- A Chicago corn rally is underway with futures rising from a US weekly EIA report did not show a significant new decline in US ethanol production. Wheat and soybeans have reluctantly followed. Corn/soybean futures reached long held downside price targets on Tuesday at $3.02 and $8.10 basis May, respectively. Short covering bounces in bear markets are often sharp/short. In the past 24-hour corn has bounced 10 cents and soybeans over 30 cents from low to high. Key resistance rests at $3.25-3.30 basis May corn and above $8.50 in May soybeans. Wheat values are acting tired with funds already long and some hit-and-miss rain in the Black Sea weather forecast. A mixed close is forecast.
- Chicago brokers estimate that funds have bought 6,400 contracts of corn, 1,200 contracts of soybeans, and 2,300 contracts of wheat. In the products, funds have purchased 2,000 contracts of soyoil and 1,200 contracts of soymeal.
- WTI crude oil prices have rallied sharply with gains of $3-4/barrel with June futures reaching $16.00. Like corn, the rally is largely based on short covering from what was from a multi-year low. We cannot find new demand that will clean up the crude abundance, but when it is priced below $10/barrel, a 40% rally can occur when the shorts want to book a profit.
- The USDA announced the sale of 198,000 mt of US soybeans sold to China for the 2019/20 crop year. The sale has created hope that China could be returning for larger US purchases under the Phase One agreement. We note that a Chinese ag analytical firm is discussing that China could book as much as 10 million mt of soybeans, 1 million mt of cotton, and 20 million mt of corn for their long-term reserve. No mention was made on whether these purchases are spread out over months or years, and they have been circulated before. However, the news is catching the market too short of corn and soybeans. China could book another 2 million mt of old crop world corn under new licenses.
- US weekly ethanol production fell to 166 million gallons/week from 168 million gallons in the week prior, which was down 46% from last year. The decline was not as large as expected. US ethanol stocks rose to a record large 1,163 million gallons.
- The midday GFS weather forecast is drier across the N Midwest with rain totals of 0.25-1.00″. The E Midwest stays wetter with rains of 0.75-2.00″ with two storm systems. Both forecast models offer warming temperatures for the W Midwest and the Plains with highs ranging from the 60′s to the mid 70′s. The E Midwest will be cooler under cloudy skies and a NW upper air flow with highs in the 50′s and 60′s. Planters are rolling across the Midwest, a trend that should persist into the weekend. Another storm system is noted for the middle of next week.
- Chicago futures are bouncing with an upside price target of $3.30-3.35 basis July. We hear of no fresh China interest for US corn. Brazilian farmers are again selling new crop soybeans as the Real declines to $5.40:1, a record low. The rising value of the US$ is likely to cap Chicago soybean rallies. The GFS weather forecast has added some rain for the Black Sea which will be closely monitored going forward. Corn looks likely to be the downside leader as the US ethanol industry stays 45% closed down.