- HEADLINES: NOPA soy crush in April well below trade guess; Dec corn pauses on 200-day moving average; GFS weather forecast features excessive Midwest rain.
- Chicago ag markets at midday are steady to slightly weaker, with new buying absent in wheat and corn following the opening of this morning’s session and with the soy complex flat. Our short-term thesis is one of choppier sessions as a majority of funds’ sizeable short has been covered, geopolitical risks remain elevated and as the row crop growing season is imminent. Today there are more questions than answers, the size of S American crops, Black Sea weather in June, and US planting dates, and we should be prepared for wide-swinging markets. Dec Chicago corn has been unable to trade above its 200-day moving average. Wheat is extracting premium following positive reports from day one of this week’s tour of KS, and as the trade has largely digested the potential for a Russian crop of 85-87 million mt.
- NOPA member crush in April was a shockingly low 166 million bu, the smallest since Sep and some 20 million below trade expectations. Large oil stocks in March and prolonged mediocre crush margins are noted.
- However, we note cumulative NOPA crush is up 5% from last year, which remains aligned with USDA’s annual forecast. Soyoil stocks on April 30 totalled 1.75 billion lbs, down 202 million year on year amid reduced production and a slight jump in disappearance relative to April 2023. Oil stocks decline seasonally in summer, and so it will be difficult to supply the US biofuel industry longer term without improved crush rates moving forward. July Chicago soyoil at midday is up $0.60.
- Exporters sold 180,000 mt of soybeans to unknown destinations. 120,000 mt of the purchase is scheduled for old crop delivery. This is positive given S American origins beans remain below US Gulf quotes into Aug/Sep.
- US ethanol production continues its seasonal recovery. Production in the week ending May 10 totalled 294 million gallons, vs. 284 million the prior week and the largest since earl April. Ethanol stocks are adequate at 1,029 million gallons, but the ethanol swap market is working to improve margins in late spring/early summer. The swap ethanol market this week is quoted at $1.80/gallon. The cash ethanol market in March traded between $1.48-1.57/gallon. Margins are positive assuming cash corn at $4.60-4.80, basis spot, and typically ethanol production expands seasonally into mid-July.
- US CPI in April was 3.4%, which reflects month on month improvement but remains a far cry below sub-3.0% targets. Our bet is that the Fed neither raises nor trims lending rates through summer. The US dollar is weaker. The Dow at midday is up 250 points.
- The midday GFS weather forecast is much wetter in eastern Plains and Central Midwest next week, which aids in validating NOAA’s call for excessive rainfall May 20-27. There will be opportunities for planting into the weekend, but thereafter heavy showers are advertised on a near daily basis into May 27-28. Notice that 10-day totals upward of 3-5” are forecast in MO, IA, IL, IN and MI. Dryness outlines the HRW Belt, where are there hints of temperatures reaching into the 90s Sat-Thurs.
- Adverse weather has allowed for new elevated price ranges, but it is back to choppiness within these ranges until clarity emerges over N Hemisphere winter wheat production and US/EU row crop planting dates.