- Chicago markets are mostly lower at midday with corn, soybean and wheat futures weaker in pre-report USDA crop report trade. US weekly export sales data, Brazilian updated corn and soybean crop forecasts (from CONAB) along with the USDA May Crop Report will be available Thursday morning. The large data dump for ag traders will cause heightened market volatility on Thursday, and likely into the end of the week. Traders are squaring their positions and risk ahead of the May USDA Crop Report. Our bet is for a lower/mixed close.
- Chicago traders estimate that funds have sold 1,900 contracts of corn, 2,500 contracts of soybeans, and 2,500 contracts of wheat. In soybean products, funds have sold 1,200 contracts of meal and bought 4,200 contracts of soyoil.
- Russia is mostly out on holiday today, however, Black Sea offers for new crop wheat in July/August ex Novo are at $205/mt or $5.58/bu. This compares to US HRW wheat in the same position at $255/mt or $6.95/bu. The difference between new crop Gulf fob HRW 12.5% wheat and 12.5% Russian Novo wheat is $1.40/bu. This hefty premium does not help US wheat exports and suggests that US futures are too high without a deepening US Plains or a Black Sea drought.
- US weekly ethanol production increased to 1,040 thousand barrels/day from 1,032 thousand last week. US ethanol stocks fell to 923 million gallons which is down 5% from last year. US ethanol imports to Brazil are no longer profitable and will slow going forward. Brazil’s large and cheap sugar crop is pressuring domestic Brazilian ethanol prices. US crude oil stocks fell 2.2 million barrels. The crude oil report is bullish, ethanol is neutral.
- The midday GFS weather forecast maintained favorable rain chances for the vast majority of the Black Sea crop area for the next two weeks. The rains have already started across SW Russia and these rains will expand north and west with time. There is no evidence of a return to the hot/dry weather of last week.
- The May WASDE report is expected to be bullish of corn, bearish of wheat and neutral for soybeans. We doubt that any trend can be sustained. Following the report, the market is expected to get back to trading world/US weather and pending trade issues. The US/China remain apart on trade and the fear over the installation of US tariffs could become real later this month, in addition NAFTA talks will have to score some real progress to be finished by next week.
- The midday GFS weather model update shows heavy rains across the expanse of the Central US from the Plains east into the Ohio Valley. The rains have been shifted farther north (from the overnight run), but still include dry crop areas such as; KS, MO and S IN. The rains miss the N Plains and are reduced across the Northern Lake States to allow spring seeding. Mostly dry weather persists across the southern third of the US which will be closely watched heading into late May. However, the fat portions of the Central US will be well watered with storms due nearly daily over the next ten days. The extended range also offers another potent storm system with near to above normal rainfall. There is no evidence of any lasting dryness that would pose a yield threat. 2018 Midwest spring crops are off to a favourable start.
- Long liquidation persists in the complex amid ongoing US/China trade tensions. US wheat futures are lower amid improved weather for the Black Sea and Central US Plains. US/world corn has a bullish story, but can corn values rise against the bearish background of soybeans. Our market stance is shifting from buying breaks to selling rallies amid the lack of a dire Midwest drought into late May.