- HEADLINES: Soy complex sinks on Brazilian farm sales and positioning for Friday’s report; GFS weather forecast wetter across the Gulf States next 10 days.
- Chicago futures are mixed at midday with the summer row crops (corn/soybeans) weaker while wheat futures hold in the green. Trade volume has been active with traders adjusting risk ahead of tomorrow’s USDA monthly crop report. July soybeans have declined near initial chart support at $12.00-12.07 on the fall in soyoil to fresh contract lows. Soymeal has also eased with bear spreading noted in July/December with nearby July likely to fall back into a discount vs new crop as Argentine soymeal exports seasonally strengthen.
- Wheat futures are holding on cold weather worry across Russia and NE Europe. There was a late season snow across Moscow overnight that highlights the outright chill that crops are enduring. Russian and European weather has been abnormal and crop assessments are likely to fall following the USDA report as freeze damage is better known. WASDE is expected to provide a starting point on where to cut Russian wheat/barley crop estimates. Already, we are hearing a widening European discussion of a Russian wheat crop of 85-87 million mt due to the recent outright cold.
- Chicago brokers report that managed money has sold 4,600 contracts of corn and 6,300 contracts of soybeans, while buying 3,700 contracts of wheat. Funds have sold 4,800 contracts of soymeal and 7,400 contracts of soyoil.
- FAS/USDA reported that for the week ending May 2, the US sold 16.4 million bu of wheat in both crop years combined, 35.0 million bu of corn, and 15.8 million bu of soybeans. For their respective crop years to date, the US has sold 692 million bu of wheat (down 3 million or 1% from last year), 1,875 million bu of corn (up 364 million or 24%), and 1,556 million bu of soybeans (down 307 million or 16%). The US soybean export sales pace argues for a US 2023/24 soybean export pace of 1,675 million bu or 25 million bu below the April WASDE. Brazilian soybeans fob July is offered at $0.40 over Chicago vs. 55 cents via the Gulf. The US Gulf is becoming competitive vs Brazil into Europe via cheaper freight. The US can pick up EU soybean import demand to stabilise US 2023/24 soybean exports. And China has just 2 cargoes of US SRW wheat to export before its purchase order is filled. Finally, China is securing US sorghum with US crop year purchases up to 203 million bu or 85% of the USDA annual forecast. China is said to be securing Argentine soybeans/soyoil on the morning Chicago break.
- The weakening Brazilian Real has kept cash movement ongoing with moderate cash sales being reported. Brazil dropped its bank lending rate by 0.25% to 10.5% overnight which weakened the Real vs the US dollar. Central Bank Board members indicated that future Brazilian interest rate cuts would be more measured.
- The midday GFS weather forecast is wetter for the Gulf states for the next 10 days. Midwest planting opportunities will occur from today into May 16 before widespread rain develops across the NC Midwest. The GFS weather model has been changeable, and the midday solution should be used with caution. NOAA indicated that El Niño will die in the next 30 days with La Niña starting in June or July. This is faster than expected and it will have an influence of the Central US summer weather pattern. A fast arriving La Niña would have negative implications for 2024 US summer row crop yields.
- Chicago futures are now waiting for Friday’s USDA May Crop Report. Funds are likely to see any sizeable weakness as a buying opportunity heading into the heart of the 2024 growing season. World weather is abnormal and fund managers are worried about US sub trendline corn/soybean yields. We see market bullishness in the following order: 1)wheat, 2)corn, 3)soybeans.