- HEADLINES: Chicago tries to recover on firming June/July corn basis; GASC secures 240,000 mt of August Romanian wheat; Midday forecast south with rain.
- Chicago futures are lower at midday in thinning volume. Corn, soybean, and wheat futures have pressed the downside on non-threatening Central US weather forecasts. The 2021 US corn, soybean and winter wheat crops are off to a solid start with spring seeding progressing on a timely basis amid a lack of extreme heat. And some moderate rain has fallen across the Dakotas, but regular moisture is necessary throughout the summer to end the drought.
- End users purchased the morning break (and the test of last week’s low) knowing that the summer weather markets start in earnest in June. Yet, some traders are side-lined trying to better understand summer Central US, Chinese and Black Sea weather before making their bullish or bearish bets. Therefore, Chicago volume has slid in recent trading sessions as traders seek to identify new trends.
- US and world exporter stock/use ratios are historically tight which means that any threatening weather will produce an oversized price impact. A Central US high pressure ridge that offers a week plus of warm/dry weather will produce a strong upside marketplace response. We doubt that seasonal price highs have been set, there are high odds of a few summer weather scare rallies.
- Midwest cash corn basis bids are holding at heady premiums as merchandisers push to stimulate additional cash corn movement. Central Illinois corn is bid at 45 cents over with 5-10 cent pushes reported for sizeable cash sales. This compares to 35 cents over on April 23. Highly profitable ethanol margins and the record large US corn export program to China will maintain a hunt for cash corn through the July. We look for July corn futures to gain on December without a Central US weather threat.
- Russia will start its wheat export tax program on June 2. The Moscow Exchange is reporting a Russian FOB export wheat price of $242/mt vs GASC offers today at $264/mt. The GASC offers makes the Russian Grain Exchange price look $19-21/mt too cheap. The lower Moscow FOB price favours Russian exporters amid a lower tax rate, but it causes confusion in terms of the relevancy of the Moscow Exchange and Russian FOB export offers. Black Sea exporters report that the lower Moscow price reflects the sales/offer prices of an offshore exporter intermediary. The Government and Exchange will be holding a weekend meeting to better discuss the program, its implementation and fob wheat cash spreads.
- GASC secured 240.000 mt of Romanian wheat at prices of $254-259/mt to establish the world wheat market for late summer.
- The US exported 68.0 million bu of corn, 7.1 million bu of soybeans, and 21.1 million bu of wheat in the week ending May 20th. For their respective crop years to date, the US has shipped out 1,924 million bu of corn (up 843 million or 78%), 2,065 million bu of soybeans (up 777 million or 60%), and 917 million bu of wheat (up 20.3 million or 2%). China remains a sizeable importer of US corn each week.
- Chicago brokers estimate that funds have sold 4,300 contracts of wheat, 2,900 contacts of soybeans, and 5,400 contracts of corn. In the products, funds have sold 3,200 contracts of soymeal and bought 2,800 contracts of soyoil.
- The midday GFS weather forecast targets Kansas and the Plains with heavy rainfall of 1-4.00″ while missing the drought-stricken Dakotas. A high-pressure ridge holds across the South-Central US with a deep trough of low pressure just west of Hudson’s Bay. There are clear indications that the speed of the jet stream will be slowing down and shifting north which raises the risk of pattern stagnation during June and July. Close attention should be paid to the extended 10-14 day forecast in terms of a Western and Central US high pressure ridge. High temperatures hold in the 70′s/80′s.
- The Chicago theme is the same, values struggle to rally or break leading to an extremely choppy and wide-ranging marketplace. Heady cash basis bids underpin July corn futures on breaks amid a massive China export program. We do not look for China to cancel or roll many June/July/August sales to new crop. Our view remains bullish on Chicago breaks in the expectation of warmer/drier weather to come from mid-June into July.