- HEADLINES: Chicago corrects in diminished volume; Russian fob wheat price rises again; China returns to seek old crop US soybeans off PNW.
- Chicago futures are mixed at midday with summer row crop futures lower while US wheat futures hang in positive territory. Today’s volume of trade is far below yesterday with managed money backing off their recent purchase pace.
- We often suggest that the bulls need to be fed and there is just not much news available to push prices higher, outside of dry weather across the Black Sea grain belt. Russian 12.5% protein wheat has pushed higher to $246/mt bid with September bids at $251/mt. This is up another $5-6/mt as the Russian market tries to close the spread vs the EU. German HRW 12.5% wheat is bid at $273/mt spot with French 11% wheat offered at $275/mt. The point is that US SRW wheat at $265/mt is $10/mt under the EU market, but this price is well above ordinary Black Sea wheat offers at $235/mt. Russia/Ukraine can secure world wheat demand, but if their crop shrinks, there will be a need to close the EU price gap. Talk is growing that Russian spring wheat seeding is falling behind optimal planting dates.
- Rising world wheat prices have changed the dynamics of feed values with excessive bearish corn bets now needing favourable US/Chinese/EU weather and record US corn yield to push prices lower. We see July corn having strong support from $4.40-4.50 until the US summer weather pattern is known and US seeded acres are announced in late June by NASS. The immediate upside price target in the spot wheat/corn spread is $2.40 wheat premium with Europe likely to feed far more corn (possibly from Ukraine) in the months remaining in 2024. The wheat premium to corn pushes record world corn feed demand in 2024/25.
- The USDA/FAS announced 113,050 mt of US corn to Mexico (split between old and new crop), and 110,000 mt of US corn to Spain. We believe that additional Spanish corn demand is being worked with total purchases to amount to 400,000 mt. US corn is price competitively against S American offers. The US export competitiveness will boost US sales for late summer and autumn.
- Chicago brokers estimate that funds have bought 5,300 contracts of wheat and sold 2,300 contracts of corn and 3,600 contracts of soybeans. In the products, funds have sold 2,600 contracts of soymeal while being flat in soyoil.
- We understand that China has purchased 3-5 cargoes of US soybeans off the PNW for late summer with the buyer said to be Sinograin. China appears to be returning the US for late summer needs which could include the purchase of US soybeans for their reserve. Brazilian and Argentine soy premiums have been in a rally phase for most of May, and US competitiveness is seasonally returning.
- The midday GFS weather forecast is wetter from the Central Plains south with 10-day rainfall totals of 2-6.00”. Showers are also further west into KS with the weekend storm system. Soaking rain falling across IA/MN at midday with severe weather warnings issued. The GFS/European weather models under forecasting W Midwest rainfall in the next 24 hours.
- There will be a few days of drier weather from May 27-31 before better rain chances return. Any drying will be limited to 2-3 days, which will not be enough to firm soils. Spring seeding is occurring in the E Midwest areas that missed the overnight rain. Temperatures cool starting Thursday with below normal highs, 60’s and 70’s, limiting drying and GDD accumulations for N Midwest and N Plains crops. The upper flow is active with migration of the jet stream northward into the Midwest during June.
- It feels like a day of correction with volume well below Monday. Open interest surged yesterday with big gains in wheat, soybean and corn open interest which reflects that managed money is willing to go long. We doubt that Chicago breaks can be sustained with a drought deepening across the Black Sea which threatens wheat/corn crops. And too much rain looks to fall across the Central US while S American soy premiums hold firm.