- HEADLINES: Chicago soybeans/soyoil test chart support; Corn basis hot in the W Midwest/Plains; Brazilian farmers unload on the falling Real.
- Russian GASC wheat offer drops $5/mt to $230/mt in the hope of securing sales: Chicago futures are weaker at midday with corn, soybean and wheat futures sagging to test chart support. Soyoil is testing its February contract low while May corn targets $4.25-4.27 support and $5.35-5.40 May Chicago wheat. The volume of Chicago grain trade is modest and cash bids on corn are rising across the W Midwest and the Plains on a lack of movement. Cedar Rapids is posting a bid of $0.20 over for spot corn with reported non publish bids as high as $0.25-0.30 over. Rumours of cash corn pushes are widespread as farmers focus on seeding, and slow or abstain on cash sales. The cash strength has rallied the May/July corn spread to 11.5 cents July premium. The push for cash corn is expected to push eastward next week. The strengthening US dollar combined with reports of active Midwest seeding late week has applied Chicago selling pressure. A lower Chicago grain close is expected today, but traders are trying to assess how much downside potential remains ahead of a new growing season. The risks vs the rewards are being tilted back in favour of the bulls.
- Chicago brokers estimate that the managed money has sold 3,200 contracts of wheat, 2,100 contracts of corn, and 4,400 contracts of soybeans. In soy products, managed money has sold 1,300 contracts of soymeal and 3,400 contracts of soyoil.
- Brazilian cash grain sources argue that farmers have been sizeable sellers on the weakening Real. The Brazilian Real has pushed out to 5.27:1 USD this morning, the weakest in over a year. The faltering Real has helped spur an estimated 7-8 million mt of corn/soybean sales from Brazilian farmers in the past 10 days, the largest cash movement since the start of harvest. Surprisingly, the sales have not had a sizeable impact on export basis with Brazilian soybeans offered for June at $0.10/over with soyoil trading at $0.035 below May futures. A year ago, these basis bids were far lower with soyoil $0.175 below Chicago and soybeans trading at $1.60 under. Brazilian crush demand is seasonally strong with active interest for soyoil from the domestic and export market. It is estimated that farmers have sold 42% of their soybean crop, which is equal to last year, but below the 10-year 57% average.
- Russian fob wheat offers to GASC fell $5/mt to $230/mt with 180-day credit from the last tender. The cheapest offer was LDC for Ukraine wheat at $218/mt with other EU offers above $230/mt. GASC will have to decide whether to accept the $230/mt offer which is carrying an estimated $5-7/mt premium relative to reported spot cash offers. GASC does not want to secure Russian wheat on private basis as the government has pushed for public tender sales. We would expect that GASC will book the Ukrainian wheat but try to see if they can broker the Russian exporters to drop $2-3/mt to move size. We shall see.
- The GFS weather forecast breaks out rainfall across some of the Midwest and Northern Delta from Thursday with rainfall amounts of 0.25-1.25” and locally heavier. Cooler and drier weather follows on the weekend and the first half of next week before a new southern branch storm system targets Texas and crop areas to the east. Corn/soybean seeding will advance at a normal rate. The extended range forecast calls for a new storm system in the 10–15-day period with warming temperatures.
- Chicago grains are under pressure due to large Brazilian cash soybean sales while W Midwest/Plains cash corn basis bids firm. Russian winter wheat areas are turning parched, and attention will have to be paid soon and also be focused on the Black Sea. Soyoil futures are becoming technically oversold while July soymeal above $345/ton is overvalued as Argentine crushers come online with new crop soybeans. The Midwest farmer is seeding spring crops at a normal pace.
- Our view is that there will be significant weather scares later this spring and summer.