• Chicago wheat/soybean futures have rallied to sharp gains with corn being pulled along at midday. The €uro currency rally occurred as their Central Bank left interest rates at 0% but promised to be a huge buyer of another $600 billion €uros ($672 million dollars) through their Pandemic Emergency Purchase Program (PEPP). The PEPP news pressured the US$.

• Research notes that the ag currencies, such as the Russian Ruble, the Brazilian Real and Argentine Peso are weaker at midday. US$ index selling is pressured largely by the stronger €uro. In fact, the Argentine Peso scored a record low vs the US greenback at 69:1.

• The morning fund short covering has pushed corn back to last week’s high while soybeans/wheat near upside price targets. July KC wheat’s 50 day moving average crosses at $4.745, which is being tested. With a harvest weekend ahead, we doubt that KC wheat futures will be able to rise too much more. Wheat unlike corn or soybeans is likely to see a smaller harvest amid the recent heat/dryness across portions of the Central Plains. This is no place to chase a Chicago rally, but it is always difficult to measure when the fund short covering will be completed.

• The US homestay grains of oats/rice have enjoyed a strong rally amid expanding domestic consumption. Oat milk and rice are the new staples for home chefs which has fuelled demand. Unfortunately, the homestay has not expanded US #2 yellow corn or soybean domestic use. In the case of corn, homestay has lowered domestic demand via ethanol grind reductions. WASDE is likely to cut US ethanol on Thursday by another 50-100 million bu due to the lower May grind.

• US farmers have been good sellers of old crop soybeans/corn this morning with merchandisers reporting that sales are the best in weeks. Cash sales are likely to persist with July soybeans holding an upside price target of $8.80 and July corn at $3.30-3.34.

• US export sales for the week ending May 28 were; 22.7 million bu of wheat (both crop years combined), 25.1 million bu of corn, and 18.2 million bu of soybeans. China showed up as taking soybeans and wheat (the wheat purchase was a switch from an unknown destination). The US weekly corn sales total was disappointing.

• For their respective crop years to date, the US has sold 990 million bu of wheat (up 41 million or 4%), 1,593 million bu of corn (down 306 million or 16%) and 1,567 million bu of soybeans (down 148 million or 9%).

• Chicago brokers estimate that funds have bought; 14.400 contracts of corn, 9,100 contracts of wheat, and 9,400 contracts of soybeans. In the products, funds have bought 5,400 contracts of meal while being flat soyoil.

• The US midday weather forecast is consistent with the overnight run. Gulf activity will produce showers/storms across the Delta with Midwest totals ranging from 0.5-2.50″ over the next 10 days. Warm temperatures prevail for another 5 days before much cooler temperatures flow southward. The sunshine and cooler temperatures will be ideal for Midwest row crops that have been warm/wet this week. There is no indication of a drought pattern and US crop conditions are likely to improve further on Monday.

• The Chicago rally is all about “market make-up” with funds heavily short corn/soymeal. Funds are likely to enter a modest long in wheat/soybeans before seasonal highs are confirmed next week. We look for US corn and soybean good/excellent ratings to rise another 1-2% on Monday.

• Rising Russian fob wheat and a sharply higher Brazilian Real are two Chicago fundamental price drivers this morning. Funds have been modest buyers of the rally with US farmers starting to increase their sale of old crop corn stocks. With an estimated 50% of the US corn crop to be pollinating by July 14, the time window for a new crop weather problem is shrinking. Chicago corn prices were weaker early and rallied back to unchanged following the gains in soy/wheat.

• We look for a mixed Chicago close. Doubt exists that the Brazilian Real can fall too far below 5:1 US$ as the break seems to be largely technical of out of positioned Brazilian Real shorts. The Brazilian economy is a mess and a rise back near 6:1 could easily develop by September. This is no place to turn bullish the Brazilian Real.

