• HEADLINES: The GFS weather forecast is like the overnight run with below normal Midwest rainfall and mild temperatures; China continues to take us corn off PNW; Crop ratings to fall in corn/soy.

• Chicago values are mixed at midday with KC wheat, July soybeans and soyoil futures sagging while December corn tested last week’s rally high at $5.48. We would note that the old breakdown point of $5.50 (March lows) in December is being tested. December corn will struggle to rise above this level until there is additional confirmation of yield loss and ongoing adverse weather. Soyoil and soybeans are sagging on profit taking following last week’s nonstop rally. However, as US renewable diesel producers seek certification of the vegoil used in overseas waste cooking oil, the use of US soyoil and Canadian canola oil will rise. We see the fall in soyoil futures as a correction in a budding bull market. KC wheat futures are lower on the improved harvest forecast with cutting moving north into Central Oklahoma. It is crop condition ratings, subsoil moisture measurements and the daily forecasts which determine price direction into the weekend. We doubt that any Chicago price fall can be sustained without having meaningful rain fall across the Midwest.

• Chicago brokers estimate that fund managers have sold 3,200 contracts of soybeans and 2,900 contracts of soyoil, while buying 6,700 contracts of corn, 1,800 contracts of soymeal, and 1,200 contracts of Chicago wheat.

• US export inspections for the week ending June 8 were 46.0 million bu of corn, 5.1 million bu of soybeans, and 9.0 million bu of wheat. The corn exports were better than expected and included four cargoes (203,000 mt) to China. China is now down to where there is only 500-700,000 mt of US corn left to ship and with vessels being nominated, no additional old crop is expected to be cancelled. WASDE is expected to lower its corn export estimate another 25 million bu in July.

• UN head Guterres is worried that Russia may leave the Black Sea Grain Export Corridor deal in mid-July. The statement from Guterres is unusual for him since he has been optimistic about its renewal. Ukraine is already making plans to export more grain off its western border which raise the cost to Ukraine farmers. However, Ukraine will have far less grain to export amid smaller harvests and carry in supplies. We argue that the market is tired of hearing on the on and off again Black Sea Grain Export corridor.

• The average analyst estimate is for US corn and soybean good/excellent ratings to drop 2% to 62% in corn and 60% in soybeans. A year ago, 72% of the US corn and 70% of the soybeans were rated good/excellent. This year’s crop is ragged looking due to the acute dryness and flash droughts that have impacted young plants. Based on the weather forecasts, that both US corn and soybean crops could be rated 60% or less good/excellent at the end of June. This would dramatically raise the need for rainfall in the first 10 days of July. The need for widespread/soaking rain is immediate across the Midwest. Unlike 2022, subsoil moisture will be unable to carry corn yield should any heat develop. Thankfully, temperatures are cool this week.

• A mild/below normal rainfall pattern is expected to hold across the Central US into June 22. A swirling low-pressure vortex across the Upper Lake States will cause some showers to persist across Wisconsin, Michigan, and N IN and OH for another 48 hours. Rainfall totals are estimated in a range of 0.1-0.8” with a few locally heavier amounts. Dry/warming weather starts on the weekend as a strong high-pressure ridge builds across the SW US. This ridge produces some ridge riding thunderstorms for the C Plains and the SW Midwest. The SW US will see flooding rain of 4-8.00” while the fat portion of the Midwest stays arid. The Bermuda high stays absent from pushing Gulf moisture northward into the Midwest. This remains a primary worry for seeing a return of meaningful Midwest precipitation.

• Our worry remains that Midwest dryness will deepen/broaden over the next 2 weeks. This raises the need for above normal rainfall in July as corn heads into pollination starting around July 8. Midwest subsoil moisture levels are historically low, but thankfully temperatures are mild. Any heat will quickly raise crop stress. It is difficult to be bearish on breaks.

• HEADLINES: June WASDE offers no surprises; Focus back on Central US weather and rising oil share trade; Russian 2023 wheat crop estimated at 85 million mt.

• The USDA June Crop Report held little fanfare with 2022/23 and 2023/24 US corn ending stocks rising 35 million bu, 2022/23 and 2023/24 US soybean end stocks rising 15 million bu while US 2023/24 wheat end stocks rose 6 million bu. All combined the 56 million bu of additional combined US corn/soybean/wheat end stocks was not a surprise and the market’s attention will turn back to US/world weather and the ongoing tightness of old crop US corn/soybean stocks and the drawback of US soyoil from European crushed US soybeans for renewable diesel. Chicago corn, soybean and wheat values are mixed with the grains sagging while July soybean and soyoil rally to sharp daily gains.

• WASDE raised their estimate of 2022/23 US corn end stocks by 35 million bu to 1,452 million bu based on a 50 million bu cut in US 2022/23 corn exports to 1,750 million bu and a reduction in imports of 15 million bu to 25 million bu. No change was offered in feed and residual use which will be determined by the June Stocks Report. We would remind that the March US corn stocks data argued for a 100-150 million bu increase in 2022/23 US feed residual use, but WASDE decided to wait until June for statistical confirmation.

