• Midday Chicago values are mixed at midday with spread unwinding/covering dominating the morning. Corn has been the short leg of most spring spreads with covering noted of long soybean/short corn and long wheat/short corn positions. The covering has pressured soybeans and KC wheat, while corn futures have been able to bounce, even in the face of improving Central US weather. We look for a mixed close with few traders having any passion to push their bullish or bearish view too hard.

• Chicago brokers report that funds have bought 2,200 contracts of wheat and 7,700 contracts of corn while selling 2,900 contracts of soybeans. In soy products, funds have bought 1,200 contracts of soyoil while selling 700 contracts of soymeal.

• The USDA/FAS did not announce any new sales of US grain or soybeans this morning.

• US President Trump was joined by farm leaders to announce the release of $16 billion in coronavirus relief payments to producers. Program details are awaited with most watching to see if payment limitations are reduced/lifted.

• Spot Chicago corn futures reached $3.00 in the closing days of April with July corn futures recovering to $3.25 today. Spot Chicago corn will struggle to rise above $3.25-3.34 resistance without a dire Central US weather problem. With the Midwest weather forecast being favourable, July corn will struggle to rise above $3.30.

• Russian domestic wheat flour prices are holding at record highs which must be concerning to the Government officials as the Ruble has strengthened (along with the rise in crude oil). The stoutness of Russian wheat flour prices and tightness of domestic wheat supplies has some wondering if the Russian’s could continue to the new quota system or work to restrict wheat exports early in their new crop campaign. World wheat importers will be closely following the Government’s intentions for Russian new crop exports in the weeks ahead.

• Indian farmers have harvested a big wheat crop which local/private analysts peg at 103-104 million mt. However, as Covid-19 has struck India, moving the wheat from farm to storage and milling facilities has been difficult amid lockdown and movement restrictions. The fear is rising with each passing day, that monsoonal rains will soon cause wheat quality deterioration. India is at risk that its wheat crop will be damaged by excessive water as Covid-19 ravages the country.

• China’s annual corn auctions are rumoured to be starting in early June which should help ease tight domestic supplies, and lower rising internal prices.

• China seasonally starts to auction off its massive Government corn stockpile each spring to bridge the supply gap to new crop and offer a means to support its farmers. It is unknown if the auction will impact China’s potential import of US corn into SE China livestock areas.

• The US midday GFS’s weather forecast is drier across the Central Plains and Upper Midwest with heavy rain stretching from the Southern Plains eastward into the SE US. To the north, 10-day rain is estimated in a range of 0.25-1.00″ with temperatures warming into Friday and the rest of the 14-day forecast. The forecast leans favourable for the final seeding effort and early crop growth.

• July corn has been the leading the rally on short covering as price is trying to spur enlarged cash corn movement. USDA has been adjusting its ethanol corn grind based on actual monthly losses, which means that future cuts in US 2019/20 ethanol corn use are still forecast. Soybeans need to see actual Chinese demand while KC wheat tests a long-term weekly uptrend line at $4.39-4.41/bu. This is no time to turn bullish of corn or bearish of wheat/soybeans. The EU midday weather forecast stays arid which is concerning for reproducing winter wheat/barley crops.

• Midday values are mixed with soybeans firmer, wheat lower and corn caught in between. Chicago appears to be trading technicals (charts) with fresh fundamental news lacking ahead of a pending long US 3-day weekend. Funds have been sellers of wheat/corn while securing modest amounts of soybeans/soyoil.

• The volume of trade is diminishing at midday. Research suggests that US and EU wheat prices are getting close to scoring their seasonal lows (early). KC July wheat futures circa $4.40 will be testing a weekly uptrend line that extends back to 2016. We expect that this support will hold amid the ongoing dryness that is trimming supplies in Europe and the Black Sea. A mixed Chicago close is forecast with traders positioning into the close looking for a turnaround on Tuesday.

• Chicago brokers report that funds have sold 3,200 contracts of wheat, 2,600 contracts of corn, while buying 2,400 contracts of soybeans. In soy products, funds have bought 3,200 contracts of soyoil while selling 1,900 contracts of soymeal. The fund’s buying of soybeans/soyoil has slowed from opening levels.