• The USDA announced another 186,000 mt of US soybeans to China with 66,000 mt being old and the remainder being new crop. China appears to be back securing 1-5 cargoes of US soybeans daily. We note that Trump Administration blocked Chinese airlines flying to the US after June 16 in a political tit-for-tat. China blocked US carriers from flying into China last week and the US is just counter punching China’s actions. The move is likely to further inflame political tensions between the US/China.

• The Russian July fob wheat price has moved up to $207/mt amid the coming difficult transition between and an old crop quota and a new crop sales system that is more state controlled. Russian farmers will be more interested in selling into the higher priced domestic market, than for export. Research looks for Russian fob wheat prices to rise into July, with their seasonal price break being delayed this year to August/September. US weekly ethanol production expanded with American’s slowly driving more miles.

• US weekly production rose to 225 million gallons vs 213 last week. 27% of the US ethanol industry remains shut down. This week’s production total is well below the USDA forecast, and cut is expected from WASDE in their June report next week.

• Chicago traders estimate that funds have bought 2,400 contracts of wheat, 3,200 contracts of soybeans and 2,600 contracts of soymeal. Funds have sold 3,200 contracts of soyoil and 900 contracts of corn. Chicago corn open interest has been rising each of the past 13 trading sessions. We hear that this rise is related to funds taking a larger net short position through swap transactions.

• The US midday weather forecast is slightly drier across IA and the Central Plains, but wetter for IL/IN as the remains of a tropical storm turn eastward more quickly. 10-day Midwest rainfall totals will range from 0.75-3.00″ with coverage pegged at 85%. The overall pattern is progress with no indication of a blocking high pressure ridge. The forecast is favourable for Central US row crops.

• Rising Russian wheat prices and a declining US HRW wheat crop are offering support to US wheat futures. However, the soybean rally is largely based on the sharp drop in the Brazilian currency, the Real, to 5:1 vs the US$. We doubt that the Real decline will continue and Nov soybeans above $8.75 appear overvalued.

• Soybeans are higher, wheat is lower with corn caught in-between in midday Chicago trade. Favourable world weather is pressuring wheat values while soybean futures are reacting to China’s return as a US soybean purchaser/importer. We look for a mixed Chicago close with November soybean futures running into resistance above $8.70 while July KC wheat uncovers support below $4.50. Chicago lacks direction for now, but in the coming days, the seasonal price trends will turn down for the entire Chicago complex. It is difficult to bull a Chicago market beyond mid-June without a summer Central US weather problem.

• China’s USDA confirmed purchase of US soybeans overnight has calmed nerves regarding US Farm Goods retaliation for Friday’s US Hong Kong sanctions. Cash connected Gulf traders report that China is back bidding for US soybeans in a new crop position. USDA confirmed that China booked 2 cargoes or 132,000 mt for 2020/21. The China buying confirmation has produced a short covering Chicago soybean rally with July futures posting double digit gains. The US/China appear to have avoided any political spill-over to the Phase One Trade Deal which is a positive development for US agriculture.

• China is asking for US new crop soybean bids, a welcome sign. China and the US continue to work through trade pact implementation, but the Phase One Trade Deal has withstood some harsh politics from both sides without bending in the past few weeks. US Senator Grassley says he is not worried about China adhering to their Phase One Commitment. That said, cash traders report that China remains highly selective in their US purchases and won’t chase rallies.

• Questions arise as to whether WASDE will raise their US corn yield estimate above trend (178.5 bushels/acre) in the June WASDE report. WASDE has shown flexibility in raising or lowering yield in June to account for weather and seeding dates. WASDE typically waits until July to make any adjustment in their soy yield. The point is that the 2020 US corn crop is off to a favourable start and condition ratings are likely to rise further amid the coming mix of weather in coming weeks. US corn crop conditions are likely to show further gains.

• GASC secured 2 cargoes of Ukraine wheat at $210/mt with freight costs amounting to just over $10/mt for a landed price of $220.40-220.90. It is not surprising that the Ukraine will be the early world wheat seller to GASC with interior Russian wheat prices above the export market. The initial Russian wheat harvest should flow to domestic millers with Russia becoming more active in world trade in August/September.

