- HEADLINES: Early Chicago rally fails as wheat retreats; May KC wheat even money with May corn, historical rarity; GASC receives 19 August offers.
- The volume of Chicago trade was active for the first half hour and has since slowed with mixed prices noted at midday. KC wheat has continued its decline on liquidation while bull spreading is back in vogue in old/new corn and soybean spreads. Cash basis bids in both the US and S America are rising on diminished farm selling. US farmers are active with fieldwork on the season’s first 70–80-degree day while the Brazilian soybean harvest surpasses 85% with farmers willing to await higher bids before making new cash sales. One chore of the market is to buy additional grain to replace daily use. Cash sales are likely to remain somewhat limited as farmers seed crops over the next 6-8 weeks.
- Chicago has a firm tone at midday with the April USDA report due out on Friday. The April report does not normally cause wild market gyrations and Friday’s post report activity should be similar as EU/Chinese traders are already enjoying their weekends. The theme thereafter will all be focused on supply, and coming weather patterns for Northern Hemisphere crops. Some of the selling in new crop futures has been related to the prospect of normal spring planting weather and producers that are active to get seed in the ground. Key support is noted between $3.78-3.83 basis December corn futures.
- Chicago brokers estimate that funds have bought 5,600 contracts of corn, 4,100 contracts of soybeans, while selling 2,300 contracts of wheat. In soy products, fund managers have bought 3,400 contracts of soyoil while selling 1,900 contracts of soyoil. Funds are on the buy side of the market; it is just the midday totals are sagging.
- Egypt’s GASC received 19 offers on August wheat with the cheapest offer being $234/ mt with the tax estimated at $23.80/mt for Russian wheat. The large number of offers indicates that GASC will have no problem of securing/receiving new crop wheat. US wheat futures took the news as bearish, and prices declined. In fact, the break in wheat pulled old crop corn futures lower with May KC wheat trading at even money with May corn. Historically, it is extremely rare that KC wheat trades at a lasting discount to corn. In the cash market, KC wheat is priced at $0.85/bu cheaper than corn which is causing feedlots to take large amounts of forward coverage.
- NOPA will be out with their March crush report next week Thursday. The report is expected to reflect a record crush rate with builds in US soy products. The US crush industry is likely to exhaust soybean supplies on a local basis that produces local shortages. Somehow, Chicago must punish the US crush margin such that the monthly crush rate slows. We note that China’s crush margins are in fast retreat, and several days of strong cash meal is needed to turn margins around. China does have record tonnages of soybeans that are afloat coming from S America which will keep crushers there well supplied.
- The midday GFS weather forecast is drier across the eastern two thirds of Brazil’s safrinha corn area. A high-pressure ridge is forecast to strengthen which will act to limit the flow of tropical moisture southward. Dryness returns to all corn areas in the 7–14-day period. The forecast shows no return of regular or normal rainfall which would aid Brazilian winter corn. Our concern is rising on terms of Brazil’s second corn crop with the reproduction phase due in late April and the first half of May. High temperatures range from the 80′s to the lower 90′s. Soil moisture declines will persist into the end of the month.
- Chicago tried to rally on the flow of new funds into old crop corn, soybeans, and Chicago wheat. However, once the fund flow of new money slowed, the market was not able to sustain the rally and values retreated. Any Chicago break should find support based on the strengthening cash market. Basis bids for corn/soybeans are rising as end users seek additional supply to replace stocks. The result of the GASC tender is awaited with the lowest offer being $234/mt with a tax of $23.80/mt. KC wheat continues to sag on sliding world wheat values. Wheat must bottom for corn to sustain a rally.