- HEADLINES: Sharp rally on worrisome Central US weather; Prevent plant date for corn on May 25; Plains corn basis stays strong.
- “Risk On” is the theme on Central US weather forecast concern: Prevent Plant estimates rise for the Dakotas/N Minnesota; Central US cash basis strength, world crush margin expansion on new US soymeal demand; Unlike Chicago sessions late last week, it appears that today’s strength should hold.
- Chicago futures rose to sharp midday gains amid speculative buying and short covering. Old crop July futures have provided the upside leadership on strong US cash basis bids and the lack of Brazilian corn/soybean imports that will reach the US prior to first notice day. We have previously commented that based on a lack of resting orders, that market volatility will stay extreme with US and world weather becoming more important during June We maintain that key seasonal lows were scored last week and that following the Memorial Day Holiday that it is all about weather/yield, across the US where rain will be in need across the C and E Midwest.
- Chicago brokers estimate that funds have bought 2,000 contracts of wheat, 9,300 contracts of corn, and 8,500 contracts of soybeans. In the soy products, managed money has bought 3,500 contracts of soymeal and 4,200 contracts of soyoil. Funds came out of the box aggressively buying soybeans from the million reopening.
- The US Prevent Plant date for corn occurs Thursday for the Dakotas, N Minnesota, and most of the Plains. Following Thursday, insurance revenue guarantees decline 1% per day for producers that have not yet seeded corn. This makes this afternoon’s NASS planting progress report important. We estimate that at least 800,000-1.0 million acres of intended North Dakota corn acres will accept the Prevent Plant option, especially with the producer able to seed a second crop and have it insured with diminished coverage.
- The US sold 225,000 mt of US soymeal to the Philippines in the 2022/23 crop year. The sale is the second of the past few weeks which reflects the impact of the 2023 Argentine soy crop failure. Brazil cannot supply the world’s soy product needs, and US soymeal/soyoil demand should persist through summer boosting demand for US soybeans and boosting crush margins.
- The midday GFS weather forecast is drier beyond the next 10 days with the good rains that were forecast for the W Midwest in the overnight run petering out. The midday GFS forecast is drier for the entire Midwest in the 9-15 day period. This means that the EU and GFS models are better aligned with a dry weather pattern to persist through June 6. Any rain will be focused across the western spine across the Plains/SE US. The Canadian Prairies will also see widely scattered showers, but our view is that GFS forecast is overdoing the coverage and amounts under a broad high-pressure ridge. We have a growing concern for Central US rain and that heat could develop in early to mid-June. This is a weather pattern to closely monitor.
- North American is not losing any yield on May 22, but the weather forecast is troubling with Central US dryness to persist for another 2 weeks. If after the Memorial Day holiday there is any hint of a stable Central US high pressure ridge (heat), the price character of Chicago shifts to bullish on supply losses. Note that funds and traders are heavily short Chicago with their only market length sitting in soymeal.