• The value of the US$ has been hurt in recent weeks against the Brazilian Real, Russian Ruble or the €uro, but not the Argentine Peso. The decline in the US$ would have been important had it occurred prior to Northern Hemisphere seeding. Today, Argentine corn is offered $0.30/bu under the US Gulf with Russian wheat being $0.54/bu cheaper. Yet, the weaker US$ could start to slow S American ag expansion in 2021.

• Chicago traders estimate that funds have bought 3,000 contracts of corn and 4,600 contracts of soybeans, while buying 2,900 contracts of wheat.

• The midday US weather forecast shows no sign of a Midwest blocking high pressure ridge with near to above normal rainfall for the next 2 weeks. Midwest high temperatures in the 80′s to lower 90′s will prevail for the next 5 days with cooling temperatures after June 8. A low pressure trough will sag southward during the 10-15 day period. The forecast is favourable for Central US row crops.

• If a Midwest weather problem does not surface by mid-June, Chicago summer row crop prices will turn down (again) led by corn. The Chicago corn market has been consolidating for over a month. The urban unrest is again cutting into fuel demand while US corn/wheat export demand is slowing. We would sell a significant corn rally as any above trend yield will only add to the 4 billion bu end stock total.

• US exporters report  that any purchase orders they are holding are from private importing or crush firms. Traders and farmers are looking for a formal announcement of retaliation from the Chinese Government to help clarify the situation on Sinograin/COFCO. The US government has been silent on the issue. Chicago soybean values initially rose on the hope that the newswires have it wrong and that China is securing US soybeans as needed.

• China is bidding for additional Brazilian soybeans and appear to be willing to pay premiums above the US Gulf on a landed basis. Those price premiums amount to $0.34-0.39/bu including freight costs. The buyers want assurances of supply in a time of high and rising political tensions between the US/China. Chinese crushers are willing to exhaust Brazilian soybean supplies.

• As China bids up/snaps up Brazilian and Argentine soybeans, S American fob/CIF offers continue to rise. Some S American sellers argue that their premiums could reach a point where non-Chinese sales could be shifted to the US or cancelled. China needs soybeans in October-December, it won’t be able to totally rely on S America until their next new crop in late January.

• Chicago traders are uncertain as to the retaliation intentions of China. If the US/China Phase One deal breaks up, tariffs would return, and Chicago prices would engage in a more bearish price profile. If China continues to secure US soybeans, Chicago prices will be supported until seasonal price trends turn lower around June 10-12. Uncertainty is never a friend of a trader.

• US export inspections for the week ending May 28 were; 44.4 million bu of corn, 14.5 million bu of soybeans, and 18.4 million bu of wheat. The sales were in line with trade expectations.

• For their respective crop years to date, the US has exported 1,121 million bu of corn (down 427 million or 27%), 1,300 million bu of US soybeans (up 43 million or 3%), and 914 million bu of wheat, up 3 million or equal to a year ago. Research maintains that US 2019/20 soybeans are overstated by 75-150 million bu. China has full coverage of their import demand through mid-August. And WASDE is likely overstating US 2019/20 corn exports by 15-30 million bu based on export pace analysis to date.

• Chicago traders estimate that funds have bought 5-6,000 contracts of corn and 3,600 contracts of soybeans since the reopening. Funds are sellers of 2,800 contracts of wheat, while buying 2,900 contracts of soymeal and 3,100 contracts of soyoil. Funds were active sellers of ion Chicago overnight.

• The forecast shows no sign of a blocking high pressure ridge in the next 2 weeks. Tropical activity will be developing in the Gulf which will trim the flow of humidity heading north into the Central US. After today, warm weather follows with Midwest temperatures in the 80′s to 90 while Plains temperatures reach into the 90′s to lower 100′s. The ridging breaks down around June 10 with near to below normal temperatures and improved rain chances.

