- Chicago values are mixed at midday with soybeans lower while the grains trade either side of unchanged. The selling in soybeans is based on China’s absence as a US buyer this week ahead of China’s biggest political gathering of the year in Beijing. The worry is that China hawks could prevail in political discussions (about the US), that could limit China’s ag purchase pace. We remains hopeful that China can/will perform and look past political sabre rattling from the US. A key USTR review of China’s purchases to date will take place in July, just 5 weeks away. China needs to get “on pace” in securing US soybeans and other ag products. The soybean market will be closely monitoring China’s purchase pace of US soybeans into July.
- We anticipate a mixed Chicago close today with future rallies in corn/ soybeans being capped by improving Central US weather. The NWS long range 30/90 day forecast was released today which indicated near normal temperatures and near to above normal precipitation. Such a forecast would be favourable to summer row crop yields. The average US farmer is undersold on old and new crop production and after June 1 will have to become a larger cash seller.
- Chicago brokers estimate that funds have sold 3,500 contracts of corn and 6,300 contracts of soybeans, while being a net buyer of 2,900 contracts of Chicago wheat. In soy products, funds have sold 2,100 contracts of soymeal and 1,200 contracts of soyoil. Chicago soymeal has fallen to a new contract low with July priced at $282/ton. A weekly close below $280/ton would set the 2016 lows at $260/ton as being the next downside price target. Spot Chicago soymeal has not closed the week below $280/ton for the past 4 years.
- US export sales for the week ending May 14 were; 15.8 million bu of wheat (both crop years combined), 34.8 million bu of corn and 44.3 million bu of soybeans. The sales of wheat were disappointing while corn/soybean sales were supportive.
- For their respective crop years to date, the US has sold 976 million bu of wheat (up 31 million or 3%), 1,554 million bu of US corn (down 309 million or 16%), and 1,525 million bu of soybeans (down 156 million or 9%). We believe that WASDE will continue to adjust their old crop US soybean export estimate downward by 50-100 million bu over several monthly reports. WASDE is too low on US soyoil exports as the sales pace remains historically large.
- China has purchased 14.5 million mt of US soybeans for the 2019/20 crop year with known new crop purchases of 1 million. There are total unknown 2019/20 purchases of 2.2 million mt which an estimated half could be to China with new crop unknown purchases clocking in at just 500,000 mt. US new crop soybean sales are running well behind prior years due to Covid-19 demand uncertainty and China.
- Several key groups of US farmers feel left out with HRW wheat/prevent plant producers not seeing any revenue from the CARES pay-outs announced on Tuesday. And producers that are holding corn/soy from multiple years will try to play the system saying that all bushels are from 2019. Moreover, producers that rightly sold bushels ahead of the Covid-19 break are complaining that the USDA is rewarding bad business behaviour. It is probably correct to suggest that the USDA financial aid is never fair, but it was needed. And producers are getting the message that if there is a CARES 2, they need to have crop to participate.
- The midday US GFS’s weather forecast is wetter across E Texas and Oklahoma with rain totals of 2-5.00″. The moisture is excessive and would produce low level flooding and quality concern for ripe HRW wheat. Otherwise, the warm/wet weather is favourable for summer row crops. Temperatures stay warm over the next 2 weeks.
- There is one more trading session ahead of a long US 3-day weekend with position squaring remaining the feature. Black Sea/European June rainfall will key cash wheat price direction. China demand controls daily Chicago soy prices.