- HEADLINES: Market getting ready for rain makes grain mentality: China soybean purchases not confirmed; New highs fail in July soybean futures.
- Corn is higher with soybean/wheat futures lower at midday. July soybean futures pushed to a new rally high at $12.5825 before faltering. The inability of July soybean futures to accelerate above their prior May high produced a round of profit taking. Corn/soy spreading then became active which underpinned corn. World wheat futures are slightly lower amid supply and Black Sea weather uncertainty. Traders argue that current Chicago and Paris wheat futures are discounting an 81-83 million mt Russian wheat crop (20% yield loss of winter wheat yield) which is adequate. The decline in the Russian wheat crop has been the Chicago rallying cry during May. As the US winter wheat harvest starts and gathers steam during June, a new wheat supply loss will be needed to sustain the rally. We look for US corn/soy crops to be highly rated in June when traders will switch over to the thinking that “rain makes grain”. The recent worry has been seeding delays and switching out of corn to beans.
- The USDA did not announce a new US soybean sale to China (contrary to rumours) with commercial sources arguing that Sinograin may have bought 1-3 cargoes of US soybeans this week, not the 6-9 cargoes that had been discussed. China can secure Brazilian soybeans through July at prices below the US Gulf.
- Chicago brokers estimate that managed money has sold 3,400 contracts of soybeans and 1,100 contracts of wheat, while buying 5,300 contracts of corn. In the products, funds have sold 2,100 contracts of soyoil while being flat in meal.
- USDA export sales for the week ending May 16 were 9.0 million bu of US wheat, 35.9 million bu of old and 12 million bu of new crop corn, and 10.3 million bu of old and 2.4 million bu of new crop soybeans. China has yet to purchase a tonne of US new crop soybeans, a record slow start. Mexico remains the primary buyer of US corn.
- For their respective crop years to date, the US has sold 696 million bu of wheat (up 2 million or 1%), 1,940 million bu of corn (up 445 million or 30%), and 1,576 million bu of US soybeans (down 292 million or 16%). The US soybean sales pace is on target for an annual 2023/24 export total of 1,675 million bu.
- On May 31, the EIA will update its April US biofuel production/feedstock use. The report will be key to gauge if sub 50 cent soyoil prices spurred renewable diesel demand. Imported used cooking oil prices are equal to domestic soyoil values today, which is underpinning cash soyoil basis.
- The midday GSF weather forecast is slightly wetter in IL, IN, N MO and the Northern Plains through early next week and offers heavy rain to the TX/OK Panhandles May 30-June 1. Central and Eastern Midwest farmers will push ahead with seeding for another 24-36 hours before a new round of rain returns. Producers report solid progress this week in both corn and soybeans seeding. A drier weather pattern is offered next week which should allow producers to finish 2024 row crop seeding. Soil moisture levels are restored, and the new weather focus will be on Central US temperatures and the placement of a high-pressure ridge.
- Volatility will be a hallmark of the 2024 summer Chicago grain markets. That said, Chicago prices have rallied strongly off their early April lows and seasonal tops are normally formed by early June. Thereafter, a US weather scare is needed to sustain a further rally. Chicago wheat values are near post-harvest highs while soybeans will struggle above $12.60 July. corn has a longer-term demand story in US exports, but a highly rated crop in early June will be seen as negative. Be careful not to chase a new Chicago rally with new speculative purchases. Corn should gain on soybeans, while the wheat market could have one more price surge before a top is set before June 1.