- Chicago grain values fall sharply with energy; Ukraine corn basis soars above US Gulf; GFS weather forecast slightly drier at midday for Central US.
- The upwards pull of US wheat futures faded under the weight of active corn/soybean selling with key chart support levels broken as world energy prices declined sharply. OPEC+’s Sunday sustain cut in supply did little to alter prevailing bearish energy price trends with WTI July crude oil down $2.70/barrel at $74.20. Today’s decline projects a test of key support at $73.60 July (trendline) and thereafter to $65-69.00. US crude oil production in waning, but the worry is that world energy demand is flagging on a slowing economic outlook.
- The sharp fall in energy price/demand left doubt in the mind of world grain traders with net long positions. If world energy demand is stumbling, will world grain demand, follow the same path? Currently world wheat and corn trade are showing hefty gains from the prior year, with world soybean trade off 4 million mt. China’s soybean import pace is slowing on faltering crude margins.
- Chicago July soybeans fell under their 50/100 day moving average while July corn is already trading under like moving average support. US wheat futures are holding near unchanged, but a strong overnight rally with gains of nearly 20 cents could not be sustained. Today the weakness in grains it is tied to falling energy values (potential end games for the Israeli war).
- The USDA announced that 100,000 mt of US corn was sold to Spain adding confirmation that the total package of purchases will reach 400-500,000 mt. Spain is a corn deficit European member with special privileges to import US corn. Ukraine corn is offered at $0.90 over July futures for June/July, so US corn is the cheapest to Spanish livestock feeders.
- Chicago brokers estimate that fund managers have sold 10,700 contracts of corn, 6,300 contracts of soybeans, and 6,500 contracts of Chicago wheat. In the soy products, funds have sold 1,200 contracts of soymeal and 4,900 soyoil.
- For the week ending May 30, the US exported 54.1 million bu of corn, 15.3 million bu of wheat, and 12.8 million bu of soybeans. For their respective crop years to date, the US has shipped 1,485 million bu of corn (up 307 million or 26%), 1,480 million bu of soybeans (down 309 million or 17%), while US wheat exports ended their crop year at 687.5 million bu or down 40 million or 5%. WASDE looks to adjust US 2023/24 wheat and soybean exports lower in the June USDA Crop report on Wednesday June 12. The cuts in US soybean/wheat end stocks will fall directly into end stocks and be considered slightly bearish.
- The midday GSF weather forecast is slightly drier and slightly warmer than was offered in the overnight run for the Central US. A high-pressure ridge is forecast to push northward from Mexico which has been enduring one of their worst droughts on record. The lack of soil moisture across Mexico is fuelling extreme heat, which could migrate north with time. Showers will cross the Central US over the next few days with totals of 0.25-1.50”, but a decidedly drier trend evolves after Wednesday with heat building through the S Plains in the week 2 timeframe. Whether this ridge pushes northward in mid June should be closely followed. For now, enough rain falls for early season crop needs.
- The fall in energy values has sparked new Chicago selling to start June. However, the Black Sea drought will worsen and Russian spring wheat areas are enduring excessive rainfall. The Black Sea/European weather pattern shows no sign of change for the next two weeks. And the Mexican drought is worsening which will boost their corn imports. July corn under $4,40, July Chicago wheat under $6.50 and July soybeans under $11.70 are too cheap nearby. We maintain that trading lows in Chicago grains will be scored early this week.