- Chicago ag markets have struggled to sustain morning strength at midday despite rumours of China aiming to restock its reserves of corn, soy and cotton and a broadly favourable macro landscape. The US$ is weaker. The Dow is up 300 points. Spot WTI crude is up $4 per barrel at $18. Consolidation is the near-term theme. We previously noted that although ethanol production has found equilibrium with weekly consumption, total domestic corn consumption will be lowered considerably. Cattle placements in March are estimated down 21% from the previous year. Demand destruction continues to weigh on rally efforts.
- US weekly export sales are viewed as a bit bearish. Through the week ending April 16, exporters sold 29 million bu of corn, vs. 36 million the previous week, 13 million bu of soybeans, vs. 9 million the previous week, and 9 million bu of wheat, vs. 7 xm the previous week. Soy oil sales also remain sizable (47 million lbs) as logistics issues continue to hinder Argentine shipments.
- For their respective crop years to date, the US has sold 1,393 million bu of corn, down 22% from last year, 1,395 million bu of soybeans, down 15%, and 936 million bu of wheat, unchanged from mid-April a year ago. Recall final US wheat exports in 2018/19 were 936 million bu. Census wheat export data for the months of March and April will be important. We would also maintain that USDA’s 2019/20 US soy export forecast is still 100 million bu too high despite sales made to China this morning.
- Saudi Arabia’s wheat tender, which closes on Friday, will provide the first real glimpse of new crop global cash prices. Quoted offers this morning out of Europe and the Black Sea range from $200-208/mt, which is comparable to $4.10-4.30, basis July KC. Whether Saudi’s purchase is executed at substantial premium to quoted offers will be important. Any lack of premium in Saudi’s tender will confirm that new crop US wheat is overvalued.
- The midday EU/Black Sea forecast remains dry in Ukraine and Southern Russia but has expanded needed precipitation across France and Germany. Now is the time that weather conditions impact wheat yield potential. World wheat market sensitivity to daily model runs will be heightened.
- A major test of Covid-19 containment lies ahead as select states begin to open portions of their economy as early as next week. Other regions will stay closed and key will be whether infection rates rise sharply in areas that relax lockdown orders. Any surge in infections foreshadows a lengthier lull in total US economic activity.
- The midday GFS weather forecast is drier in the mid-South but slightly wetter across IL, IN and OH. Fieldwork will be disrupted into the middle/latter part of next week east of the MS River. Elsewhere rain will be scattered/regional in nature with planters to stay active across the Central Plains and far Western Corn Belt as high temperatures there stay in the upper 60s and low 70s. We also note that the bulk of coming rainfall in the Eastern Midwest falls on the weekend. The 6-15 day forecast is not completely dry but features normal Midwest spring rainfall every few days into May 10.
- Chicago futures have stabilised and await spring seeding progress and whether a needed weather pattern shift occurs in the Black Sea within the next two weeks. Bounces will occur at times, but the USDA’s May US and world balance sheets will show oversupply.