- HEADLINES: Chicago rallies as weather patterns stagnate; Crude extends recovery.
- MOSCOW, June 13 (Reuters) – President Vladimir Putin said on Tuesday that Russia was considering withdrawing from the Black Sea grain deal, saying that Moscow had been “cheated” over implementation of the parts of the accord that concerned its own exports. In a televised meeting with pro-Kremlin war correspondents, Putin said the deal, brokered by the United Nations and Turkey, was intended to help “friendly” countries in Africa and Latin America, but that Europe was the largest importer of Ukrainian grain, providing a key source of foreign currency to Kyiv.
- Chicago values are higher at midday as ag markets worldwide more aggressively add weather premium to values. Spot Paris milling wheat has recovered from early weakness and continues to slowly pierce initial chart-based resistance. Climate patterns look to be stagnant in the US, Europe and key parts of the Black Sea as even extended range forecasts fail to include any hint of needed rain. Northern Hemisphere temperatures will be rising seasonally, and in the US summer-like temperatures will add to a lack of moisture beginning this weekend. The weather market has begun in earnest, and it is the risk that USDA’s projected gains in global corn stocks will be eliminated without climate pattern changes by late June/early July. The burden placed upon soy acreage expansion/yield performance in S America this winter rises considerably if US yield fails to exceed 50 bushels/acre.
- The macro environment leans supportive, with spot crude extending its overnight rally to $2.20/barrel and the Dow up 160 points. We estimate that managed funds this million were short a net 35,000 contracts of corn and 115,000 contracts of Chicago wheat. Fund length in soybeans is estimated at 18,000 contracts, vs. April’s recent peak of 135,000. Major moving averages are being tested and chart health will in part determine with short covering accelerates as the growing season progresses.
- NASA’s updated root-zone soil moisture anomaly shows the extent of dryness in E Plains/Midwest, Europe, Ukraine and Central Russia. A pause in Argentine wheat seeding due to the return of dryness and a sputtering Indian Monsoon are also noted. The message is that Mother Nature has so far failed to cooperate in crop year 2023/24.
- Other news is lacking. The market’s addition of premium to corn and wheat has been relatively more tepid as demand concerns remain intact and Russian fob wheat is still buyable at $240/mt (vs. EU origin at $260 and Gulf HRW at $330). But top priority for markets over the next 30-45 days is pinpointing yield potential, and probably in the US specifically.
- There is still no word from EPA on proposed updated volume mandates, and the deadline for release has been extended to June 21.
- The midday GFS weather forecast is similar to the overnight run in projecting heavy rainfall in KS and across the Southeast but very little in the heart of the US corn/soy belt. Areas weighted most heavily to row crop production will experience net soil moisture loss for another 10 days, at which point soaking rain and sustained mild temperatures will be absolutely required to prevent a sizeable trimming of yield potential. A pattern of continuous precipitation triggers accumulation of 1-4” in AR, MS, AL and GA into the weekend. Isolated showers will dot the Central Plains and Northern Plains Fri-Sat. Abnormal heat moving forward favours the Dakotas and Upper Midwest.
- A fast-moving weather-based markets lies ahead into late summer. We caution against chasing daily moves, but consumer coverage is recommended on corrections.