• US corn 2023/24 US corn end stocks were raised by 35 million bu to 2,257 million bu amid the additional old crop supply. WASDE made no change to its 2023 US corn yield at a record large 181.5 bushels/acre or to new crop demand. The average farmgate cash corn price was estimated at $4.80.

• 2022/23 world corn end stocks held steady at 297 million mt with the Brazilian corn crop rising 2 million mt to 132.00 million mt which was balanced against a 2 million mt fall in the Argentine crop to 35 million mt. World corn trade was unchanged at 176.5 million mt with the US corn export loss switched to Brazil (55 million mt total).

• WASDE raised 2022/23 US soybean end stocks to 230 million bu with a 15 million bu reduction in US soybean exports to 2,000 million bu. No other demand changes were made. The old crop US soybean exports were reduced on the slowing US sales pace, but recent old crop US soybean sales to the EU to produce soymeal (Argentine crop shortfall) with a drawback of the US soyoil for renewable diesel demand could underpin US 2022/23 soybean exports at 1,975 million bu. The US soybean crush pace is record large and on pace to achieve the USDA estimate. US 2023/24 soybean end stocks were raised by 15 million bu due to the larger old crop carry in with yield left at a lofty 52.0 bushels/acre.

• World 2022/23 soybean end stocks were 101.3 million mt with the Argentine crop cut 2 million mt to 25 million mt while the Brazilian soybean crop was left at 156 million mt. China soybean imports held at 98 million mt but looks to be raised to 101-104 million mt by October.

• USDA wheat data was neutral to slightly bearish. The US balance sheet was left mostly untouched, while global production was hiked 10.4 million mt amid yield increases in Russia, Ukraine, and Europe. We believe these adjustments to EU and Black Sea production as premature given stagnant dryness across some 50% of Europe’s wheat belt and as dryness lingers in Russian spring wheat areas.

• USDA now projects major wheat exporter stocks in 2023/24 at 59.2 million mt, vs. 55.7 in May, but vs. 63.7 in 2022/23. Exporter stocks/use was lifted to 14.6%, vs. 13.8% previously. Global balance sheet changes still come down to weather, with June critical to EU and Black Sea yield performance.

• Winter wheat yields were increased slightly in TX, OK and CO following improved rainfall since mid-May but were left alone in KS and NE. NASS raised total US winter wheat production 6 million bu to 1,136 million bu. HRW production is pegged at 525 million bu, vs. 514 million in May and 531 million last year. SRW production is estimated at 402 million, vs. 406 in May and vs. 337 million last year. US wheat end stocks were raised 6 million to 562 million to account for larger winter output. No other changes were made.

• Markets have done little post the report, and even grain/oilseed contracts in Europe have been unphased by USDA data, which are unimportant in June. It is immediately back to watching US, EU, and Black Sea weather patterns, with the midday GFS weather forecast having trended drier in MO and the Eastern Midwest. The GFS’s latest view is that meaningful rain next week will be pulled south of the primary ag belt. This pattern of elevated rain chances begins in just 48 hours. Sunday night’s forecast and actual radar drives prices nearby with extreme volatility anticipated. The need for rain is today! The risk is to the upside of next week’s rain is less than expected.

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Weekend summary 9 June 2023

• HEADLINES: El Niño climate pattern is now underway; Midwest drought builds with 45% of corn and 39% of the soybeans involved; Soyoil rallies above its 50-day moving average for the first time since February; Cash corn/soybeans stay strong.

• El Niño has officially returned and is likely to yield extreme weather later this year, from tropical cyclones spinning toward vulnerable Pacific islands to heavy rainfall in America to drought in Australia. After three years of the La Niña climate pattern, which often lowers global temperatures slightly, the hotter El Niño is back in action, according to an advisory issued on Thursday by the U.S. National Oceanic and Atmospheric Administration’s Climate Prediction Centre. El Niño is born out of unusually warm waters in the Eastern Pacific near the coast of S America, and often accompanied by a slowing down or reversal of the easterly trade winds.

• “In May, weak El Niño conditions emerged as above-average sea surface temperatures strengthened across the equatorial Pacific Ocean,” the advisory said.

• The last time an El Niño was in place, in 2016, the world saw its hottest year on record. Coupled with warming from climate change, 2023 or 2024 could reach new highs. Most experts look to two agencies for confirmation that El Niño has kicked off, NOAA and Australia’s Bureau of Meteorology (BOM). The two agencies use different metrics for declaring El Niño, with the Australian definition slightly stricter. NOAA calls an El Niño when ocean temperatures in the eastern and central equatorial Pacific, have been 0.5℃ higher than normal for the preceding month, and has lasted or is expected to continue for another five consecutive, overlapping three-month periods. The agency also looks at a weakening of the trade winds and cloud cover. Australia’s BOM needs things to be hotter, with the key regions of eastern Pacific 0.8℃ warmer than average.