• Uncertainty on China demand prevails with traders not wanting to go home long if a retaliation announcement is made overnight by China that includes US Farm Goods. Our hope is that it doesn’t. That said, US weather forecasts are favourable and Midwest corn/ soy conditions are expected to rise in the coming weeks.

• It has been a big morning of volume in Chicago with grain futures rising to sharp gains on technical buying and spread unwinding. Long soybean/short corn and long wheat/short corn spreads are being unwound as fund managers are looking at the end of the month (and they’re not getting paid for being short corn).

• Wheat is following corn upwards with soybeans holding in the red on US/China concern. The Trump Administration promised to place sanctions on China now that Hong Kong is being nationalised. Traders long of soybeans are getting to the sidelines. We look for a mixed close, but work suggests that corn and wheat are both stretched to the upside. In fact, Wednesday’s daily Chicago volume was the lowest since Christmas while today’s volume eclipsed yesterday’s total by 9:30am.

• Chicago traders report that funds have bought 22-25,000 contracts of corn, 5,500 contracts of wheat, and 4,100 contracts of soybeans. In soy products, funds have bought 1,300 contracts of soymeal while selling 2,900 soymeal.

• In checking with US/world grain exporters, we cannot find any interest from China for US corn. China stopped checking US corn prices about a week ago.

• This is not to say that China can not return for a purchase of US corn, but with rising tensions between the US/China, we doubt that the Government is interested in making new US corn purchase until it is clear what sanction steps the Trump Administration will be applying related to Hong Kong.

• EIA indicated that US corn ethanol production expanded by 18 million gallons to 213 million gallons last week. This was down 32% from last year and well below the weekly corn grind needed to justify the existing USDA May WASDE forecast. US ethanol stocks fell to 973 million gallons, down 19 million gallons which is up 2% on last year. Research argues that WASDE will need to cut US corn ethanol grind for 2019/20 by another 50-100 million bu in its June report. Our work argues for a total US 2019/20 corn ethanol reduction of 300-350 million bu by August.

• The US midday GFS weather forecast model is struggling with an early seasonal tropical storm that is forecast to develop in the Gulf around June 7. Warm/dry weather follows with rains noted on the weekend across the NW Midwest as warm air builds northward. A tropical system is forecast to make landfall over NOLA on June 12. This is way too far out for any confidence, but we would suggest monitoring early June tropical storm development. We see no evidence of any hot/dry pattern that looks to be locking in for the summer. The upcoming warm/dry weather will aid corn/soybean crops by allowing farmers to complete their planting and getting crops to root down.

• Funds became too short of corn/wheat and are covering a portion of those shorts. We see no evidence of China corn demand or a lasting/hot dry Midwest weather pattern.

• It must stop raining first before you can have a drought. This is a corn rally to sell with the autumn supply outlook burdensome (over 4 billion). Wheat prices are also nearing their pre harvest peak. We would not chase this rally, and work doubts it continues.

• Dull/listless is the midday Chicago trade as an early rally effort failed to garner any buying interest. End users see no reason to chase rallies while speculators appear comfortable with their existing market positions. All eyes are on Central US and European/Black Sea weather as spring seeding is wrapping up.

• Chicago traders are closely watching weather forecasts to gauge 2020 crop yield potential. We look for a mixed close with both the bulls and bears showing frustration with range bound markets.

• Chicago brokers estimate that funds have bought 3,200 contracts of corn and 4,800 contracts of soyoil, while selling 1,200 contracts of Chicago wheat and 900 contracts of soybeans. Funds are flat in soymeal. Interest in new positions is relatively low in midday activity.

• China is said to have purchased 10-14 cargoes of Brazilian soybeans for Sept/October, and even 1 cargo for November. The purchases are surprising US exporters as Brazil appears to have more soybean supply available than expected. China is bidding for additional Brazilian cargoes this morning which indicates either than Brazil’s 2020 soy crop is understated or that Brazil’s soy crush rate is sharply lower to due Covid-19 reduced soymeal demand.

