- HEADLINES: Wheat plunges on spec selling as corn soars on export demand; Rumours of EU demand for US soymeal as EU natural gas prices soar.
- Wheat values are sharply lower while corn/soy futures try to hang onto a moderate rally effort. The volume of Chicago trade is in decline (from prior days) with trader interest watching whether wheat can close limit down. Wheat is on a string of limit days amid extreme market volatility. May Chicago wheat was down over $1.20/bu as prices continue their upwards and lower streak. High prices beget volatility, but amid wheat’s recent market behaviour, Chicago margins are too cheap at $5,100-5,200/contract. The spot Chicago wheat/corn spread peaked on Monday at $6.70 and has done a swan song to $4.65, a 4 day $2.00/bu move which is breath-taking for a spread. Value should be witnessed in December KC wheat at $10.00 or below. The loss of Black Sea production coupled with a developing drought across the winter wheat areas of the Plains mandates support at $9.70-10.10 basis KC December.
- December corn futures will find value at $6.25 and below due to the need for extra acres and a record corn yield to make pipeline supplies in the 2022/23 balance sheet. And the current soybean/corn ratio does not favour either extra corn or soybean acres. US farmers report that they expect that farmers will continue with crop rotations that could cause a few extra soybean acres, and less corn. However total combined acres will likely total no more than 181 million acres.
- Food security/prices will cause anxiousness from politicians and populations. Egypt, the world’s largest wheat importer placed a ban on wheat exports. For most of the western world, the rising cost of grain will not change lifestyles. We estimate that at today’s wheat price, there is 8.8 cents of actual wheat in a loaf of bread. Even if the price of wheat triples, it is not going to cause a dramatic decline in milling use. It is the feed use of wheat that would be the big loser and boost the demand for corn/DDGs.
- The midday GFS weather forecast is slightly drier across N Argentina vs the overnight forecast. Enough rain looks to fall across C and N Brazil to maintain favourable conditions for the winter corn crop. Temperatures will be seasonal with highs ranging from the 70s/80s/90s. April and early May is the key pollination period for Brazilian winter corn.
- There was hope yesterday that a peace deal could be brokered with Russia which caused profit taking. Overnight, talks failed, and Russia is back firing rockets, and the war appears to have longevity. Soaring European natural gas prices are cutting soy crush rates and causing end users to reach for US soymeal. Sizeable export demand for US corn, soyoil, and soybeans is ongoing. Stay Bullish.