• On Tuesday, Australia issued their own bulletin, noting a 70% chance of El Niño developing this year. NOAA said there is a 56% chance that when this El Niño peaks in strength, normally during the N Hemisphere winter, it will be a strong event, meaning that Eastern Pacific Sea surface temperatures are at least 1.5℃ higher than normal.

• This could yield more intense impacts, from drought to cyclones, across the world. Still, impacts vary, and El Niño come in “two flavors”, said an atmospheric scientist. Those with their warmest waters near the west coast of S America are deemed Eastern Pacific events, such as the strong 1997-98 El Niño. The other arises in the Central Pacific, near the equator around Hawaii, as was the case in the most recent 2015-16 event. Weather anomalies can be more extreme depending on where waters are warmest, making things drier or wetter in certain regions. Some forecast models predict the 2023-24 winter to be a Central Pacific El Niño.

• Early signs of hot, dry weather caused by El Niño are threatening food producers across Asia, while American growers are counting on heavier summer rains from the weather phenomenon to alleviate the impact of severe drought. The El Niño could lead to winter crop production falling 34% from record highs in Australia, and also impacting palm oil and rice production in Indonesia, Malaysia, which supply 80% of the world’s palm oil, and Thailand. In India, a country that largely depends on the monsoon rains for its summer crop, impacts from El Niño could be offset by the Indian Ocean Dipole, or the Indian Niño, yet below normal rainfall was expected over north-western parts of the country.

• Chicago grain futures are slightly higher as the midday GFS weather forecast has shifted drier and now is more like overnight EU weather model as the amount of crop involved in the 2023 flash drought continue to grow. The US Drought Mitigation Centre Indicated that 45% of the US corn and 39% of the soybean crops are involved in a D1 (moderate) or worse drought. This is well above the level of the last dire drought when 16% of the corn and 12% of the US soybean crop were impacted. The point is that with Midwest subsoil moisture in freefall, that the need for rain is immediate with producers reporting poor germination and seed death of corn/soybeans that were planted after mid-May. Crop yield potential could drop quickly without a needed Midwest rain.

• The USDA will be out with the June Crop Report Friday. We look for WASDE to raise global 2022/23 wheat/soybean trade to record large levels based on the offtake to date, along with making downward reductions to Argentine corn/soybean production due to actual reported harvested yield. The surge in world wheat/soybean trade has been away from the US, which is why WASDE could trim its US corn/wheat export estimates slightly. We do not expect that WASDE will cut its soybean trade forecast just yet.

• The July/November soybean spread has pushed out to a new contract high this morning at a $1.93 premium while July/December corn has followed to a new rally high of $0.81 premium. This is the highest price for the July/December corn spread since June of 2022. The widening old/new spreads argues that old crop cash supplies are tight heading into first notice day against July futures. Central IL soybean basis is bid at $0.70 over July with Central IL corn bid at $0.50 over. There are reports of higher basis being paid for sizeable quantities of old crop corn and soybeans. The point is that the March US stocks report argued that NASS has overstated the 2022 US soybean crop by 75-85 million bu while US corn feed/residual use was understated by 100-150 million bu. Cash bids back up the theme that US old crop corn/soybean stocks are in strong hands and extremely tight. This will maintain upward pressure on July futures with the transition to the new harvest being bumpy with elevators being empty.

• US corn, soybean and wheat sales for the week ending June 1 were seasonally slow with just 6.8 million bu of old crop corn and 7.6 million bu of old crop soybeans being sold. US 2023/24 wheat sales stand at 139.1 million bu on June 1 (down 28 million bu from last year). Brazil is exporting record tonnages of soybeans/corn, which is stealing US export demand. This is not surprising. Yet, there was a cargo of US soybeans that was sold to Germany with the soyoil likely to be drawback to the US on a shortage of soyoil for renewable diesel. This follows a like drawback for 3 cargoes of US soybeans sold to Spain earlier this week.

• The midday GFS weather forecast model run was drier and like the overnight EU model on rainfall. A storm system for Sunday/Monday is forecast to produce 0.1-1.25” of rain across the Midwest with locally heavier amounts across E Wisconsin and Michigan. The Central Plains will see an additional 0.5-1.50” of rain on the weekend. Dry weather follows on Tuesday which lasts into the weekend. The next chance of meaningful rain is hard to define until the 11–15-day period when a hurricane is forecast to reach the TX Coastline. The GFS forecast remains erratic from run-to-run with rainfall placement, but it is wet in the 11–15-day period. Our confidence that far out is low, and we remain highly doubtful of a TX landing hurricane with none of the other models in agreement. Our bias stays drier than normal Midwest weather with budding heat after June 20.

• We look for a 2-4% fall in US corn/soybean good/excellent ratings on Monday with the coming rain not being enough to reverse the ratings downtrend. And Northern European and Russian spring wheat crops are also suffering which is tugging 2023 world wheat production lower by 5-9 million mt. Russian 2023 spring wheat is estimated by USDA at 23 million mt with the drought cutting yield by 10-20%. With funds sizeable shorts, it is premature to be bearish. Soaking rain is needed NOW.

• HEADLINES: Soy complex finds support on global demand; Midday GFS weather forecast maintains needed Midwest rainfall; US ethanol production rising seasonally.

