- HEADLINES: Chicago uncovers demand on the early break; US Plains weather forecast arid, USDA report due Friday.
- Chicago futures are mixed at midday with soybeans leading the rally, while the grains slide on position squaring ahead of the USDA April crop report due tomorrow. The USDA report should not produce market fireworks, but at elevated prices and high volatility, traders want to be conservative in their positioning. Morning Chicago trade volume is subdued and interestingly, open interest totals are well below last year.
- We look for a mixed to mostly higher close, with traders likely to add weather and war premium to Chicago valuations heading into the weekend. As we hinted yesterday, our fear is that the Russian war against Ukraine will be long and drawn out, which must facilitate a repricing of world grain and vegoil values over time. The world can band aid Black Sea export losses for a few weeks, but if the conflict is ongoing, that task becomes almost impossible as world supply shortages manifest themselves by late spring and early summer. Any lasting sustained Chicago price decline can only be started with record large EU, US, and Canadian crop yields. The market risks are to the upside with any US/European or Brazilian corn crop loss, exacerbating the rally effort. Bull market trends show no sign of relenting.
- Chicago brokers estimate that funds have sold 2,400 contracts of wheat, 3,100 contracts of corn, and 8,200 contracts of soybeans. In soy products, funds have bought 900 contracts of soymeal and 2,500 contracts of soyoil. The better volume today has been in the soy complex on the rally.
- US weekly export sales for the week ending March 31 were 5.7 million bu of wheat, 30.8 million bu of corn, and 29.4 million bu of soybeans. There was also 5.7 million bu of new crop corn and 11.0 million bu of new crop soybeans that were sold.
- For their respective crop years to date, the US wheat sales pace lags last year by 222 million bu or 24%, US soybean sales lag by 166 million bu or 7.4%, with corn sales off 467 million bu or 18%. The US soybean difference has narrowed quickly, and China continues to book late July/August offerings from the US Gulf. We would also remind that US Census corn exports are running 200 million bu ahead of FGIS weekly inspections.
- CONAB raised Brazilian yield in their forecast of a record large 88.5 million mt winter corn crop as of April 1. However, adverse weather has impacted 65% of the crop in recent days. And like CONAB’s forecast of the soy crop in December, coming weeks are critical for final Brazilian corn production. We hear that corn has gone backwards fast in recent days of sunny/hot/dry weather. Soil moisture levels are limited, and rain is needed today as the crop starts to pollinate. Crop concern is growing.
- The midday Central US GFS weather forecast is consistent with limited rainfall for Southern and US Central Plains into late April. The Midwest will endure rain every 4-5 days with a potent system due during the middle of next week producing widespread heavy snow across the E Dakotas, Wisconsin, and portions of E Iowa. The cold and wet forecast offers little chance to seed spring crops. And the Delta is targeted with 2-5.00” of rain next week which further adds to their flooding woes. The opportunity for widespread Midwest spring seeding is poor into April 20, thereby pushing corn seeding into a narrow 10–14-day window in late April/early May if warmer temperatures arrive.
- The flow of funds is on the buy side of the ledger today. A large US bank is discussing that commodity prices may have to rally another 40% based on investors placing additional raw material positions. The US inflation reading for March will be released on Tuesday could reach 9%. We hold a bullish Chicago view on tightening world supplies. Any loss of the 2022 Brazilian winter corn crop would cause a quick rally to $8.00-8.25 resistance. China stays active securing Brazilian and US soybeans.