- HEADLINES: Algeria books Russian wheat at $275/mt basis CIF; Turkey says Black Sea grain deal could be extended for 2 months; Chicago mixed on low volume.
- Chicago is mixed with tight cash markets offering support to July corn and July soybeans while the wheat market swings back and forth on the Algeria tender. The USDA May Report looms on Friday and a mixed close is forecast.
- Russia held its wheat sale price at $275/mt to Algeria today, but the purchase was completed on a CIF not a FOB basis. This means that the actual FOB wheat price dropped to $245/mt (estimated $30/mt freight). Russian exporters once again acted in tandem with each seller having the same price which further points towards a Russian Grain Board. This is why multinational sellers were expelled in March. The fall in Russian fob wheat price pressured Chicago/Paris wheat futures, but prices have recovered at midday in a bottoming process. Russia and the EU still have old crop wheat to move.
- Chicago corn/soybean prices are mixed with December corn futures finding support at last week’s low at $5.10/bu. July appears to be leading the rally without any additional Chinese cancellations. Cash connected sources suggest that China has now switched 1 million mt of US corn sales (known and unknown) from the US to Brazil in the July/August timeframe. China will ship out the remainder of its US corn purchases due to requirements into SE Chinese livestock areas. July Chicago corn appears cheap with Central Illinois cash bid at $0.70. Cheap Brazilian corn will NOT move into the US due to high import tariffs but could find a buyer in Mexico if Brazilian corn premiums keep declining.
- US weekly ethanol production averaged 965,000 barrels/day vs 976,000 last week. The decline was due to seasonal maintenance. The weekly US ethanol grind rate is right at USDA’s annual forecast. We anticipate no change in the US ethanol grind rate on Friday.
- China used the morning break to secure 5-7 cargoes of Brazilian soybeans for August. The break to $14.00 July entices world end users to extend their coverage. The Chinese are active on breaks adding to forward coverage.
- Brazilian dryness is adversely impacting the winter corn crop with crop ratings in decline in Parana/Mato Grosso do Sul. Several good rains are needed or the total corn crop will slip below 120 million mt (vs 125 million). The Brazilian corn market should start to catch a bid from importers on further declines.
- The US inflation rate for April was 4.9% with the monthly gain (excluding food and energy) being +.4%. The rate is double what the US Central Bank is willing to tolerate, but the movement of inflation is down which will cause a pause in further rate hikes through the summer and the autumn.
- Turkey has indicated that Black Sea Grain Corridor could be extended for 2 months; Russia and UN confirmation is lacking. Details are awaited.
- The GFS midday weather forecast is consistent which raises our confidence. A series of storm systems in a zonally flowing jet stream will produce a combined 0.5-2.00” of Midwest rainfall over the next 10 days. The heaviest rain targets Texas, the SE US and North Dakota. These areas will endure heavy bouts of rain that produce localised flooding.
- Canada holds in an arid/warm flow with soil moisture quickly being depleted. The persistence of a low-pressure trough off the NW US Coastline keeps a high pressure ridge anchored across N Canada. It is this high-pressure ridge that could produce a “flash drought” in late May.
- Volatility remains the Chicago theme. Neither rallies nor breaks are sustained, which produces a choppy Chicago market that is difficult to trade. The USDA report looms on Friday which is likely to produce a sizeable price reaction. Our bet is that a bearish or bullish report will not be able to be sustained. This leaves summer weather conditions/supply that will direct Chicago prices during June and July. Canada, Argentina, and the spring wheat areas of Russia are too dry today. Pay close attention to each area’s respective forecast in the weeks to come. Spring seeding is active across Canada.