- Adverse weather for world crop production is supporting Chicago corn and wheat, with trade uncertainty over China providing back and forth price action in the soy complex. The volume of trade has been active with funds on the buy side of the market so far. A deepening drought in the Western US Plains, Brazilian winter corn area, and now the Black Sea is underpinning corn and wheat values. Chicago has been the leader on short covering with hard wheat futures in tow. May Chicago wheat is back testing the March highs at $4.185 with a push above this price likely to cause a push to closer to $6.00, a test of the 2017 highs. July corn is above its key chart based resistance at $4.02 while the soybean market lags. Soybeans are uncertain whether the US will be able to negotiate more than extension of the dispute in meetings later this week. China is not showing any willingness to negotiate either intellectual property rights or a promise for reduced annual US trade deficits with the US. Our bet is for a higher close today with the market adding weather premium to price for a diminished Brazilian corn and Black Sea wheat crops. Seasonal price trends are up into mid May to mid June.
- Chicago brokers estimate that funds have bought 3,900 contracts of wheat, 7,200 contracts of corn, and 2,800 contracts of soybeans. In soy products, funds have bought 2,800 contracts of soymeal while being on both sides of the soyoil market.
- The Black Sea and Brazilian weather forecasts are little changed from the overnight run with ongoing dry weather offered for the next ten days. The developing SW Russian and Ukraine dryness is a worrisome trend.
- The midday GFS weather model forecast is drier across the northern portion of IA/S Minnesota with rain totals of no more than 1.00” with SE IA, N IL, and S WI still seeing rains of .5-1.50” with a frontal pass due from late Tuesday into Thursday. Kansas and much of the Plains see just a few spits of moisture this week which deepens the drought with rising temperatures. The best chances for a Plains rain event does not occur until the final days of the 11-15 day forecast, but our confidence that far out is extremely low. The Midwest will see fair/warming temperatures from Friday into the weekend with a few showers early next week. That rain does not look exceptionally heavy with totals of .2-.6”. Any corn seeding delays will be modest with additional Midwest dry weather next week.
- Adverse Brazilian and Black Sea weather looks to support any Chicago corn/wheat correction. US/China trade negotiations will determine late week soy price action. Our concern is that China will be unlikely to sign any US sponsored deal since they do not see that they are doing anything wrong. As such, the grains will gain on soy with wheat being the upside leader on a shrinking Black Sea crop.