash bids of the year. Brazilian farmers have also started to price their second corn crop with the harvest across the Mato Grosso to start in 2-3 weeks.
- RGDS in Brazil has a rolling landscape with soybeans on the sides of hills likely to be harvested but those in the lower areas are a loss in recent flooding. We see RGDS soybean losses at 1.5-2.5 million mt. RGDS holds about 16% of Brazil’s soybean crush capacity with at least half of that crush closed on flooding. That would amount to above 16,000/mt per day. Most cannot determine when the flooding will subside and when operations will come back online, but it all depends on future rainfall totals. The point is that Brazil will have lost crush capacity with Mother Nature determining when it returns. Thankfully, the midday GFS forecast is drier for S Brazil.
- The midday GFS weather forecast is drier for the E Midwest vs the overnight run and similar in the W Midwest. There will be windows for spring crop seeding. One such window will emerge Thursday and last into the middle of next week. High temperatures will range from the 60’s to the 70’s. The forecast leans positive for planting across the Plains, W Midwest, and Illinois.
- At current elevated Chicago prices, it will be difficult for Friday’s USDA report to hold a bullish slant. We expect that the week’s highs will be forged early with a break into Friday, and the USDA report. The midday GFS weather forecast has turned wetter for Russian winter wheat areas. Today, July Chicago wheat does not need to rally above $6.50 nor July soymeal above $390. The Chicago rally seems to be ahead of itself until summer weather patterns are known. The midday GFS forecast has added rain for the dry winter wheat areas of SW Russia.