- HEADLINES: Chicago wheat rallies on drier GFS weather forecast for the W Plains; Mato Grosso winter corn seeding down 10%; Oil share trade bottoming?
- Firmer midday Chicago values are noted with early-day grain weakness finding support. Managed money grain short covering with SW Russian dryness lingering in the background while the GFS/European models are at odds over whether W Kansas/Oklahoma receives needed rain this weekend. Kansas wheat is in the jointing phase of crop development and enters the critical heading phase in 10-14 days. Rain is in immediate need. It is the heading and fill stage of wheat development that determines US HRW wheat yield.
- Soybeans and corn are following wheat’s upside lead, but the oil share spread is bouncing off key chart support at 39%. The oil share spread should continue to perform as renewable and biodiesel demand seasonally increases, and Argentina becomes an aggressive exporter of soymeal from their expanding new crop harvest. The Argentine soy harvest is gaining speed which will restock their depleted cash pipeline from last year’s drought. July Chicago wheat is testing the 100-day moving average at $5.9775 with the next upside target being the 200 day at $6.28. Wheat has a bull supply story.
- Chicago brokers estimate that funds have bought 3,100 contracts of Chicago wheat, 2,900 contracts of corn, and 2,400 contracts of soybeans. Funds have bought a net 1,300 contracts of soyoil and a net 3,400 contracts of soymeal.
- Mato Grosso’s IMEA estimated that its farmers seeded 10% less winter corn than last year helping to confirm CONAB estimates that call for a 9% drop in winter corn seeding across Brazil. Mato Grosso farmers seeded less second crop corn due to negative profit margins amid large US stocks. Moreover, farmers cited the negative outlook and high cost of crop inputs. Some forecasts estimate the 2024 Brazilian corn crop at 116 million mt, down 21 million from last year. The decline is preventing Brazil from being an aggressive corn exporter with fob offers well above the US Gulf until August. A Brazilian corn crop under 120 million mt would make any loss of Argentine corn production due to corn stunt disease more important to US corn export estimates in 2024/25. We have raised our 2024/25 US corn export estimate to 2,300 million bu due to diminished S American and Ukraine corn production. Argentine fob corn offers are holding at 65-70 cents over May-June implying that US corn stays competitive in world feedgrain trade.
- US farmers are racing to seed spring crops ahead of wet weather that starts on Friday. Farmer sources report that seeding is active across the Midwest and the Plains with the forecast calling for warming temperatures and rain next week. We look for US corn seeding to near 25-28% completed through Sunday. The push is to get corn planted before soybeans.
- The midday GFS weather forecast is wetter for the Midwest with 2-4.00” of rain to fall across MO/IL/IA/AR/IN into May 6. The GFS forecast continues to show considerable run to run variability which reduces our forecast confidence. Showers/storms return with frequency on Friday and linger into the first week of May. The rain will fall every 3-4 days with warming temperatures. Producers should be able to get seed in the ground this week, but the progress will be curtailed beyond Friday. Temperatures will be warming across the Central US with highs in the mid 60’s to the lower 80’s. The warmth and rain will favour seed emergence. The EU model has been more consistent and close attention will be paid to see if rain reaches the W Plains this weekend.
- It is a second Chicago rally day due to managed money being too bearish/short. The influence of a fund short can be felt as they try to buy their way out of existing net short positions. Dryness in the W Plains of the US and SW Russia needs to be closely followed as weather has become the topic of interest for traders. Too much rain looks to drop across the Midwest, but so far, US seeding progress is ahead of normal with farmers rushing seed into the ground.