- Mixed with diminished volume has been Chicago trade. Midday values have soybeans/wheat weaker with corn trying to hold modest gains. Traders do not want to take on large new positions with the US Trade delegation expected to return from Beijing Friday evening. This means that some sort of “how did the talks go” announcement could be forthcoming overnight. Moreover, traders are trying to measure whether enough progress has been scored with NAFTA to get some sort of deal worked out before mid-May to get approval from the current Congress. Recent local elections have hinted that Democrats are likely to do well in the midterm US elections in November with either the House or Senate leadership shifting over. It is trade concern and improved US weather which is acting to cap Chicago rallies. The longer it takes US/Chinese trade negotiations to be resolved, the longer that China will take in avoiding US soybeans. We note that China cancelled old crop US soybeans in the US weekly export sales report, but did purchase two new crop cargoes.
- We look for a mixed close today with many traders focusing on the length of funds in Friday’s CoT report. Funds have been large buyers of corn this week with open interest expanding as July reached above key resistance at $4.00. The favourite of funds this week has been Chicago corn.
- Chicago brokers report that funds have been net buyers of 4,300 contracts of corn and 1,200 contracts of wheat, while selling 3,400 contracts of soybeans. In soy products, funds have sold 2,900 contracts of soyoil and 3,700 contracts of soymeal.
- The midday Black Sea weather forecast is generally dry/warm through the weekend with showers/cooler temperatures next week. The rain will be focused on Ukraine/SW Russia with much of the northern crop areas staying drier. No stress is being reported to Russian or Ukraine wheat, but such stress is possible if rains do not fall in late May.
- The midday GFS weather forecast model update shows no changes from the overnight run for the next ten days. Additional rain of .25-1.50” looks to fall with a slow moving frontal system over the next 36 hours. These rains end late Friday in the E Midwest with lingering showers through the N Delta. Temperatures cool for a day or two, before turning warm next week under abundant sunshine. The next chance of Midwest rain is indicated for Wednesday/Thursday with a frontal pass to produce .25-1.25” (with locally heavier amounts). A third system is noted for the weekend following that produces additional rain through the Midwest/Delta with totals of .2-1.25”. The W Plains are missed. The midday weather forecast is wetter/cooler in the extended range compared to prior runs.
- Chicago is worried that the US/China talks will not be able to bridge their trade differences. This has soy lower. Wheat is higher on the expectation of a low KS crop estimate from the Crop Quality Tour. Corn is following wheat higher. Friday and next week’s Chicago trade will be about US/China and NAFTA Trade progress (or the lack thereof). US spring crops are off to a great start amid a good mixture of rain and sunshine. Trade politics are impossible to forecast; we would suggest not chasing the morning rally.