- HEADLINES: Chicago steady/higher at midday; Ethanol grind recovering seasonally; GFS weather forecast drier in Black Sea.
- Chicago futures are mixed are mixed at midday, with wheat pausing as contracts in the US and Paris continue to flirt with overbought charts, while corn finds support at July’s 20 and 100-day moving averages. Soyoil’s extended recovery has kept crush profitability intact.
- That there are more questions than answers surrounding Black Sea winter grain production, final S American crop sizes and the speed at which the last 15 million acres of corn and 25 million acres of US soy get planted suggests corrections will be shallow into mid-summer. We note S American corn yields won’t be available in bulk until mid-June. A large Mato Grosso safrinha crop is anticipated, but late-season dryness and abnormal heat in Mato Grosso do Sul and Parana are noted. High temperatures in the mid/upper 90s in Central Brazil in late April/May are atypical.
- We also highlight this week’s incredible strength in Ukrainian corn fob premiums. Basis for Jun-Jul delivery there is quoted at $0.50 over spot Chicago. A week ago, Ukrainian fob basis was just $0.05 over. US Gulf corn is highly competitive in the world marketplace through summer and recall weekly export sales of just 15 million bu/week are needed to hit USDA’s 2023/24 target.
- US ethanol production in the week ending May 17 totalled 300 million gallons, up 6 million on the prior week and up 4% from the same week a year ago. Ethanol grind’s seasonal recovery continues. Additionally, US gasoline use last week totalled 9.32 million barrels/day, vs. 8.88 million the prior week, and elevated gasoline use is most probable throughout the summer months. Industrial corn disappearance strengthens in June-July.
- Yet, WTI crude will struggle at $83-85/barrel amid this spring’s abnormally large build in stocks. Commercial crude stocks last Friday were 459 million barrels, vs. 457 million the previous week and up 1% from last year, and higher year on year for the first time in 2024.
- Other breaking news is largely absent. The Black Sea forecast at midday is drier in Ukraine and Southern Russia in the 11–15-day period, and so the GFS forecast mirrors EU and Canadian model outlooks in calling for a lack of rain into June 5. Heat returns to Russia after May 28, which adds to already elevated crop stress. A Russian wheat crop of 78-80 million mt is possible, and this assumes normal spring wheat growing conditions.
- In the US, the GFS forecast is wetter in IL, IN, TN and KY through early next week, and adds heavy rain to the TX/OK panhandles May 30-June 1. This wetter southern Plains forecast reflects a major shift from overnight/early morning runs, and so confidence is low in details.
- Open planting weather will be widespread for 24 hours. Heavy showers occur in the E Plains, Midwest, and mid-South Sat-Mon. Accumulation of 1-3” favours southern IA, IL, IN, OH, MO and TN/KY. A drier pattern is forecast May 28-June 3. Central US heat is absent.
- USDA’s May WASDE, floods in S Brazil, poorly rated winter crops in W Europe and rapidly developing Black Sea drought have collided to place an incredible burden on US yield performance in 2024. We maintain caution against chasing large daily moves, but normal seasonal trends suggest downside is limited between now and late June.