- HEADLINES: Chicago mixed as risk reduction is the theme; Russian wheat board developing; Central US weather forecast pulls rain eastward.
- US regional bank contagion limits market participation/desire to chase Chicago rallies; Central US weather good for planting/crop establishment; Russian corridor talks set for Friday; CBOT gives back some of Wednesday’s gain.
- Midday Chicago futures are mixed as traders reduce their exposure ahead of next Friday’s USDA Crop and WASDE report. Also, the tightening credit of US regional banks is causing trader “indigestion”. And accordingly, traders are adjusting their risk. The two markets that managed money is short, wheat/soyoil, are witnessing buying while where funds are long, soybeans/soymeal, are enduring selling. Corn is caught in between. Volume at midday has declined with few wanting to add to their market risk ahead of the May 12 USDA Crop and WASDE Report. Looking at December and November soybeans at $5.00 and $12.50/bu respectively, the market has done enough to the downside. It is too early to be overly bearish with a Northern Hemisphere growing season ahead.
- Chicago brokers estimate that funds are net buyers of 6,400 contracts of wheat and 1,700 contracts of soyoil, while being a net sellers of 2,800 contracts of soybeans, 1,200 contracts of corn, and 2,700 contracts of soymeal.
- For the week ending April 27, the US sold 7.8 million bu of wheat, 10.6 million bu of soybeans, and a negative 12.4 million bu of corn. The corn cancelations should have been expected following the daily confirmations of China’s cancelling prior purchases. For their respective crop years to date, the US has sold 1,501 million bu of corn (down 794 million or 35%), 1,863 million bu of soybeans (down 279 million or 13%), while US wheat sales rest at 694 million bu (down 18 million or 2%). WASDE is expected to trim their US 2022/23 corn and soybean exports next week Friday due to the aggressive export pace of Brazil. We would remind that world wheat and soybean trade is record large, it is just that the US’s share has been cut.
- In reflection, following the recent Egyptian GASC tender, a new national grain board is being established called the “Russian Grain Board”. During the GASC tender all Russian sellers initially offered Egypt’s GASC wheat at $275/mt. However, after hearing other lower FOB offers, they consulted with Russian Government officials that allowed them to drop their FOB offer by $15/mt to $260/mt. Again, all Russian sellers acted in tandem. This means that the Russian Government has the final say in Russian wheat sales, much like a grain board. And should a cargo of Russia fob wheat be needed for spot we are told that the price is back to $275/mt. There is much yet to learn about the new sales strategy from the world’s largest wheat exporter, but it appears that Russia is acting much like Argentina did during its military control some 40 years ago. This is the reason why multinational exporters were thrown out of Russia in late March.
- The GFS weather forecast is drier across the Western Plains and the Eastern Midwest. This is similar to the overnight EU model. Notice that soaking rains of 2-5.00” is offered to E Texas/Oklahoma, but this rain does not fall until late in the forecast period. Nearby a series of storms will trek across the Central US offering scattered showers/storms. Some worry will exist about timely row crop planting in the Dakotas, but Nebraska will welcome the rain following months of dryness. The entire 14-day forecast is warm with 60’s/70’s/80’s. Notice the ongoing and deepening drying trend across Canada. Our biggest weather concern (nearby) is Canada.
- Volatility stays the theme. The trade is fully expecting a bearish USDA May report for US corn/soybean balance sheets. However, don’t forget that Argentina’s corn and soybean production will be lowered again which has implications for world soy product supplies. The US export sale of 14,000 mt of US soyoil is the largest in months, and shows that price has fallen to levels that encourage new trade demand. Who really wants to sell December corn below $5.20 or November soybeans below $12.50 with an entire growing season ahead?