- HEADLINES: Fund buying slows and Chicago futures retreat; GFS midday weather forecast offers a dry week for Midwest seeding; RGDS flooding starting to recede.
- Midday Chicago grain futures are mixed at midday with fund demand noted after the morning reopening. The fund buying was not as heavy as the past 3 trading sessions, suggesting that money managers are getting to flat or modest net short positions ahead of the USDA Crop Report due out Friday.
- The bear spreading of futures is related to massive cash sales of old and new crops from US/S American farmers. US cash merchandisers advise that farmers have sold more crop in recent days the biggest days of the 2023 harvest. The cash pipeline has been refilled and cash basis bids are in retreat. Brazilian and Argentine farmers have also been active sellers with an estimated 2 million mt of Brazilian soybeans and 700,000 mt of Argentine beans moving yesterday. The recent Chicago rally has sparked sizeable farm selling.
- Chicago brokers report that managed money has sold 1,200 contracts of wheat while being flat in corn and soybeans. Funds have sold 1,100 contracts of soymeal and bought 3,500 contracts of soyoil.
- A growing share of RGDS (Brazilian) crushers are restarting operations as flood waters recede. And farmers are expected to restart harvest by late week in a soybean salvage operation. The moisture content of seed will be elevated which will require commercial drying. That said, loss estimates are in retreat with most targeting 0.8-1.3 million mt of production. S American meal basis bids are starting to relax as worry over lengthy Argentine labour strikes is waning. The next general strike is set for Thursday but is not expected to last more than a day.
- The coming spate of warm/dry weather will allow for US crops to get seeded on a timely basis. We expect that US corn and soybean crop ratings due out in early June will be historically high with soil moisture largely restored. Initial US summer row crop ratings have little correlation to final yield, it is July and August weather makes that determination. Nonetheless, we expect considerable market volatility as traders react to improving US weather.
- The midday GFS weather forecast is drier for the W Midwest and similar with rain across the E Midwest. The Midwest will enjoy a 6–8-day window to seed spring crops with near to above normal temperatures into May 16. For most farmers, it should allow for considerable planting progress. Showers return after May 16 in the west with dry weather holding a few days longer in the E Midwest. The details of the rain for the W Midwest are still be worked out, but totals of 0.25-1.50” are expected. High temperatures will range from the mid 60’s to the lower 80’s.
- Managed money demand has slowed from recent days with cash basis bids retreating on large farm sales. And a new IA crush plant, Platinum, is operational and adding to US soy product supplies. It has a daily crush capacity of 110,000 bu. Midwest soil moisture has been replaced which provides a moisture cushion against summer heat. Chicago markets have got ahead of themselves with a break into early June forecast.