• It was expected that the US would be able to garner Chinese demand from late August into early 2021. The US will still dominate China’s purchases in this timeslot, but totals will be cut from prior expectations. Even with Brazilian soybeans being more expensive this autumn, China is securing this origin via what they see as the political risk in US soybean/grain sales.

• There has been considerable discussion on 2020 US corn seeding totals (like last year) with North Dakota just 54% planted through Sunday. Research would argue that farmers will continue to seed a few days after their PP insurance date (May 25) such that 65% of the North Dakota corn crop will be seeded at the end of this week.

• NASS indicated that 3.2 million North Dakota acres were intended to be planted to corn in March, thus 800,000-1.1 million acres could be enrolled in the Prevent Plant program. Yet, we all know that you cannot deduct one states PP acres from the US March Intentions to forecast the June Final US corn seeding total.

• We would hold to a 2020 US corn seeding estimate of 96.0 million acres based on some western US states seeding more corn via favourable weather while others such as ND, IL and PA placing acres in the PP corn program. Historically, the US has some 2.5-4.5 million acres enrolled in PP each year.

• EIA will be out with their weekly ethanol report on Thursday due to Monday’s US Government holiday. Moreover, the US weekly export sales report will be pushed back to Friday. Argentine FOB corn for June/July is offered $0.32-0.34/bu below the US Gulf which is impacting the current and future US corn sales pace.

• The midday US GFS weather forecast model is struggling with an early seasonal tropical storm that it is forecast to develop in the Gulf around June 7. The models are very erratic with the storm’s positioning and impact on the flow of Gulf humidity northward. Confidence in the US GFS forecast beyond the next 7 days is low. We suspect that the GFS is under forecasting rain for the Western Midwest amid “ring of fire” rains that start this weekend. The next 48 hours will produce scattered showers across the E Midwest including a portion of Eastern IA. Rain totals are estimated in a range of 0.15-1.00″ with coverage of the area pegged at 65%. Warm/dry weather follows with rains noted on the weekend across the NW Midwest as warm air builds northward. A tropical system is forecast to make landfall over NOLA on June 12. This is way too far out for any confidence.

• Soaring palmoil futures is supporting gains in Chicago soyoil. US/China tensions are likely to worsen into the weekend as China’s Parliament passes the National Security Law which will spark US sanctions. Advice is not to chase Chicago rallies. E Midwest farmers report that the recent heat is aiding corn/soy crops.

• Rising macro-financial markets have sparked some modest short covering in the summer row crops with funds active early buyers of corn. The bears have not been rewarded over the past 3 weeks and with values not cracking to the downside following the long US holiday weekend, the shorts are losing patience. Amid seasonal price trends that normally peak in early June, Chicago traders are taking some short risk off the table.

• We see nothing that would change the longer-term fundamental view, but with US energy markets in recovery and a few more US ethanol plants opening this week, Chicago appears to be waiting on summer weather/yield prospects before taking their next price cue. We look for a mixed CBOT close.

• USDA/FAS reported that China booked 264,000 my of US soybeans with an unknown buyer (strongly rumoured to the Philippines) took 216,000 my of US soymeal. The China sales were split into 66,000 mt for 2019/20 with the remaining 198,000 mt going into the 2020/21 crop year. We hear that the demand was filled on Friday and being reported today.

• Further, we also hear that Chinese crushers are bidding for 3-5 cargoes of US soybeans. No new US soybean purchases can be confirmed by China this morning, but it is heartening that China is bidding for US soybeans (again) amid the political tensions that exist. China is back securing US ag products, but traders are wary that the Trump Administration will apply new sanctions on China for their takeover legislation of Hong Kong that was announced on Friday. There is no sign that Sinograin is securing large amounts of US soy for China’s reserve.

• US export inspections for the week ending May 21 were; 43 million bu of corn, 12.2 million bu of US soybeans, and 16.8 million bu of wheat. The sales were all in line with trade expectations.