• US export inspections for the week ending May 14 were; 45.3 million bu of corn, 12.9 million bu of soybeans, and 16.2 million bu of US wheat. The corn inspections were better than expected while China shipped out 2.6 million bu of US soybeans.

• For their respective crop years to date, the US has shipped 1,032 million bu of corn (down 443 million or 30%), 877 million bu of wheat (up 8 million or 1%), and 1,277 million bu of soybeans (up 57 million or 4.5%). We believe that US 2019/20 soybean exports will be cut another 25-75 million bu in the June WASDE report. We cannot statistically argue with the WASDE old crop wheat and corn export estimates.

• World exporter wheat stocks are declining via ongoing dry weather. Private estimates for the European all wheat crop have declined to 139-141 mt vs 155 million last year (including durum). With another 2 weeks of dry weather, EU exporters report that EU wheat production could drop below the 2018 harvest at 135 million mt. This looks to severely reduce EU wheat exports at a time with growing North African demand due to their own dryness issue from January through March. French wheat futures fell on lacklustre end user demand, but the crop outlook for EU wheat is becoming a concern with the crop either in the heading or just entering the heading stage of production.

• And, sporadic rain across the Black Sea and developing drought for Siberia look to trim the Russian/Ukraine wheat crops. Crop concern is growing which could produce an early seasonal low with Russian flour prices at record highs.

• The developing loss of EU/Black wheat crops is likely to produce an early seasonal fob low with US wheat crop quality becoming important to world importers. The US has a developing export opportunity of the EU/Black Sea continues with its arid weather profile into June.

• The midday GFS’s US weather forecast is like its overnight solution which raises confidence in its correctness. Soaking rain will be positioned from the Central Plains into the SE US later this week. Showers will dot the Northern Plains next week. Thankfully, the Central IL forecast is drier which will aid the drying and reseeding effort. Temperatures warm from west to east with highs by Thursday ranging from the 70′s to the mid 80′s. The warmer temperature profile aids seed emergence.

• Fund selling and sagging world wheat prices ($194/mt ex the Black Sea) is keeping pressure on Chicago wheat. A seasonal low is forecast to develop with fresh downside price risk limited to 3-7 cents. China did not show up as a buyer of US soybeans over the weekend, but moderate interest is noted today. This is no place to be selling wheat or soybeans. We would look to sell corn on rallies as US new crop supplies will overwhelm.

• Funds bought 24,000 contracts in soybeans, lifting their net long to 26-week high of 32,500 contracts. Funds bought 6,900 in live cattle and 1,200 in feeder cattle. Across all 3 wheat exchanges, funds sold 5,600 contracts.

• The heaviest selling for the week was in corn, where funds sold 24,000 contracts, taking the net short to a 52-week high of 214,000 contracts. Funds net short Ag position is heavily concentrated in corn, making it the most vulnerable to a major short covering rally.

• Chicago corn futures ended steady to higher. Talk of select ethanol plantings resuming production in the next two weeks is noted. Cash production margins are at/above break-even across the far Eastern Corn Belt, and amid ongoing boost in weekly gasoline consumption, ethanol production on the margin will be rising. Yet, note that production margins remain negative across in SD, NE and IL. The widespread return of closed plants is not expected in the near-term.

• Research continues to suggest that the USDA will ultimately reduce its old crop ethanol demand draw forecast to 4.50-4.60 billion bu, vs. its May estimate of 4.95 billion. This is important as rising old crop stocks raise the burden on Northern Hemisphere yield loss if one is to be bullish of corn. And while European dryness will stress wheat there in the next two weeks, key EU/Black Sea corn producing regions, including Ukraine’s primary Corn Belt, have seen normal/above normal precipitation in the last 30 days.

• Funds on Tuesday were short a net 214,000 contracts, up 24,000 on the prior week. A pause in the break was due. But there’s nothing available to spark meaningful fund short covering.

• US wheat futures ended mixed but little changed. Paris milling wheat ended €1.50-1.75/MT higher as weather premium continues to be added amid the return of lasting dryness to France, Germany, Poland and the UK. EU/Black Sea weather is now critical with yield loss or gain to be determined by rainfall and temperatures over the next 30 days. Funds on Tuesday were long a net 3,000 contracts in Chicago. We estimate that funds this evening are net short 7,000 contracts.

