• An early Chicago soybean recovery stalled as November soybean futures found resistance above $12, and technical selling swept the market lower into the close as the prospect of US debt talks dimmed.

• While soybean prices collapsed this week, meal and oil prices have followed at a lesser rate, and the nearby Chicago soybean crush spread has more than doubled in the last week to $1.13/bu. The decline in product values has been far less than the break in soybean prices.

• US soybean meal exports and sales have firmed in recent weeks as world price spreads narrowed. While Brazilian soybean basis has fallen to historic lows, meal offers have firmed considerably in the last month, gaining nearly $30/mt. Argentine offers have been well supported by reduced crush and are quoted at $19 over Chicago, versus US quotes at $22 over. However, quality concerns due to the drought-stressed Argentine crop remain, even with the inclusion of imported Brazilian soybeans.

• It has been an emotional week driven by fund liquidation in Chicago, but soybeans have fallen to deeply undervalued levels. World cash prices are firming, and a Chicago recovery should be underway by early June.

• Chicago corn futures ended mixed with new input lacking and with funds on Tuesday short a net 91,000 contracts. We believe that the speed and intensity of the recent collapse has digested USDA’s call for a resetting of supply, demand, and price in 2023/24, and it is now left to Mother Nature to prove USDA right or wrong. Fundamentally, the loss of US export demand is important as old crop stocks will be above pipeline minimum barring a bullish surprise in March-May feed/residual disappearance. Yet, focus moving forward shifts rapidly to US, exporter, and world new crop supplies.

• We note that processing margins have soared on the break in corn. Ethanol plant revenue in Western IA is calculated at $0.10/gal above costs. There remains a need for larger weekly grind as the summer driving season begins, and a key is whether plants opt for discretionary production to build stocks amid strong margins.

• We again reiterate that volatility will be incredible during the summer. Weather model guidance next week increasingly peeks into June. Focus will be centred on the duration of coming Midwest heat/dryness. Current prices have digested a US 2023 yield of 182 bushels/acre. The price risk in summer is up.

• Wheat futures on Friday ended lower by varying degrees, with long liquidation ongoing in KC and Minneapolis. A decent fund length was established in KC early in the week which along with overbought technical signals triggered the past 2-day correction. We strongly doubt recent Plains rainfall adds to HRW yield potential relative to the USDA’s current forecast, but the boost in soil moisture is welcomed. Additional light rain is forecast in parts of KS and NE May 24-29.

• Managed funds in Chicago on Tuesday were short a net 113,000 contracts. Friday, fund’s short is estimated at 133-137,000. Recall the record low scored in 2017 was net short 162,000 contracts.

• Our primary issue is that exporter yield loss of just 2% from USDA’s current estimate pulls combined stocks to a nearly untenable 47-48 million mt, a level not seen since the 1970s. Net soil moisture loss will continue in Canada. Heat and dryness in Central Russia have now been extended into June 3.

• Weather is not typically a focal point to the market until June, but we must be prepared for a wide swinging market.

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