- Chicago summer row crop futures continue their decline amid weak S American corn/soybean offers amid fresh fund selling. Argentine fob corn for August is offered at 7 cents over September futures compared to US Gulf offers of 48 cents over (US corn 41 cents/bu more expensive). Brazil is offering August corn at 24 cents over, 24 cents/bu cheaper than the US. Argentina is offering June soybeans at 30 cents under Chicago July compared to the US Gulf at 33 cents over. The point is that Argentine soybeans are 63 cents cheaper than the US and 66 cents cheaper than Brazilian fob offers. The discount of S American offers via their discounted currencies is pressuring Chicago. It is a surprise that Brazilian fob soybean offers are above the US as they enter the “gut slot” of their new crop shipping period. Chicago is reacting to the weakness of world corn/soy fob offers and potential of reduced China demand for US soybeans amid the ongoing trade battle. Chicago traders have given up trying to forecast a US/China trade deal as the length/uncertainty of the negotiations has caused apathy. Most traders say show me a deal, and I’ll decide whether I need to cover my short position. A China deal or adverse weather is needed to alter prevailing price trends.
- Chicago brokers estimate that funds have sold 7,300 contracts of corn, 6,900 contracts of soybeans, and 900 contracts of wheat. In soy products, funds have sold 3,100 contracts of soymeal and 3,400 contracts of soyoil.
- The Argentine Peso has weakened 0.8% this morning to 42.54 vs. the US$ with the Brazilian Real 0.35% weaker at 3.96:1. The currency fall (US$ rally) has helped offset the Chicago decline with Argentine farmers adding to new crop sales.
- The soybean market is decline as China import demand has been tepid and analytics show that US exports to China are not keeping pace with the 2018/19 forecast. Research argues that WASDE will cut their US 2018/19 soy export forecast by 25-50 million bu in May which will add to end stocks. China’s African Swine Fever has ended their soybean import demand growth. This means that it is enlarged corn/wheat trade that must garner any bullishness. Of course, if the US could persuade China to secure US soybeans to narrow their trade differences, this could underpin Chicago. Yet, that US captive demand won’t be known until a trade deal is completed.
- The US S&P has pushed to a new record high with crude oil futures posting another strong day with June WTI up $0.80/barrel to $66.35. Investor flows are into equities and energy. The trend is your friend; grains that have not shown any bullishness outside of prior rallies tied to a US/China trade deal. Funds are adding to net shorts, but a bullish catalyst is lacking to tell them they are wrong. The next chance for bullish news is next week’s US/China talks.
- The midday Central US GFS weather forecast is little changed into May 1 and wetter thereafter. Warm/dry weather is expected into the weekend with showers/thunder storms redeveloping next week. High temperatures look to range from the 60′s to the upper 70′s. Colder Canadian air will be pushing southward next week producing more frequent showers/storms. The rains are expected to become heavier into the closing days of April. Note that the rains are farther north than was indicated by the EU model overnight, but we suspect that the models are having trouble in deciphering where the frontal boundary needs to lie. Some 2-4” of rain is projected for IA/N MO with 1.50-3.00″ for the remainder of the Midwest. This is a wet start to May that will reintroduce localised flooding and slow the spring planting progress.
- The red ink continues to flow with fresh lows in Chicago corn/soybeans on renewed fund selling. The discounts in S American corn/soy are not new, but they are not narrowing as Chicago declines. This keeps the US in a non-competitive export position. We remain optimistic for a US/China trade deal and a turn in the market. A bottom is expected this week before next week’s US/China talks.