• The midday EU weather model added needed rain to Ukraine and Southern and Central Russia. This rain will be welcomed but the forecast needs to verify. And supply concern is shifting from the Black Sea to Europe. Complete dryness is forecast in Western Europe into the very end of the month. European temperatures will be rising as soil moisture is lost. This will exacerbate crop stress. There is also growing concern over ongoing dryness in W KS, WOK and ECO.

• Weak new crop demand will provide a buffer against EU dryness in the near term. But this is no place to add to sales. We believe that Chicago’s premium to KC will weaken over time.

• Limited news at the end of the week had soybeans trading in a narrow range before closing steady.

• NOPA reported an April soybean crush rate of 172 million bu, which was nearly 2 million more than expectations. The monthly figure was 107% of a year ago and by far the largest April crush rate on record. Based on the NOPA figure, we estimate a total US soybean crush rate of 182 million bu or 10 million more than a year ago. This puts the cumulative soybean crush rate at a record large 1,447 million bu, and right on track to reach the May WASDE forecast of 2,125 million bu.

• FAS did not report any soybean sales on Friday, but China has become a regular buyer of US soybeans in recent weeks. However, the old crop sales that have been made are not expected to ship until late in the season and could potentially be rolled to new crop. This week’s ship line-up did not include any vessels headed for China.

• Amid low prices and recent Chinese demand, our short-term outlook is neutral.

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Weekend summary 15 May 2020

• It has been a mixed morning with Chicago grains weaker with soybeans slightly higher at midday. Trade volume remains diminished with few end users desiring to chase a rally without a dire US/world weather problem. China is securing US soybeans daily which is helping underpin the complex. For now, most argue that COFCO is booking US soybeans for their own crush plants. At some point, China is expected to start securing US soybeans for their reserve. We look for a mixed Chicago close as the fund selling abates in soybeans/wheat heading into the weekend. Funds appear willing to add to their growing net short corn position.

• Chicago brokers estimate that funds have sold 3,200 contracts of corn, 2,900 contracts of wheat, while buying a net 1,200 contracts of soybeans. In soy products, funds have bought 1,900 contracts of soyoil while selling 1,500 contracts of soymeal. Fund managers appear to be slowing down on their sales of soybeans and wheat as both test chart-based support.

• Weekly US export sales for the week ending May 7 were; 13.0 million bu of wheat (both crop years combined), 42.2 million bu of corn and 17.5 million bu of soybeans.

• For their crop years to date, the US has sold 838 million bu of wheat (up 24 million or 3%), 1,000 million bu of corn (down 456 million or 31%), and 1,273 million bu of soybeans (up 48 million or 4%). Research argues that WASDE is still too high with its US 2019/20 soybean export estimate by 50-100 million bu. Chinese demand will be focused on the new crop position with August needs covered.

• FAS this morning confirmed that China secured another 198,000 tons of US soybeans and 20,000 mt of soyoil. The soyoil sale was a surprise while China’s soybean purchase was under trader expectations. We continue to hear that China is bidding for September/October US soybeans on basis.

• The CFTC warned the US Commodities Industry should it should be prepared for heightened market volatility and the potential for negative pricing for certain futures contracts in the wake of Covid-19. Last month, the US May WTI crude oil futures contract fell below zero for the first time that a non-electrical commodity was priced at a negative level. The CFTC issued the advisory letter to warn traders and brokers of the potential for negative prices and to combat against the occurrence during the delivery period. Exchanges may seek emergency authority to either liquidate, transfer positions or suspend trading to preserve the integrity of the marketplace if needed during expirations.

• The US Transportation Dept revised rules for short haul US truck drivers allowing them to work 14 hours instead of 12 and expanding the distance limit to 150 miles from 100. The new regulation will salvage $2.8 billion over 10 years.

• The midday GFS’s US weather forecast is wetter than the overnight run with showers/storms to be more frequent following the weekend. Research cautions that the position of Tropical Storm Arthur is causing sizeable run to run model deviations. However, outside of the N Plains, much of the Delta and Midwest would receive 1.50-3.00″ of rain over the next 10 days. Such rain is 50% greater than average. We suspect that the forecast is too wet with downward revisions to come. A warming of temperatures is imminent, with highs across the Plains and Midwest to reach into the 60′s, 70′s and 80′s.

