- It has been another weak session amid continued fund selling in the US and Europe. KC wheat is leading the way down again amid favourable Plains weather and the rising potential of needed rainfall in Western and Southern Europe over the next 4-5 days. Corn has recovered from session lows amid positive weekly ethanol data. The next issue for the trade is whether funds add to massive/record short position amid oversold technical conditions. RSI in wheat, corn and soybeans is near or below 30 (read very oversold!).
- Stats Canada this morning released its planting intentions forecast using data compiled in March. Like in the US, the theme in Canada is higher grain and lower oilseed seedings. Canadian spring wheat acreage in 2019/20 was put at 7.85 million hectares, vs. 7.01 a year ago. Corn intentions total 1.3 million hectares, vs. 1.2 million a year ago. Combined canola and soybean seedings are forecast at 10.9 million hectares, vs. 11.8 million in 2018/19.
- Canada’s spring wheat area will be largest since 2001. Assuming trend yield Canadian exports in 2019 will be unchanged at 23-24 million mt. Even amid reduced oilseed area, Canadian canola and soy markets will maintain a search for demand and look to end the recent Chinese-Canadian trade dispute. Work suggests Canada’s exportable canola surplus will stay in a range of 10.5-11.5 million mt, which is near record large.
- This week’s EIA report included a modest rise in total US crude stocks, but was otherwise supportive. US ethanol production last week totalled 308 million gallons, up 9 million on the prior week and 6% higher than the same week in 2018. In fact, this was the largest production total for mid-April on record. The market has responded to improved weather and better margins. US ethanol stocks last Friday totalled 955 million gallons, unchanged on the week. And total US motor gasoline stocks fell to 226 million barrels, down 5% on last year and the lowest since late November. Note that seasonally US gasoline stocks trend lower into mid/late May. Crude at midday is down $0.50/barrel. RBOB is just marginally weaker.
- Following today’s break in wheat, we look for Gulf HRW to be offered at $199 per ton for Jun-Jul arrival. This is highly competitive with comparable wheat out of Europe. And old crop US wheat’s discount to other origins will widen to $16-26/mt, which is historically large.
- The US$ is finding a new two-year high on continued weak economic data in other developed economies. S American currencies are sharply weaker, which continues to weigh on corn and soybean fob offers there.
- Argentine exporters are now offering corn for Jul-Aug arrival at $0.03-0.08/bu over Chicago prices. Soybean fob basis is $0.15-0.30 under futures. S American crops are priced to sell.
- The Central US midday GFS weather update is similar to the morning run. The recent bout of mild, dry weather ends in the next 48 hours and will be replaced by another lasting period of wet and cooler conditions. The primary concern is that of totals upward of 3-4″ falling across AR, MO, IA and IL in the 6-10-day period. Light showers then linger across much of the Central US May 6-9.
- The market continues to digest adequate grain/soy stocks and a shift in demand from the Northern to the Southern Hemisphere. This is fair, but very little weather premium exists currently. Note that funds are short an estimated 355,000 contracts of corn. This beats the prior record short by a massive 125,000 contracts.