• Chicago ag markets are mixed but mostly lower at midday. The break in grains has been led by high-protein wheat contracts, and while there is no specific catalyst for renewed selling there is news suggesting that flooding of the Dnipro River in Ukraine won’t impact nuclear power output. This follows aggressive Russian fob offers to Egypt on Wednesday. We believe that this week will be defined by wide swinging back-and-forth trade, and most important in the near-term is whether the major forecasting models come to agreement on Midwest rainfall next week. The midday GFS weather forecast keeps in place accumulation of 1-3” in MO, northern IN, IL and MI next Tues-Thurs. Crude oil is up $1.20 at $72.90/barrel following a modest draw in US stocks last week.

• The soy complex remains firm following better than expected monthly imports reported by China overnight. Chinese demand into autumn will be filled by S American origin almost exclusively, but global oilseed demand growth is intact. Recall USDA in 2023/24 projects combined global soybean, rapeseed and sunseed demand to expand another 23 million mt to a record 526 million.

• Additionally, US official US soybean exports in May totalled 94 million bu, 18% above reported FGIS shipments and larger than anticipated. NASS’s June 30 US corn & soy stocks data is still important.

• US ethanol production in the week ending June 2 totalled 305 million gallons, up 10 million on the prior week and the largest since December. Ethanol stocks are adequate at 964 million gallons, but the seasonal boost in weekly grind should keep USDA’s industrial corn consumption forecast unchanged in its June WASDE. Any revisions must be based on exactly how much corn is used in August. We also note the US ethanol swap market remains firm. Margins are profitable. And gasoline use last week was unchanged year on year at 9.22 million barrels per day. US gasoline use has been at/above prior year levels in 4 of the last 5 weeks.

• A largely stagnant pattern of dryness will remain intact across Northern Europe, including major wheat producing areas of France, and Central Russia into June 17, which makes French wheat crop rating more important in the next two weeks.

• The midday GFS weather forecast is broadly consistent with the morning run in allowing needed rainfall to expand into the Midwest and mid-South. Isolated showers are projected in MO, IL and IN early next week. A second loosely organised but expansive system impacts the eastern Midwest June 14-15. 10-day totals are pegged 1.00-2.00” across the primary Corn Belt, and if realised soil moisture improvement will begin. Key is whether the EU model this afternoon follows the wet GFS solution. Otherwise, it becomes an issue of watching radar maps throughout the entirety of next week.

• Today’s limited extraction of corn/soy weather premium suggests there is concern over the current health of US row crops, and that raindrops need to be felt before lasting/meaningful selling resumes. It does appear portions of the Midwest benefit from increased rain chances next week, but the devil will be in the details. Don’t chase daily moves.

• HEADLINES: Midday GFS weather forecast drier in 6–10-day period for E Midwest; Spain buys US soybeans to send the oil back to US on renewable diesel.

• Chicago grains are mixed at midday with July soyoil holding above the 20-day moving average at $0.4875 and rising to $0.5074 (highest price since May 12) while corn/wheat futures have traded in a wide range on fundamental battles between improving Central US weather forecasts and heightened war concern between Russia/Ukraine. Nearby, crop stress is ongoing for Midwest/Delta corn and soybean crops with the weather forecasts promising a few showers early next week. Research maintains that the showers are an interlude in an overall dry weather pattern. The midday GFS weather model has lost notable rain for the E Midwest in the extended range. The lack of run-to-run consistency is reducing confidence of traders in the prospect for meaningful Midwest rain.

• Each new model run has added or subtracted rain and is pushing back any meaningful rain in time. Amid rapidly falling subsoil moisture, regular and meaningful rain will have to fall across the Midwest during the growing season. 2023 crops must be made with surface, rather than ground water this summer. This means that a sustained price break will likely have to wait until favourable weather is offered for Midwest corn pollination in mid-July.  We look for a mixed Chicago close today with all eyes on future Midwest weather forecasts as the market adds or subtracts weather premium in price.

• USDA reported that 165,000 mt of US 2022/23 soybeans was sold to Spain. We understand that the sales are for August when the price spread between US and Brazilian soybean offers narrow. US exporters report that US soybeans were bought since the meal will stay in the EU, while the oil will be shipped back to the US where it will be needed in biodiesel or renewable diesel.

• Cash talk is noted/growing that several renewable biodiesel producers are seeking audits/clarification on imported waste oil from China. The renewable fuel producers want to make sure that the waste oil is not made from palmoil or other tropical oils that are not eligible for renewable diesel carbon credits. The exclusion of imported waste oil from renewable diesel feedstocks would shift demand to refined soyoil by default. This is important to follow.

• A newswire is claiming that the EPA has abandoned a proposal to include the electric vehicle in its 2023-2026 biofuel program which would withdraw billions of dollars of tradable RIN production in the coming years. These RINs would harm production profitability of other congressional approved biofuel blenders that are also granted RINS.

