- HEADLINES: Chicago values pressured on favourable Midwest weather forecast; Brazilian soybean premiums weigh; Egypt’s GASC secures 600,000 mt of Russian wheat.
- Favourable warm/dry weather for Central US summer row crop planting has produced pressure on Chicago values as traders expect that farmers will be sitting tall in their tractors planting corn on a timely basis next week.
- The open weather and the steep discount of Brazilian fob soybean offers to the US Gulf has continued the correction which started on Monday. The markets are complex, 1) Historically tight old crop stocks with a higher than normal percentage of those stocks on farm, 2) Cheap Brazilian basis offers as their export and storage system strains as the soybean harvest reaches past 80%, 3) A dire drought in the Plains and high odds that 2-3 million acres of Northern Plains and Upper Midwest acres will be enrolled in the Prevent Plant program.
- And it is also difficult to understand why only 61% of the US renewable diesel plants are operating. If plant operations were 90%+ like they are in crude oil, North American veg oil and animal fat supplies would be quickly exhausted. The point is that for today, the bulls and bears both have talking points and first notice day against May futures is still several weeks off. The Chicago choppiness could persist next week.
- Chicago brokers estimate that funds are flat in wheat, while selling 6,600 contracts of corn and 5,500 contracts of soybeans. In the soy products, funds have sold 4,800 contracts of soyoil and bought 1,200 contracts of soymeal. Commercials are doubtful that Argentine farmers will be active cash sellers following their Dollar Peso program at 300 Pesos vs the US$ rate.
- For the week ending March 30, the US sold 7.1 million bu of wheat, 49.1 million bu of corn, and 5.7 million bu of soybeans. For their respective crop years to date, the US has sold 667 million bu of US wheat (down 37 million or 5%), 1,465 million bu of corn (down 678 million or 32%), and 1,834 million bu of soybeans (down 226 million or 11%). The US soybean sales pace is expected to slow dramatically, while US soymeal sales stay strong due to the dire Argentine drought. US cash crush margins are well above Chicago, and we forecast future gains as Brazil’s crush capacity is near its maximum which shifts demand back to the US.
- Egypt’s GASC secured 600,000 mt of Russian wheat at tender for May delivery. Russian wheat was the cheapest at the tender with values holding above $270/mt basis FOB. The Russian Government hinted several weeks ago that it did not want to see Russian fob wheat prices falling below their benchmark at $270-257/mt. Today Viterra was the low-cost Russian wheat seller at $272.00. Egypt is now harvesting their own new crop, but due to a lack of private buyers in the Egyptian market, GASC will continue to be a large importer.
- The midday weather forecast is bone dry for the Plains over the next 9 days with showers forecast to break out across the drought-stricken Plains on April 16. The US and EU models have been fighting over the correctness placing showers across the Central Plains, but it is encouraging to see the GFS/US models pull it forward into the 10-day run. The EU model remains arid for the Plains and is our model of choice, but the GFS forecast is not yet backing down in its shower forecast.
- Next week’s warmth allows the Central and Southern Midwest corn seeding to start on a timely basis. Widespread snowmelt in the N Plains and Upper Midwest will produce regional flooding. The 11–15-day forecast added to the rain chances across the C Plains with 1-2.50” totals.
- Improved Midwest and Plains weather forecasts are applying pressure to Chicago today. We doubts that December corn will slide below $5.50 or November soybeans too far below $13.00 with the growing season right ahead. World wheat values have stabilised which argues that May Chicago wheat has support below $6.50. This is no place to turn bearish.