• For their respective crop years to date, the US has shipped out; 1,077 million bu of corn (down 442 million or 36%), 1,289 million bu of soybeans (up 50 million or 4%), and 896 million bu of wheat (up 7 million or 1%). Research maintains that the USDA is overstating US 2019/20 soybean exports by 50-150 million bu.

• The Brazilian Real has rallied to 5.38:1 vs 6:1 just 2 weeks ago. The macro market risk on mentality due to America and much of Asia and Europe reopening has spurred the selling of the US$. What is unknown is whether a second wave of the virus returns to Europe and the US, and its impact on GDP recovery forecasts. The Argentine Peso has not rallied and is trading at 68:1 while the Russian Ruble is priced at 71:1. The Ruble bottomed out in mid-April at 79:1.

• Notes that the cheap Argentine Peso is keeping their fob corn offers at a hefty $0.34/bu below the US Gulf. Research forecasts that over 87% of the 2020 US corn and over 65% of the US soybean crop were seeded as of May 25. There are pockets of problems in Central IL and North Dakota, but for the most part the 2020 start of the growing season is highly favourable.

• The midday US GFS weather forecast is wetter across the upper Midwest with rainfall totals of 0.75-2.00″. The moisture is well placed and deemed as favourable with most of the 2020 corn/soybean crop already planted in this area. A tropical system in the Gulf could push northward into the SE US that ends their soil moisture shortages. Temperatures stay warm over the next 2 weeks which should enhance growth rates. The tropical system must be watched, but it would dislodge any Central US high pressure ridge.

• Today’s Chicago rally is based on the rise in macro financial markets and that the US did not impose new sanctions on China (yet?). We doubt that soybeans or corn can sustain a rally amid favourable Central US weather. US corn crop ratings next Monday should be high which will start to exert downward pressure again with US farmers.

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Weekend summary 22 May 2020

• Chicago values are mixed at midday with soybeans lower while the grains trade either side of unchanged. The selling in soybeans is based on China’s absence as a US buyer this week ahead of China’s biggest political gathering of the year in Beijing. The worry is that China hawks could prevail in political discussions (about the US), that could limit China’s ag purchase pace. We remains hopeful that China can/will perform and look past political sabre rattling from the US. A key USTR review of China’s purchases to date will take place in July, just 5 weeks away. China needs to get “on pace” in securing US soybeans and other ag products. The soybean market will be closely monitoring China’s purchase pace of US soybeans into July.

• We anticipate a mixed Chicago close today with future rallies in corn/ soybeans being capped by improving Central US weather. The NWS long range 30/90 day forecast was released today which indicated near normal temperatures and near to above normal precipitation. Such a forecast would be favourable to summer row crop yields. The average US farmer is undersold on old and new crop production and after June 1 will have to become a larger cash seller.

• Chicago brokers estimate that funds have sold 3,500 contracts of corn and 6,300 contracts of soybeans, while being a net buyer of 2,900 contracts of Chicago wheat. In soy products, funds have sold 2,100 contracts of soymeal and 1,200 contracts of soyoil. Chicago soymeal has fallen to a new contract low with July priced at $282/ton. A weekly close below $280/ton would set the 2016 lows at $260/ton as being the next downside price target. Spot Chicago soymeal has not closed the week below $280/ton for the past 4 years.

• US export sales for the week ending May 14 were; 15.8 million bu of wheat (both crop years combined), 34.8 million bu of corn and 44.3 million bu of soybeans. The sales of wheat were disappointing while corn/soybean sales were supportive.

• For their respective crop years to date, the US has sold 976 million bu of wheat (up 31 million or 3%), 1,554 million bu of US corn (down 309 million or 16%), and 1,525 million bu of soybeans (down 156 million or 9%). We believe that WASDE will continue to adjust their old crop US soybean export estimate downward by 50-100 million bu over several monthly reports. WASDE is too low on US soyoil exports as the sales pace remains historically large.