• Midwest soil moisture has been in a freefall since April and subsoil totals are nearing decade lows. Amid this week’s dry weather, crops must rely on rain (surface moisture) heading into reproduction. This means that regular/meaningful rain is needed to preserve yield potential, anything less is bullish. US corn, soybean and spring wheat ratings are likely to fall again next Monday amid this week’s warm/dry weather amid a lack of soil moisture. Illinois corn and soybean crops are showing acute crop stress today.

• The midday GFS weather forecast is drier for the E Midwest with widely scattered showers being heavier and more important for the W Midwest on the weekend. Rain could even make it into Central IL on Sunday. However, the 6–10-day period pulled out much of the heavier rain for the E Midwest. Rains are now positioned across the Delta and the SE US. Please note that the midday GFS forecast also builds an impressive 594 millibar high pressure ridge across the Delta and SW Midwest on June 20. This is the second day in a row that the models have offered a strong high-pressure ridge. This is why we believe that the coming rains are an interlude, not a lasting pattern change. This is where low subsoil moisture would become extremely important to US crop yields.

• Chicago is back to adding weather premium to price amid a midday run that offers less E Midwest rain. The risk in Chicago values is to the upside with falling soil moisture and crop conditions if the coming rains prove to be disappointing. It is premature to be overly bearish until 2023 Midwest crop yields are made/better known.

• HEADLINES: Midday GFS wetter at midday for SE Midwest/Delta; Chicago option volatility rate under pressure; Goldman roll starts Wednesday.

• Following an active opening, low volume amid uncertain Central US weather has left Chicago grain futures to chop. Chicago values are mixed at midday with traders debating weather/yield, old crop basis strength and a Saudi wheat purchase of optional origin wheat. NASS will be out with their weekly crop progress and condition report which will help traders measure the impact of 3 weeks of dry weather and soil moisture declines. Reports are widespread of Midwest wheat unable to fully tap nitrogen, rolling corn and soybean seed that did not germinate or prematurely died. And whether S Midwest farmers will be willing to seed double crop soybeans following corn unless a soaking rain arrives. Look for additional choppiness in Chicago values until there is weather clarity.  Option volatility is in sharp decline today, we argue that such a fall in option vol is too early with the heart of the growing season ahead and 2023 Midwest soils drier than on the same date back in 2012.

• Chicago brokers report that fund managers have been on both sides of the markets with early corn/wheat buying fading, with outright sales of July corn and soybeans. Managed money purchased 2,100 contracts of Chicago wheat, while selling 7,400 contracts of corn, while being flat in soybeans. In the products, funds have bought 2,000 soymeal while selling 1,300 contracts of soyoil. We look for a mixed Chicago close due to the uncertainty of when a soaking Midwest/Delta rain will fall, The need for Midwest rain is immediate.

• The US exported 46.492 million bu of corn, 7.872 million bu of soybeans, and 10.714 million bu of wheat last week. For their respective crop years to date, the US has exported 1,177 million bu of corn (down 545 million or 32%), 1,788 million bu of soybeans (down 46 million or 2.5%), and 13.056 million bu of wheat in the first week of the crop year. We expect that WASDE will trim 2022/23 US corn/soybean export estimates by 15-35 million bu on Friday. This should result in a like rise in 2023/24 US corn and soybean end stocks.

• Saudi Arabia booked 624,000 mt of optional origin wheat for Sept-October. The sale was concluded at an average price of $262/mt basis CIF. Assuming a $24-26/mt freight cost to Jetta, the only origin that works would be Russian wheat at a FOB price of $234-236/mt. The largest seller, Holbud, has Iranian financial ties but has been absent as a world wheat merchandiser for over a year. The point is transparency and whether Russia has a fob floor price that is effective in the new crop year. Remember that Russian wheat export taxes end below $210/mt, but that Russian farmers will be slow sellers on marginal profitability below $160/mt. Russia and Europe hold large caches of old crop wheat which is likely to keep pressure on world fob prices until a real supply new crop supply loss can be confirmed.

• US farmers are increasingly pulling back from side dressing nitrogen on corn and the planting of double cropped soybeans that follows SRW wheat due to dryness. Acute dryness alters fertilisation and seeding decisions. This is why receiving Midwest soaking rain in the next 2-3 weeks is so important.

• The Goldman Roll starts on Wednesday with traders already positioning by selling the July/December corn spread and July/November soybeans. We note that the July/November soybean spread is holding better than corn due to strong domestic processor demand and expanding cash crush margins.

• The midday GFS forecast is wetter for the SE Midwest and Missouri than what was offered overnight. Popcorn showers will dot the W Midwest early this week with the E Midwest staying bone dry. Heat is maintained with highs ranging from the 80’s to the 90’s. A back door cold front is forecast to drop southward through the Midwest this weekend producing 0.2-1.25” of rainfall favouring the Delta/W Midwest. The GFS forecast is back and forth on the rain details and change in location/amounts are expected.

• The midday GFS weather forecast is wetter with the rain working into the E Midwest in 9-10 days. Remember that droughts are not defined by no rain, but a persistence of below normal rainfall. Our concern for the 2023 Midwest weather stays elevated. Look for crop ratings to fall this afternoon and for back and forth trade this week.

