• HEADLINES: Sharp rally on early managed money demand; Cash end users/importers cover soymeal; Cash soyoil awaiting biodiesel demand; GFS weather forecast wetter E Plains.

• Cash, mysteries, and speculative demand underpin market, Chicago futures rallied sharply in the first 45 minutes of the day session on managed money buying. No one knows for sure why the funds came out so aggressively in securing bull spreads or outright grain futures, but it produced a strong Chicago rally with limited selling from the US and Brazilian farmer. There has been cash movement from the Brazilian farmer as the soy harvest pushes near 82% completed, but to the surprise of the market, Brazilian farmers were better sellers of corn from Mato Grosso/Goias. Amid the strength of the US dollar and weakness of the Brazilian Real, we would have expected Brazilian farmers to dump cash beans if they were storing all this newly harvested supply. It just did not occur. Brazilian cash premiums firmed on the rally which lent further support to Chicago short covering. Chicago corn, soybeans and wheat are higher at midday with the close being important heading into the weekend. A close at the higher end of the range will fuel additional short covering early next week.

• Chicago brokers estimate that the managed money secured 4,200 contracts of wheat, 10,200 contracts of corn, and 7,200 contracts of soybeans. Funds also bought 7,200 contracts of soymeal and a net 1,100 contracts of soyoil. Speculative buying of soyoil was much larger than the selling that has since followed.

• The cash mystery is tied to US seasonal soy crush downtime for maintenance, cash soymeal coverage and cash soyoil availability. We noted that there is a large amount of statistical uncertainty in the grain’s vs prior years amid record USDA/CONAB crop production differences in soy/corn, Argentine Exchange cuts in corn due to a disease called corn stunt, and a surprisingly low Indian wheat stocks estimate at 6.9 million mt for a population of 1.4 billion. The statistical uncertainty places a bid under Chicago on sharp corrections.

• There are supply mysteries in cash soy. Traders understand that US soybean processors will be taking a lengthy period of seasonal downtime due to sliding US crush margins and the record large crush to date. Soymeal end users foresee a bearish landscape due to new crush capacity coming online (Platinum Crush in Alta Iowa in June) and the arrival of Argentina as more significant exporter due to this year’s big harvest. Importers/domestic soymeal end users have limited forward coverage expecting weekly cash bids to drop.

• However, slowing US soymeal production has caught end users flat footed with CIF basis jumping to $30 over this morning, up $8-10/ton on the week. EU soymeal end users are also thinly covered, and they are buying US soybeans for the draw back on US soyoil under the $1/gallon blenders credit. This leaves Chicago futures to sharply rally for short periods of time. The cash mystery is when will end users gain enough forward coverage to feel comfortable heading into new growing season. And why are cash soyoil supplies ample when traditional biodiesel producers hold their best margins in nearly 7 years. US soyoil demand should be seasonally rising amid strong biofuel production margins.

• Private Russian grain exporter RIF/Grain Flower continues to struggle to export grain. They have 6 wheat vessels that are either loaded or waiting to load without phytosanitary certificates. RIF/Grain Flower has halted their interior grain origination due to the export halt. The longer the wait the more likely that the Russian government will take control of RIF.  We note that the halting of RIF interior grain origination raises the prospect of wheat supply shortages and a further rise in export offers. Russian fob wheat ended the week at $213/mt according to European traders. Grain Flower may have to shift their wheat sales to the EU or issue a force majeure.

• The GFS weather forecast breaks out rainfall across some of the Eastern Central Plains, but we are doubtful that the rains will make into the heart of HRW crop areas. Otherwise, the forecast is slightly drier for the Midwest which favours spring seeding. We have little trust in a forecast longer than 10 days as April tends to be a period of transition due to volatile weather patterns.

• Choppiness in a range bound trade is forecast with Chicago having questions surrounding S America crop size and Brazilian soybean selling. The final size of S American crop impacts 2024/25 US corn and soybean export forecasts. We see new crop corn exports being far larger than WASDE at 2,300 million bu (up 150 million) on diminished S American corn production and Ukraine war disruptions on trade. Wheat will be the upside leader on smaller EU/Black Sea harvests.

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