- HEADLINES: Farmers sell cash corn on the rally; Corn futures pull back; US soybeans to unknown destination; Argentine transit strike only 3 hours on Monday.
- Midday corn/soybean futures are higher in active volume with wheat being the upside leader. July Chicago wheat is testing last week’s high at $6.33 and has poked above the 200-day moving average ($6.28). Corn/soy are following wheat’s gain, but with less vigour as the week two Midwest weather forecast holds opportunities for spring seeding. The cool/dry forecast helps Midwest farmers achieve timely planting. Into May 12, another 3 storms are forecast for the Central US which slows seeding progress. Traders will closely follow Midwest weather forecasts on Sunday and early Monday for late May weather direction.
- It has been a volatile Chicago week with large first notice day deliveries pressuring prices on Tuesday before unruly Mother Nature (too wet Central US/too dry W Russia/record flooding S Brazil) and corn stunt disease in Argentine corn all providing significant supply risks and the late week rally. USDA/WASDE will release their important May report next week with US winter wheat production estimates and 2024/25 balance sheets in play. The May USDA/WASDE report is expected to bearish, but without significant world weather pattern changes, traders will be looking to buy the break heading into the “guts” of the US summer row crop growing season.
- The USDA reported the sale of 122,000 mt of US soybeans to an unknown destination. We see the buyer as being the EU with a financial US drawback for soyoil into renewable diesel. The CIF spread for US soybeans into Europe is positive beyond July. And August rapeseed futures have rallied to their highest price since October at €470/mt. The rising price of European/Canadian rape/canola oil is making soyoil attractive as feedstock for biodiesel/renewable diesel. Note that Argentine soyoil for August/September is trading at $800/mt or some $55-60/mt cheaper than fob Malaysian palmoil, which is historically rare which will jump soyoil demand into India/SE Asia.
- Thursday’s final Chicago open interest showed inflows and a rise of 21,451 contracts in corn, 18,423 contracts in soybeans, and 1,111 contracts in Chicago wheat. The shocker was that meal open interest rising 15,330 contracts and soyoil 4,566 contracts. The gains in Chicago open interest speak of new money. Grains are the only commodity that have not rallied in 2024 which, in an inflationary world, makes sense to own (from a hedge fund manager perspective).
- Chicago brokers report that managed money has bought 6,700 contracts of wheat, 2,500 contracts of corn, 4,300 contracts of soybeans, and 4,500 contracts of soymeal. Funds have been on both sides of the soyoil market and are flat.
- The Argentine transit strike is expected to be short on Monday, no longer than 3 hours, followed by a more lasting strike next Thursday, if the Argentine senate does not veto the omnibus/tax bill that came from the lower house. Argentine labour strikes historically do not last very long, so it is a sharp rally and a sharp break in soymeal futures, depending on the latest strike rumours that are being threatened against President Milei.
- The midday GFS weather forecast is like the overnight run and wet for the southern third of the US with 1.50-4.00” of rain in the next 10 days. The Upper Midwest and the Northern Plains will see near to above normal rain in a range of 0.5-2.00” into Friday, with a cool/drier trend in the week two forecast. Another three storms are lined up to impact the Central US into May 10. Drier weather follows with seeding restarting after May 14. Below normal temperatures are forecast in the week two timeframe via a ridge/trough pattern.
- The CoT report should show funds holding a large net long in soymeal and an even larger short in soyoil. The oil share spread is back near the November low at 36%. Chicago wheat futures will stay highly focused on W Russian rain and their winter wheat crop size. Corn is a story of falling world production and expanding US export opportunity.