• HEADLINES: Soybeans rally continues on Midwest drought worry: Corn futures add weather premium ahead of weekend; chart pattern improves; late June weather to drive price: Wheat short covering continues; heat in Canada, Northern US Plains needs watching.

• Soybeans rallied to end the week, leaving July up 15.25 cents after trading as much as 66 cents lower early in the week. Soyoil marked strong gains on Friday and for the week, while soymeal was slightly lower. Soybeans scored a key weekly reversal.

• The weekly US Export Sales report showed soybean sales increased to a 4-week high of 4.5 million bu, with exports of 8.5 million. Total commitments are down 312 million bu from this time last year, and the USDA is expected to make cuts to the export forecast in upcoming WASDE reports.

• Soymeal held the most bullish data, with exporters selling 446,831 short tons. This was the third largest weekly sale of the year, and there have been just 6 weekly sales that were larger in the last 3 years. Cumulative exports are now 3% larger than last year and are record large at just over 9 million tons. More importantly, outstanding sales are up 2%, the third largest on record. A strong summer export rate is expected to aid crush margins and keep crush demand elevated.

• A Chicago soy recovery is underway amid hot/dry Midwest conditions. Soybeans will remain well supported by strong old crop basis and the need for weather risk premium. US good/excellent conditions are expected at 64-66%.

• Chicago corn futures rallied sharply on Friday, with both July and Dec scoring 5-week highs. Short covering has been featured since mid-May, and managed funds on Tuesday were short a net 51,000 contracts, vs. 98,000 the previous week. Fund’s current short is a bit smaller than expected, but the covering of this position will continue if Midwest warmth/dryness is extended into the second half of June. Nearby forecasts are threatening. A Midwest rain is needed immediately. July is targeting an open chart gap left in mid-May, and also the contract’s 20- and 100-day moving averages, and $6.20. Next major resistance in Dec lies at $5.55-5.60. Corn chart patterns are turning supportive, but we expect an increase in already-high volatility. There is little doubt premium will be added/subtracted daily based on latest weather model forecasts. This will be exacerbated by a lack of resting orders above & below the market. We see support at $5.10-5.20 Dec with the upside determined by expanding Central US dryness. Recall pollination lies just ahead in 30 days. December corn futures closed above a neckline of a head and shoulders bottom, which could be a significant chart indicator.

• US wheat futures ended higher, led by spring contracts, as ongoing heat and dryness is most probable across the Northern Plains and important areas of Southern Canada. Net soil moisture loss will also persist across the spring wheat areas of Russia and Kazakhstan through mid-June, and overall focus appears to have shifted from cheap Russian wheat to new crop production threats. Like corn, it is weather that drives price into late July. We also view downside in the Russian market as limited as exporter margins get compressed.

• Funds in Chicago on Tuesday were short a net 127,000 contracts, a newer 5-year high. This position has been pared down only slightly. The funds’ position this evening is estimated at 115-118,000 contracts. It is the risk of rapid short covering amid adverse weather that leans bullish at current prices.

• HEADLINES: Soybeans rally on oversold conditions and Midwest weather worry: Corn futures recover on Midwest weather concern; Argentine crop overstated: Wheat extends recovery on Black Sea tension; Saudi Arabia seeks new crop supply.

• Soybeans gained 30 cents in old crop and 23 cents in new crop on Thursday. Soybean oil paced Thursday’s rally, but meal also marked strong gains as a hot and dry Midwest forecast brought fund demand back into the Chicago soy markets.

• The June Fats and Oils report confirmed a US April soybean crush rate of 187 million bu, which was largely anticipated following the NOPA report. End of April soybean oil stocks of 2.5 billion lbs were up 6% from March, which was also expected following the last NOPA report. Compared to a year ago, stocks were up 5%, and the largest April stocks figure in 3 years. Note that while stocks were above average in April, they are forecast to fall 24% by September. Production will seasonally decline through the summer, while biofuel demand seasonally strengthens in the last half of the year. The market has not been able to look ahead to see the falling stocks outlook but has been focused on the near-term supply figures. A change in trend is underway, and Midwest soyoil basis should reflect this change in the coming weeks.

• Chicago corn futures ended steady to higher on Thursday, with Dec testing last week’s high on rapidly expanding dryness across the principal Corn Belt. Debate this weekend will be cantered on the likelihood, and degree, of pattern change beyond mid-month, but exceptional heat this weekend mandates the return of regular rain through the balance of the growing season. Our concern is that neither the EU nor Canadian models include a major pattern shift prior to June 16.

• US export demand stays weak. US ethanol production in the week ending May 26 totalled 295 million gallons. A weekly average of 305 million gallons in needed in Jun-Aug to meet the USDA’s forecast. This year’s seasonal recovery in grind has been slow to develop. But supply still matters. Focus nearby will be placed on the Central US nearly exclusively, but we note that yield data in Argentina has plateaued and final production there is still pegged at 31-32 million mt, vs. USDA’s projected 37.

