- Chicago grain futures are mixed at midday. US wheat futures have rallied on news of the Russian export quota proposal to President Putin by the ag ministry of 7.0 million mt from April through June. Corn/soybean futures have retreated on the potential of reduced world demand due to the dramatic slowing of the US economy. Although there a few countries that are looking to restock or restrict their exports, the bigger question rests with how much of the world’s caloric consumption is now in fast retreat.
- Soybeans are struggling to rise above $9.00 while May corn futures have resistance above $3.55. The corn market is forming a bearish flag on the charts that offers another leg lower if Tuesday’s NASS Stocks/Seeding Report is bearish. We looks for a mixed Chicago close with volume in retreat heading into another Covid-19 weekend.
- Chicago floor brokers estimate that funds have bought 3,400 contracts of wheat while selling 4,100 contracts of corn and 900 contracts of soybeans. In soy products, funds have sold 800 contracts of soymeal while buying 2,100 contracts of soyoil. The volume has been limited this morning.
- The USDA confirmed the sale of 114,000 mt of US corn to an unknown destination and 63,290 mt of US soybeans sold to Mexico. The corn sale was likely the back half of the 250,000 mt of US corn that was rumoured to China by Gulf exporter sources on Wednesday.
- April-June Russian grain export quota for 7 million mt is being yawned at by Russian exporters as it only reduces their potential business by 1-2.5 mt through June. The 7 million mt quota is for all Russian grains. If Russia exports 5.5 million mt of wheat during the April-June timeframe, total annual exports would be 33 million. The question becomes is whether 1-3 million mt of world wheat demand is shifted to new crop or others from Russia. It is worth noting that the Russian embargo is based on rising bread prices is due to the sharp decline in the Russian Ruble as crude oil prices fall to $20/barrel. The Russians are not hoarding wheat/grain, the Government is fighting the heady price rise of flour due to the decline of the Ruble and the economic inflation that it has produced.
- The Russian Ruble is priced just below 80:1 US$ this morning, a record low. The Brazilian Real is priced 5.10:1 US$, with the Argentine Peso at a record low of 64:1. Farmers in Russia, Brazil, Ukraine and Argentina continue to see their profit margins expand on local currency. Few non-US farmers are looking to curtail future production amid rising profitability.
- The Central US weather forecast looks to improve in the first half of April with seasonal temperatures and drier weather profile.
- The Chinese crush industry has been slow to return from the Covid-19 near shut down. Plants have been slow to return to normal, with cash sources reporting that some 15-25% of the Chinese crush industry is still not back to normal activities. Crushers say that there are plenty of soybeans in China, it is just getting them processed into meal/oil.
- The GFS midday weather forecast is like the overnight run for Brazil/Argentina. The rain favours the winter corn crop in Parana. No extreme heat is indicated for the next 2 weeks. The Brazilian soybean harvest is moving ahead and will be 90% completed by mid-April. The Argentine harvest will gain momentum.
- Crude oil prices are testing $21/barrel and the financial losses on US ethanol plants are acute. We fear additional plant closures/slowdowns to be announced next week with 2019/20 US ethanol production falling to 5,000 million or less. The financial implications on the US biofuel industry is dire. The spot Chicago wheat/corn spread has moved out to $2.33 wheat premium. The upside target is $2.50. Key NASS crop reports loom Tuesday with a sharp gain in corn/soy seedings forecast from 2019.
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