• Our initial morning thought, which we did not forward was as follows:

New money entered ag markets yesterday, despite a seemingly bearish crop progress update from NASS on Tuesday. In addition to month-beginning money flow, there’s lots of talk on the potential for a shift to warm/dry weather beginning in late June, and for heat to be lasting across the E Midwest in July. Drier weather is noted through the next 10 days, but we are doubtful that it is the beginning of a trend. Soil moisture reserves across the Plains look to buffer heat in the near term, and building a drought will be difficult. Better precipitation coverage is forecast to return to the Central US in mid-June.

• This evening, soybeans are pushing ever higher with nearby Chicago contracts surging up another 4% on what appears to be a combination of technical and follow through buying. Grain futures struggled earlier in the day although wheat managed 2% gains on the day. Talk of Argentine lacking sufficient natural gas to dry soybeans was one bullish aspect we have not preciously encountered! However, switching from S America to US Gulf origin is on the cards (although not yet physically in evidence) and added to upside momentum. Estimates suggest that funds are record long soybeans, possibly as much as 230,000 contracts, some 15,000 above previous highs.  This rally is no longer about weather as near term forecasts suggest slightly wetter and cooler conditions are expected into the next ten days across the E Plains and Midwest.

• The current move higher has forced end users into pricing soybean and meal requirements, adding to bullish momentum. We must be at the back end of the digestive process as far as S America crop issues but the funds must surely need to see confirmation of non-threatening weather into July before letting go of significant position length. June market rallies are far from unknown historically, the question now is how high will this one go. That said, with funds potentially record long, the possibility of a dramatic price correction can not be overlooked in the event of favourable central US weather.