• Expect volatility based on latest weather model forecasts. Weather premium will be added quickly & intensely if outlooks fail to boost Midwest rain chances in the coming weeks. Yield loss of even 5-7% relative to trend in the heart of the Midwest is a big deal this year for end stocks and price.

• Wheat futures worldwide ended higher amid ongoing regional weather concerns, including coming Midwest heat, and as Saudi Arabia this morning released the first new crop tenders of the major exporting countries. This tender will be filled with Romanian or Russian origin. Price details will be important, but clearly one of the world’s larger importers finds value at current prices. Additionally, Ukrainian vessel movement has been effectively halted by Russia despite May’s extension of the export corridor.

• Additional supply dislocation leans bullish. Heat will be unrelenting across the Canadian Prairies, while rapid drying will continue across the northern half of Europe into mid-June. Aussie yield performance when El Niño is present in September, suggests odds are high Australian output & exports in 2023/24 will be down 11-13 million mt year on year. Short covering will be accelerated by drought expansion in Europe and Central Russia in June. US wheat cannot work into feed rations due to own supply tightness, which adds Midwest corn weather concern.

• HEADLINES: Weather models agree on Midwest dryness next two weeks; temperature outlook diverges: Soybeans end firm following early selloff: Corn futures end weak but above session lows; weather models lack us precipitation pattern change into June 16: Chicago wheat recovers on rising Black Sea tensions; Canada, Russia as climate hot spots.

• Another day has passed without hints of a precipitation pattern change, with Midwest dryness extended into June 15-16. Additional rain will fall across the spine of the Central US into mid-June, which boosts soil moisture but threatens HRW harvest progress and quality in TX, OK and parts of KS. Near zero rain is offered to IA, the eastern Midwest and mid-South in the next two weeks, and the need for rain becomes immediate thereafter.

• The EU and GFS models agree that arid conditions persist in the principal Midwest nearby. The two are rather different with respect to temperatures next week. The GFS projects the arrival of much cooler temperatures beginning next Tues/Wed. The EU (and Canadian) extends abnormal warmth into June 10, with max temperatures in the upper 80s and 90s to blanket the MO, IA, IL and IN this weekend and again June 8-10. The EU model implies rapid and significant soil moisture loss into June 10.

• NOAA’s own June temperature outlook has trended warmer. Odds are high that abnormal warmth is extended into the second half of the month in Canada across the Upper Midwest, Great Lakes region and IA. Below normal precipitation in June will favour the Upper Midwest and Great Lakes. Drought development is forecast in IA and east of the Mississippi. River. Extended range forecasts are of course changeable, but so far calls for a pattern shift on June 8-10 have not been validated by operational model guidance.

• It is still early to be overly concerned, but there is no doubt a heavier burden is being placed upon Midwest rainfall in late June/July. Note that pollination dates this year will be a bit earlier than normal in the Central Midwest. Heat/dryness become a problem if this pattern fails to change in the next three weeks.

• Soybean futures plunged to new lows in early trade on Wednesday and were near daily highs at the close. July uncovered good demand below $12.75 and was 3.25 higher at the close, while the rest of the market was nearer to the day’s highs.

• Soymeal marked similar closes, falling early in the day and then closing modestly higher in July. World soybean meal export premiums have trended higher in the last month as Chicago futures have collapsed. Argentine meal this week is quoted $20/ton over Chicago versus the US Gulf at $22 over. The $2 fob spread is the narrowest for late May since at least 2004. The spread reflects the sharp decline in exportable Argentine meal supplies and is also lifting Brazilian offers. Brazilian meal this week has been quoted at $12 over Chicago, up from $9 under in early April. Cash markets are reflecting a rapid tightening in the world meal market, which should continue to drive export business to Brazil and the US.

• The last 3 months have been punishing for the bulls amid large Brazilian crops. But Brazilian soybean and Argentine meal basis is firming, with a worrisome June Midwest weather forecast. A seasonal low looks close.

• Chicago corn futures ended slightly weaker as the demand-focus bears point toward ongoing weak Chinese factory output, and cheap Brazilian corn and Black Sea feed wheat, which are offered $20+/mt below US origin corn. The story this summer will not be one based on demand, but supply issues remain present. A portion of crops in IA & IL will begin pollinating in the first 10 days of July. A boost in moisture is desired.

• Spanish co-ops have pegged corn production there at 2.0 million mt, vs. 3.8 last year and vs. USDA’s initial forecast of 2.9 and the lowest on record. Spain will import record tonnages in 2023/24, and rapid drying will be ongoing across N Europe and Europe into mid-month. We remain uncomfortable with N Hemisphere climate patterns, and while stagnating demand does make it easier to build stocks in 2023/24, trend/above trend yields are required. Extended range Midwest weather forecasts are critical in the next 7-10 days. Dryness is starting to hurt US corn yield potential.

• Wheat futures on Wednesday ended mixed, with Chicago & KC higher and Minneapolis slightly lower. The market at midday simply ran out of sellers following the recent collapse. Nearby contracts in Chicago and Paris are again oversold. Russian stocks are large. Russian wheat is cheap, but farmer selling there is on pause as the government’s export tax drops $15-20/mt beginning June 1. A more nuanced market is expected as weather plays a more critical role in price discovery.