• China has purchased 14.5 million mt of US soybeans for the 2019/20 crop year with known new crop purchases of 1 million. There are total unknown 2019/20 purchases of 2.2 million mt which an estimated half could be to China with new crop unknown purchases clocking in at just 500,000 mt. US new crop soybean sales are running well behind prior years due to Covid-19 demand uncertainty and China.

• Several key groups of US farmers feel left out with HRW wheat/prevent plant producers not seeing any revenue from the CARES pay-outs announced on Tuesday. And producers that are holding corn/soy from multiple years will try to play the system saying that all bushels are from 2019. Moreover, producers that rightly sold bushels ahead of the Covid-19 break are complaining that the USDA is rewarding bad business behaviour. It is probably correct to suggest that the USDA financial aid is never fair, but it was needed. And producers are getting the message that if there is a CARES 2, they need to have crop to participate.

• The midday US GFS’s weather forecast is wetter across E Texas and Oklahoma with rain totals of 2-5.00″. The moisture is excessive and would produce low level flooding and quality concern for ripe HRW wheat. Otherwise, the warm/wet weather is favourable for summer row crops. Temperatures stay warm over the next 2 weeks.

• There is one more trading session ahead of a long US 3-day weekend with position squaring remaining the feature. Black Sea/European June rainfall will key cash wheat price direction. China demand controls daily Chicago soy prices.

• Chicago wheat values have surged on a combination of fund short covering amid rumours that the 2020 Russian wheat crop may only be as large as last year. This may raise pressure on the Government to maintain an export quota system for the new crop. A 2020/21 export quota would make the EU dryness much more important for nearby world wheat availability.

• KC July wheat futures have forged a bullish key reversal off a weekly trendline which has the attention of technical traders. A weekly close above $4.525 July KC would produce a weekly reversal, which would signal that wheat has scored an early seasonal low with all eyes on whether the EU wheat crop receives a needed rain during June, the key heading and filling timeframe.

• We look for a mixed Chicago close as corn stays the laggard. China interest for US soybeans persists and weekly export sales of US soybeans are expected to reach nearly 1 million mt in combined old/new crop positions. Funds have not been paid for being short of corn for several weeks which could produce fresh short covering. Chicago brokers estimate that funds are net buyers of 7,000 contracts of wheat, 3,000 soybeans while selling 2,200 contracts of corn.

• Weekly US ethanol production showed further recovery with 195 million gallons produced last week vs 181 million gallons last week. It is estimated that 40-41% of the US ethanol industry is still shut down, but we expect that additional plants will be coming on-line in June. US ethanol stocks have plunged in the past month as blenders pull from their stores and ethanol producers shed stock before coming back online.

• We estimate that WASDE will cut its 2019/20 US ethanol production further in June by another 50-75 million bu to account for the ongoing production cut. US gasoline consumption fell last week to 6.79 million barrels per day, which was down 8% from the prior week and down 28% from a comparable week last year.

• China announced that it will start its weekly corn auction on May 23 with an offer of 4.0 million mt. The price will be the same as last year at 1,650 RMB/mt. The pending auction has pressured cash corn/Dalian futures in recent days.

• The midday GFS weather forecast is farther north with rain next week into the NW Midwest and Northern Plains. The moisture is not excessive and would be ideal for newly planted corn/soybeans. Heavy rains will stay confined to the OK/TX and the Delta where the rain can help established crops. Warming temperatures and near to above normal rainfall is favourable to 2020 US summer row crop potential. The rains come too late to aid TX/OK HRW wheat yields.

• The ongoing dryness across Europe and portions of the Black Sea will become more important to wheat export availability during June. World wheat crops are made or lost from the opening days of June into mid-July. China’s buying of 3-5 cargoes of US soybeans is offering support to Chicago futures. Corn holds in a fundamentally bearish trend. Corn’s more bullish statistic is that funds are already short 215,000 contracts.