- HEADLINES: China cancels US corn purchase; Fund selling accelerates on the charts; Brazilian export premiums rally; Stats Canada bullish canola.
- Chicago futures drop on Chinese corn cancelation; Rain across the KS/NE and bearish charts; Stats Canada March Stocks data bullish on canola/durum wheat; Brazilian soybean basis roars higher into September as logistical woes are cleared. Chicago market volatility stays the theme heading into late May.
- Midday Chicago futures are sharply lower on renewed speculative selling. News that China cancelled 272,000 mt of US corn added to the bearish mentality. November soybeans have traded back to $12.50 chart support while December corn tests its old lows at $5.10-5.15. The July KC/Chicago wheat spread pushed out to a record $2.06 KC premium as the May/July corn spread tested the 2013 high at $0.60 over. Cash basis bids ex Central IL are holding firm with corn at $0.70 over soybeans bid at $0.75 over July futures. Cash movement is nil.
- China cancelled 272,000 mt of US old crop corn which added to last week’s cancelations totalling 730,000 mt. China has 2.9 million mt of US corn that has been purchased, but not shipped with another 1.0 million held in the unknow destination category. Chinese corn cancellations appear to be due to cheaper Brazilian offers from July forward vs the US Gulf.
- The US continues to ship corn to China, but with Brazilian offers $0.95/bu cheaper in July/August, late summer business is being moved. Brazilian corn was added by China as an origin in December to make sure that it had more than one supplier following the Russian war against Ukraine. Please be aware that due to the Ukraine/Argentine corn supply shortfalls, the US/Brazil will be fighting for Chinese/world corn demand going forward. The US Gulf cannot match Brazilian offers due to the huge basis premiums being paid by US domestic corn users (ethanol). Central IL corn is bid at $0.70 over which makes US corn non-competitive in world feedgrain trade.
- The UN announced today that outbound grain vessels from Ukraine have resumed. The clearing of outbound boats waiting to get out the Black Sea is growing. With just 9 days remaining in the agreement, it is an exodus to exit the Black Sea on the fear that waters could be mined to prevent a Russian assault.
- Chicago brokers estimate that funds have sold 5,100 contracts of Chicago wheat, 10,500 contracts of corn, and 6,500 contracts of soybeans. In the soy products, funds have sold 4,200 contracts of soymeal and 5,000 contracts of soyoil.
- Stats Canada surprised with lower-than-expected March 31 stocks of wheat and canola. All wheat stocks were 13.26 million mt against an average trade estimate of 14.00 million, with canola stocks pegged at 5.9 million mt vs estimates of 6.9 million. The lower stocks explain the big rise in cash basis bids of late. And for canola, the lower stocks make favourable new crop weather a must.
- Brazilian fob soybean basis has been rising sharply as logistical issues are resolved and farmers are tight fisted with new crop supplies. Paranagua fob soybeans are offered $1.00/bu under July and $1.00 over by September for a $2.00/bu basis rally in 3 months. Such a basis rally is unheard of in recent years with US soybeans competitive in the world market in September.
- The GFS weather forecast is like the overnight run with a series of storm systems to move across the US over the next week producing 0.5-2.00” of rain. The heaviest rain targets Texas/Oklahoma late this week. Canada holds in an arid/warm flow which is concerning. The week 2 US forecast calls for a new round of dryness to boost the spring seeding effort.
- Volatility remains the theme in Chicago. There will be summer US weather threats, but for now, weather is a nice mixture of rain/sunshine/temperatures. Chicago new crop futures have digested a large amount of bearish news with December corn at $5.20 and November soybeans at $12.50. An Algerian wheat tender tomorrow should be closely followed to determine if Russia is willing to cheaply sell old crop wheat to gain demand. Vegoils are the bull story longer term on smaller canola, palmoil and soyoil supplies/stocks.