• There is a massive divide between US/Argentine offers and EU/Black Sea. This is a function of short-term oversupply in Russia & parts of Europe, and extremely tight supplies elsewhere. Current EU/Russian fob prices are testing the lows of 2021, when exporter stocks were more abundant.

• Importer interest will surface by mid-summer. Soil moisture remains a concern in Saskatchewan and Central Russia. Millers in Pakistan are seeking to allow imports of 1 million mt to ease rising domestic prices. Chinese wheat quality is uncertain following flooding rainfall in major producing province Henan. Its late to be ultra bearish wheat.

• Russia continues to restrict grain flows from Ukraine as the extension that was signed 2 weeks ago is not fully operational. Russia has not allowed any vessels to sail into or out of Ukraine’s Pivdennyi port since April 29. Russia is demanding that its ammonia flow through a Ukraine pipeline and that the world allows SWIFT banking to be used by the Russian Agricultural Bank. The Russians are not allowing the extension of the corridor to run freely with time of the essence with another pact extension needed in mid-July.

• HEADLINES: Weak importer currencies remain an issue for demand growth: Soybeans fall on technical selling: Corn futures erode but find support on concerning midday forecasts: Wheat falls sharply on demand concerns, weaker Russian offers.

• Ongoing currency weakness in major grain importing countries, from Egypt to Turkey, continues to act as an obstacle to demand growth. This was highlighted on Monday as the Turkish Lira scored a new all-time low following the re-election of sitting President Erdogan. Inflationary pressures will stay intact in importing regions as weak global stocks collide with sinking currency valuations.

• Since May 2022 the price of spot Chicago wheat has fallen 49%. The price of Chicago wheat valued in Turkish Lira is down only 36%, which implies Turkey in real terms is still forced to pay the equivalent of $7.50/bu for wheat.

• It would appear that, in the long run, food demand will be satisfied, but discretionary grain purchases will be in decline. A hand-to-mouth approach to importing food products stays intact until domestic harvests are worked through by mid/late summer.

• Soybean futures fell to steep losses to start the week. Soybean oil led Chicago soy markets lower and fell back to test recent lows, while old and new crop soybeans were pulled to new lows.

• NASS reported that soybean planting progress advanced 17% last week to 83% complete. IA reached 94% complete, with IL and LA at 92% each. ND passed the halfway point and reached 53% complete, which was just 2% below the 5-year average. All other states were ahead of their 5-year averages. The 2023 crop is now the earliest planted since 2012 and the second earliest since 2000. NASS reported that 56% of the crop was emerged as of Sunday, and we would estimate that 50% of the crop was emerged on May 26. There were 11 days between the 50% plant date and the 50% emerged, which was 1 day ahead of the long-term average and the shortest in 4 years.

• Last week’s CoT report showed that funds were net long, just over 4,000 contracts which was the smallest since April 2020. Since last Tuesday, we estimate that funds have sold 12-15,000 contracts and now hold a modest net short position. The point is that speculative length has been fleshed out, with farmers waiting for a rally to offload stocks.

• Chicago corn futures ended 10-11 cents lower on Tuesday but recovered from session lows as neither the GFS nor EU weather models offered much of a Central US pattern change, with both now peeking into the very middle of June. There is hope for a shift thereafter, but we would caution against putting too much faith into long range model-based guidance. Most important is that operational models begin to show a boost in precipitation and a cooling of temperatures in 11-15 day forecasts by late week. Otherwise, rapid drying of the Midwest grabs attention.

• Global demand remains an issue amid weak importer currencies, reduced livestock herds/bird flocks in Europe and the US. But supply still matters, and the importance of Northern Hemisphere weather over the next 8-10 weeks cannot be overstated. Additionally, interior US cash basis levels remain elevated. There is still clearly an imbalance of supply and demand in the US.

• Wheat futures in the US and Europe ended sharply lower as Russian wheat for old and new crop delivery is buyable at $230-240/mt, new seasonal lows. Russia and Europe will be well supplied in the near term as large stocks collide with seasonally weak demand and additional currency-based challenges in many large importing countries. We also note that US winter wheat on Sunday was rated at 34% good/excellent, vs. 31% last week. Improvement is mostly a function of good/excellent in Oklahoma rising 20 points week on week. US spring wheat planting is 85% complete, vs. 86% on average.

• A highly segmented market is anticipated, with the US rationing export demand and Europe and Russia actively searching for it. Otherwise, cheap/available Russian wheat acts as a weight until there is confirmed supply loss in Europe and/or the Black Sea. Rapid drying will continue across the northern half of the Europe and across Russian spring wheat areas, and unlike the US Southern Palins, weather’s impact on EU/Black Sea yields rises substantially in June. The arrival of heat to the Midwest next week must also be monitored.

• There is still near zero tolerance for supply loss in 2023. We estimate that funds in Chicago are short 130,000 contracts.