- Active fund selling, and a lack of end user demand has pushed Chicago corn, soybean and wheat futures to sharp losses at midday. Wheat has paced the decline with KC July setting new contract lows. July soybeans are back to testing their lows that were set following the March Stocks/Seeding report. And corn is following wheat/soybeans lower in moderate volume. Record large S American corn supplies along with improving weather in the US and portions of the Black Sea has provided the bearish fundamental background. And, when US/China trade news falls to the bottom of the media page, the bearishness of world supply comes forward. Traders remain frustrated by the rhetoric that a trade deal is close, without any actual announcement. Frustration over the lack of a deal is building across much of the Central US as farmers wonder if the Trump Administration will delivery on his promises.
- Chicago brokers estimate that funds have sold 6,800 contracts of corn, 5,500 contracts of wheat, and 5,200 contracts of soybeans. In soy products, funds have sold 3,400 contracts of soymeal and 1,200 contracts of soyoil. The funds are piling into a larger net short corn, wheat and soybean position.
- There is little or no US or S American farmer selling on the Chicago decline as they continue to hold stocks in the hope of higher prices. Cash basis bids are rising to spur enlarged cash movement. A top in cash basis levels should be set in early May as farmers focus on getting seed in the ground.
- Russian interior wheat prices are rising as cash supplies tighten for millers. The spread between the interior and fob markets are at levels that should produce a near halt in Russian May/June wheat exports. The new crop harvest won’t start across SE Russia until the last half of June, and even then, the spot domestic market should secure much of the early harvest.
- The US is asking if China would shift their retaliatory tariffs on ag goods to other goods so that the Trump Administration can claim a bigger win for US farmers. US meats (in particular) are of interest for imports into China. The US would like to leave some tariffs in place so that as China performs on its promises, they can be removed. China has a history of not performing on its trade import promises such as their 2001/02 WTO entry pledge to secure 7.2 million mt of corn and 9.0 million mt of wheat annually.
- EU 2019 wheat production will rise sharply in 2019 with normal summer weather. Dryness/heat are noted across Northern Europe, but amid favourable soil moisture, it is too early to be overly concerned. History argues against a second consecutive year of European drought in 2019.
- The midday Central US GFS midday forecast is wetter across the E Midwest and slightly drier across the W Midwest. The midday GFS forecast is more like the overnight EU model solution with the best rains across IN/OH. Fieldwork and an increase in W Midwest spring seeding is expected where soils are firming. The Delta will endure an additional 1-3.00″ of rain which will keep flooding potential high. Temperatures look to be highly variable, but average near to above normal. The extended range forecast offers a wet east and drier west type of forecast.
- The news today is not much different from yesterday. What is different is the technical condition which is more bearish on active fund selling. US/China trade deal talk has become stale as political rhetoric has not produced a deal. Farmers are fretting on their weakening profit outlook. The world has an abundance of grain with a new Northern Hemisphere growing season at hand. Corn will not be able to rally with wheat values at fresh contract lows. The big question traders are asking is how short can funds become.