- HEADLINES: Chicago firm at midday; NOPOA crush slightly below expectations; GFS weather forecast still too wet in Brazil.
- Midday Chicago grain and soy futures are firm at midday on additional fund inflows and no material change to global weather patterns. The speed of the rally has slowed as input today lacks excitement, but US corn and soy balance sheets continue to tighten, while dryness across Western Europe becomes a more pressing issue in May. New crop Paris milling wheat futures are up €1.50-2.25/mt ($0.05-0.07/bu), with EU corn also adding premium on tight stocks. Spot Chicago ethanol has reached $2.00/gallon. Brazil’s interior corn index has again scored a new all-time record high of 96 Reais/mt ($7.23/bu).
- NOPA-member crush in March totalled 178 million bu, vs. expectations of 179-180 million and vs. 181.4 million a year ago in March. Chicago soybeans neither rallied nor broke following the release of NOPA data, but it remains that pace analysis suggests the USDA’s forecast remains too low. Sep-Mar NOPA crush is up 3.1% from last year, vs. USDA’s projected year-over-year increase of just 1.1%. Soy oil stocks in March totalled 1.77 billion lbs, vs. 1.90 billion last year. Soaring soy oil basis levels keeps crush profitable through summer.
- Corn, soy and wheat export sales were lacklustre. Corn sales through the week ending April 8 totalled 13 million bu, vs. 30 million the previous week. Yet, exporters must average sales of just 3 million bu/week to meet the USDA’s forecast. New crop global feed wheat is offered cheaply, but we maintain that the USDA’s corn export forecast will be met no later than the end of April. Soybean export sales totalled 3 million bu, vs. cancellations of 3 million bu the previous week. Old crop wheat sales were a net negative 2 million bu amid modest cancellations from Japan, Mexico, and S Korea. New crop wheat sales were 10 million bu, vs. 19 million the previous week.
- Yet, there is no sign that China’s need for feed has waned. China last week purchased 24 million bu of US sorghum, a marketing-year high. US sorghum export commitments, mostly to China, now sit at 277 million bu, or 94% of the USDA’s annual forecast. We expect China to secure the bulk of this and next year’s US sorghum surplus. New crop sorghum basis across the W Plains ranges from $0.35-0.65/bu over Dec Chicago corn, which is firm. High corn/sorghum cash prices assure enlarged wheat feeding consumption this summer. Unlike recent years, the US cannot afford to increase its share of world wheat trade amid contracting stocks.
- NOAAs updated May-Jul US climate forecast offers the return of heat to all regions and below normal precipitation to the entire Western US. Drought stays intact across the Dakotas and far Western HRW Belt. And major soil moisture draws are offered to the PNW, which is an issue for white wheat amid growing demand.
- Dryness across the Dakotas and PNW takes centre stage into early summer. Both regions combined are sizeable suppliers to the west coast export market. Confirmation of drought/yield loss bodes even more favourably for interior Central US basis levels.
- The midday GFS weather forecast is much wetter across Mato Grosso do Sul and Parana in the extended range period. The GFS forecast advertises cumulative rainfall there of 2-4″ April 25-27, which if realised would stabilise soil moisture ahead of pollination. However, the GFS forecast has been much too wet in Brazil since the end of winter, and EU and Canadian ensemble models must back up this wetter change. In the near-term, Brazilian rainfall stays confined to Mato Grosso and pockets of Goias. Drought worsens elsewhere.
- Bull markets must be fed constantly but regional global weather issues and the need for record N Hemisphere production offer strong support on price breaks. Risk trends to the upside until late summer. Corn remains the leader of the global ag space on tightening exportable supplies.