- HEADLINES: Chicago firm at midday; US ethanol grind stays strong; US dollar struggles at chart resistance.
- Midday Chicago values are again mixed, with wheat up 10-12 cents, corn following and soybeans trading both sides of unchanged. A reversal of macro sentiment, a weaker US dollar specifically, has provided a pillar of support to the raw material space as the US$ index has struggled at major chart-based resistance. There is talk of China cancelling previous purchases of Ukrainian corn, but details are lacking. We note Dalian futures in China have been firm this week, and so it will be difficult to slow Chinese corn imports and also have feed market price deflation. Spot WTI crude is up $0.70/barrel at $85.90. The Dow is up 30 points.
- It is difficult to find a specific catalyst for this morning’s strength in wheat, but it is difficult to be bearish seasonally and as the Russian fob market firms. Recall US SRW seedings in 2024 are down 1.1 million acres (15%) year on year, while spring seedings are near unchanged. Only the HRW balance sheet will feature stocks building in 2024, and there will be a need for regular rain in TX, OK and KS by late April. The HRW crop is rated highly today, but early April conditions correlate only loosely with final yields.
- We would also note that the spot Indian milling wheat market is unmoved at $8.00/bu (equivalent) despite harvest having begun. The Indian wheat market tends to score its annual low in April, and the lack of any break in the next 30 days would be noteworthy. USDA’s attaché this week pegged 2024 Indian wheat production at 112.5 million mt, up 1.9 million on last year and record high. Yet, due to carryover stocks being decimated in the last two years, the Indian wheat balance stays historically tight in crop year 2024/25.
- US ethanol production in the week ending March 29 totalled 315 million gallons, up 5.6 million on the prior week, 7% above last year and an all-time record for the last week of March. We estimate corn used for the production of ethanol in March at 461 million bu, up 6% year on year and the second largest for the month on record. USDA’s ethanol grind forecast is 25-50 million bu too low, and ethanol export demand has been particularly robust as the Brazilian market’s premium to US Gulf origin since early Feb has ranged from $0.10-0.20/gallon.
- EU/Black and S American weather forecasts at midday are consistent with morning output. Heavy rainfall continues into mid-month across Mato Grosso, Goias and fringe safrinha producing areas further north. Rainfall expands into the driest areas of Mato Grosso do Sul and Parana, but not until April 11-12. A stagnant pattern of dryness persists in E Europe, Ukraine, and Russia into April 18. Russian dryness grabs much more attention if it persists into late April. Abnormally warm temperatures accelerate evaporation in the next two weeks.
- The midday GFS weather forecast continues to trend drier across the US Plains, with rainfall now completely eliminated from TX, OK, KS and CO. Whether the EU model follows is key, as short-term moisture deficits begin to mount across the US HRW Belt. Otherwise, heavy precipitation into mid-April favours the W Midwest and Delta/Southeast, where soaking totals of 3-5” are forecast. A warmer temperature profile beginning next week sets the stage for Midwest fieldwork/planting opportunities in the second half of April.
- Choppiness continues. Both the bulls and bears need meaningful perceived balance sheet changes for leverage, and we reiterate that it is Mother Nature that takes control May 1 onward. Our work suggests medium-term risks lean toward the upside amid funds’ sizable, short ag position and as weather extremes have been present for months. Stay cautious in chasing daily moves.