- Rising macro-financial markets have sparked some modest short covering in the summer row crops with funds active early buyers of corn. The bears have not been rewarded over the past 3 weeks and with values not cracking to the downside following the long US holiday weekend, the shorts are losing patience. Amid seasonal price trends that normally peak in early June, Chicago traders are taking some short risk off the table.
- We see nothing that would change the longer-term fundamental view, but with US energy markets in recovery and a few more US ethanol plants opening this week, Chicago appears to be waiting on summer weather/yield prospects before taking their next price cue. We look for a mixed CBOT close.
- USDA/FAS reported that China booked 264,000 my of US soybeans with an unknown buyer (strongly rumoured to the Philippines) took 216,000 my of US soymeal. The China sales were split into 66,000 mt for 2019/20 with the remaining 198,000 mt going into the 2020/21 crop year. We hear that the demand was filled on Friday and being reported today.
- Further, we also hear that Chinese crushers are bidding for 3-5 cargoes of US soybeans. No new US soybean purchases can be confirmed by China this morning, but it is heartening that China is bidding for US soybeans (again) amid the political tensions that exist. China is back securing US ag products, but traders are wary that the Trump Administration will apply new sanctions on China for their takeover legislation of Hong Kong that was announced on Friday. There is no sign that Sinograin is securing large amounts of US soy for China’s reserve.
- US export inspections for the week ending May 21 were; 43 million bu of corn, 12.2 million bu of US soybeans, and 16.8 million bu of wheat. The sales were all in line with trade expectations.
- For their respective crop years to date, the US has shipped out; 1,077 million bu of corn (down 442 million or 36%), 1,289 million bu of soybeans (up 50 million or 4%), and 896 million bu of wheat (up 7 million or 1%). Research maintains that the USDA is overstating US 2019/20 soybean exports by 50-150 million bu.
- The Brazilian Real has rallied to 5.38:1 vs 6:1 just 2 weeks ago. The macro market risk on mentality due to America and much of Asia and Europe reopening has spurred the selling of the US$. What is unknown is whether a second wave of the virus returns to Europe and the US, and its impact on GDP recovery forecasts. The Argentine Peso has not rallied and is trading at 68:1 while the Russian Ruble is priced at 71:1. The Ruble bottomed out in mid-April at 79:1.
- Notes that the cheap Argentine Peso is keeping their fob corn offers at a hefty $0.34/bu below the US Gulf. Research forecasts that over 87% of the 2020 US corn and over 65% of the US soybean crop were seeded as of May 25. There are pockets of problems in Central IL and North Dakota, but for the most part the 2020 start of the growing season is highly favourable.
- The midday US GFS weather forecast is wetter across the upper Midwest with rainfall totals of 0.75-2.00″. The moisture is well placed and deemed as favourable with most of the 2020 corn/soybean crop already planted in this area. A tropical system in the Gulf could push northward into the SE US that ends their soil moisture shortages. Temperatures stay warm over the next 2 weeks which should enhance growth rates. The tropical system must be watched, but it would dislodge any Central US high pressure ridge.
- Today’s Chicago rally is based on the rise in macro financial markets and that the US did not impose new sanctions on China (yet?). We doubt that soybeans or corn can sustain a rally amid favourable Central US weather. US corn crop ratings next Monday should be high which will start to exert downward pressure again with US farmers.