- Dryness issues are really starting to build across the Black Sea with Russian/Ukraine and Eastern European crops being adversely impacted. Since April 1, SW Russian rainfall has been mostly less than 50% of normal with temperatures running 3-4 degrees above normal. The combination has lowered soil moisture to drought type levels. This has impacted winter wheat and is now stunting their corn crop. If not for the US/Chinese trade dispute, the ongoing Black Sea dryness would be front page news.
- At the close, soybeans were mixed, soymeal was $1-3/ton lower, while soybean oil marked the best close for the day on fund short covering. Argentine soymeal exports in April were the lowest in 10 years, and have remained below last year through May and June. Private shipping estimates show May exports at 2.4 million mt, with 2.7 million that are scheduled to sail for the month of June. This would put first quarter exports near 7 million mt, which would be the slowest in five years. Reduced Argentine exports have pushed business to the US, where exports since March have been 48% larger than a year ago, which is a record. Quarterly stocks and acreage reports are just over a week away and Chicago soybeans have (indirectly) priced in bearish reports. Outside of trade resolution, we expect markets to move sideways into the USDA reports. At some point, the US and China will return to the negotiation table and in an effort to hammer out a deal.
- Chicago corn futures found light buying interest amid oversold technical conditions and a growing net fund short. Estimates show that funds this evening are net short 67,000 contracts. This compares to a net short of 54,000 in mid-June last year. Notice that only three times since records began have funds been short ahead a growing season. Short covering followed in early July of 2017 amid brief heat and dryness. Actual US/world corn demand remains strong. US weekly ethanol production totalled 313 million bu, a 17-week high, up 7% from last year. US ethanol stocks fell. Blend demand is solid, and ethanol exports are ongoing. Note that Brazilian ethanol prices are rising seasonally. Heat/dryness is offered to the Black Sea through late June. Maximum highs in Ukraine/S Russia will reach the low/mid-90s. Gulf corn remains the world’s cheapest into Asia for delivery in July-August. US corn is priced to sell. Sideways trade is expected into next week’s USDA report. Focus thereafter will be on the extent/duration of US high pressure ridging in July. Any below trend yield pushes corn back to $4.00.
- The wheat market is looking for a bottom and may have found one. Russian crop estimates continue to be drawn down. Spring wheat planting there has ended, and final spring acreage will be a record low 12 million ha. Another rally in Russia’s domestic market is expected once new seeding data is revealed on Friday. Russian wheat is by far the world’s cheapest at $198/mt for August. Similar quality Gulf HRW is offered this evening at $227. However, note that Argentine and Aussie origin are higher still at $250-270/mt. We view Russian wheat prices as too cheap, and the market is expected to rally sharply following the harvest. And Aussie’s domestic market will get tight come August/September. Wheat often bottoms first following dramatic breaks. Heavy rain will benefit corn across the Plains, but will plague harvest in KS and NE. Note also that world import demand returns in bulk beginning in mid-summer. The US approving NAFTA will provide an immediate spark.