- HEADLINES: Soy complex finds support on global demand; Midday GFS weather forecast maintains needed Midwest rainfall; US ethanol production rising seasonally.
- Chicago ag markets are mixed but mostly lower at midday. The break in grains has been led by high-protein wheat contracts, and while there is no specific catalyst for renewed selling there is news suggesting that flooding of the Dnipro River in Ukraine won’t impact nuclear power output. This follows aggressive Russian fob offers to Egypt on Wednesday. We believe that this week will be defined by wide swinging back-and-forth trade, and most important in the near-term is whether the major forecasting models come to agreement on Midwest rainfall next week. The midday GFS weather forecast keeps in place accumulation of 1-3” in MO, northern IN, IL and MI next Tues-Thurs. Crude oil is up $1.20 at $72.90/barrel following a modest draw in US stocks last week.
- The soy complex remains firm following better than expected monthly imports reported by China overnight. Chinese demand into autumn will be filled by S American origin almost exclusively, but global oilseed demand growth is intact. Recall USDA in 2023/24 projects combined global soybean, rapeseed and sunseed demand to expand another 23 million mt to a record 526 million.
- Additionally, US official US soybean exports in May totalled 94 million bu, 18% above reported FGIS shipments and larger than anticipated. NASS’s June 30 US corn & soy stocks data is still important.
- US ethanol production in the week ending June 2 totalled 305 million gallons, up 10 million on the prior week and the largest since December. Ethanol stocks are adequate at 964 million gallons, but the seasonal boost in weekly grind should keep USDA’s industrial corn consumption forecast unchanged in its June WASDE. Any revisions must be based on exactly how much corn is used in August. We also note the US ethanol swap market remains firm. Margins are profitable. And gasoline use last week was unchanged year on year at 9.22 million barrels per day. US gasoline use has been at/above prior year levels in 4 of the last 5 weeks.
- A largely stagnant pattern of dryness will remain intact across Northern Europe, including major wheat producing areas of France, and Central Russia into June 17, which makes French wheat crop rating more important in the next two weeks.
- The midday GFS weather forecast is broadly consistent with the morning run in allowing needed rainfall to expand into the Midwest and mid-South. Isolated showers are projected in MO, IL and IN early next week. A second loosely organised but expansive system impacts the eastern Midwest June 14-15. 10-day totals are pegged 1.00-2.00” across the primary Corn Belt, and if realised soil moisture improvement will begin. Key is whether the EU model this afternoon follows the wet GFS solution. Otherwise, it becomes an issue of watching radar maps throughout the entirety of next week.
- Today’s limited extraction of corn/soy weather premium suggests there is concern over the current health of US row crops, and that raindrops need to be felt before lasting/meaningful selling resumes. It does appear portions of the Midwest benefit from increased rain chances next week, but the devil will be in the details. Don’t chase daily moves.