- HEADLINES: Chicago expands overnight rally; Delta, southern Midwest forecast too wet.
- Chicago grain/soy futures are sharply higher at midday amid unrelenting cash basis levels and a lack of change in climate patterns across the US Plains. Canada and Brazil. Other breaking news is absent, but there remains no indication that supply issues will be solved for any length of time.
- The early morning surge has been led by July corn, which has broken through $7.00 surprisingly easily. Spot Gulf corn prices are no doubt slowing summer export demand relative to prior expectations, but any material decline in the pace of corn sales will be short-lived on ongoing historic Brazilian dryness. Importers will be forced to return to the US marketplace in August, when Brazilian exports typically arrive in bulk. However, this year Brazil’s domestic market will absorb the early safrinha harvest. We note that domestic Brazilian corn prices remain perched above $7.80 per bushel. Additionally, Census May corn exports were a record 347 million bushels, and the corn export market’s physical demand pull will stay intact into summer.
- Safrinha corn in Parana in Southern Brazil this week is rated at just 28% good/excellent, vs. 40% last week. Crops rated as poor jumped to 27%, vs. 18% a week ago. We fully expect Parana good/excellent to drop to or very near zero by mid-May as subsoil moisture is depleted almost entirely. Temperatures across the southern third of Brazil in the next 10 days will be routinely in the upper 80s and low to mid-90s. Still no rain is advertised in any region of Brazil’s safrinha corn region into May 20.
- Brazil’s forward cash soy market is also finding strength. Brazilian fob soy basis for August delivery is now quoted at $0.90 per bushel over Sep Chicago, and indeed Brazilian supplies will be dwindling rapidly in the months ahead. Brazilian exporters shipped a record 17.4 million tons of soybeans in April. FebruaryApril shipments total 33.5 million tons, or roughly 40% of the USDA’s full annual forecast, vs. 30.6 million last year. Brazilian soy exports typically peak in April and decline rapidly beginning in August. Recall a year ago, Brazilian soy fob basis soared to $2.50 over spot futures during the autumn months once supply was exhausted.
- The message is that enlarged Northern Hemisphere crops are required to satisfy global corn and soy demand over any 12-month period.
- September Paris milling wheat has expanded its early morning rally to €3.75 per ton ($0.12 per bushel}. Global rapeseed/canola futures are sharply higher as spot EU rapeseed oil scores a new all-time high equivalent to $0.71 per pound. Rising vegoil markets have sustained profitable oilseed crush margins worldwide.
- Compared to its overnight run, the midday GFS weather forecast is drier in Indiana and Ohio but much wetter in Missouri, southern Illinois, Indiana and Kentucky. The overall pattern into mid-May maintains active showers across the Delta and Eastern Midwest throughout the next 10 days. Lasting delays in seeding will be only regional in nature.
- Unfortunately, meaningful rainfall across the Northern Plains will bypass major crop areas, while drought intensifies across the far Southern Plains and Canada. Soaking rain will be needed across the Dakotas and Canadian Prairies no later than mid-May. Already there is talk of producers in ND switching from spring wheat to corn amid insurance date considerations.
- Upside old crop targets have been hit. However, US and world corn balance sheets continue to tighten on a complete lack of Brazilian rainfall and positive soy crush margins. Breaks in wheat will be short-lived until Northern Hemisphere row crop production is known.