• Wheat and soybeans have limited downside price potential from current depressed levels. This is no place to be making new sales, but rallies depend on enlarged China buying of US soybeans or a continued drying weather pattern across Europe and the Black Sea. We are troubled by the ongoing decline in European soil moisture into June. The 14-day forecast calls for only sporadic rain. A bearish long-term outlook is advised with corn likely to score a short term trading low in early June.

• Chicago ag futures are weaker by varying degrees at midday. Of note is that WTI crude futures failed to garner much upside momentum despite a modest but surprising draw in weekly US crude stocks. Short-covering in corn has paused as forward ethanol margins remain negative and Central US weather looks broadly favourable into the opening week of June. US and world wheat futures are down sharply on a lack of fresh news, an aggressive sale to Algeria, and as additional moisture boosts lie in the offing across E TX, OK and E KS.

• The market’s reaction Tuesday to the USDA’s May WASDE was limited. US and world corn stocks were lower than expected. But the data was by no means bullish and until there’s a major change in the perception of grain oversupply, rallies will remain brief and uneventful.

• This week’s weekly EIA release featured another decent improvement in US gasoline consumption. It should be noted that restaurant traffic has improved in areas where lockdown restrictions have been relaxed. Markets will continue to monitor infection rates in those regions, but US economic activity has risen from the lulls of early April.

• US gasoline consumption through the week ending May 5 totalled 7.4 million barrels/day, vs. 6.7 million the previous week and vs. 5.1 million during the first week of April. This is still down 19% from the same week in 2019, but the rise in miles driven is drawing down US petroleum stocks. US crude stocks, less reserves, on May 5 totalled 531.5 million barrels, vs. 532.2 million the prior week. Ethanol stocks last week were down 60 million gallons to 1,015 million. US ethanol stocks have fallen a massive 147 million barrels in the last three weeks.

• However, gains in weekly ethanol production have been muted as plants stay closed and profitability remains absent. Ethanol production last week totalled 181 million gallons, up 6 million from the previous week but still down 41% from last year. It is estimated that weekly production of 275 million gallons will be needed throughout the summer months to validate the USDA’s forecast. Spot futures-based margins are fractionally in the black but deferred margins remain negative.

• FAS this morning confirmed that China secured another 396,000 tons of US soybeans, split evenly between old and new crop delivery. This demand had been rumoured and largely digested.

• Otherwise it is still tough to find bullish input. Spotty dryness will persist across key area of the EU/Black Sea wheat belt, but Europe and Ukraine’s primary corn regions will be well watered.

• The GFS weather forecast also hints at soaking rainfall of 1.0-1.5″ across Mato Grosso. This will add to what is already record safrinha yield potential there.

• The midday GFS’s US forecast is consistent with the morning run. A warming of temperatures is imminent, with highs across the Plains and Midwest to reach into the mid-70s on Thursday. Moderate to heavy rainfall will impact a wide swath of the Central US, stretching from OK/KS into the Eastern Corn Belt, over the next 3-4 days. Complete dryness will be established next week. Scattered Midwest showers then follow May 24-25. This mix of rain, sun and warmth will boost vegetation health in the weeks ahead.

• Ag markets worldwide are looking for demand. Also key in the days/weeks ahead will be the evolution of US-China tensions. A positive atmosphere is critical for China in meeting its Phase One buying commitments.

• The USDA May Report failed to offer any major market surprises. US 2020/21 corn stocks are forecast at the largest in over 3 decades (3,300 million bu) while US wheat stocks stayed large (909 million bu) with soybeans more than adequate at 405 million bu. 2020/21 world wheat stocks were record large at 310 million mt (up 15 million), world 2020/21 corn stocks were up 25 million at 340 million mt, while world soybean stocks fell nearly 2 million to 98.4 million mt. The US and world hold an abundance of grain and oilseeds in old and new crop positions.

• Chicago outlook hinges on Central US/world weather and future Chinese demand for US ag goods. We would note that WASDE is taking a stepped approach in reducing US/world demand due to Covid-19. WASDE made little or no demand reduction in 2020/21 world trade/consumption due to Covid. Our concern is that WASDE is too optimistic as the virus grips the world’s health. However, forecasting the end of the virus is impossible. Thus, WASDE will be making a demand reduction on a month-by-month basis. This means that without dire weather, Chicago rallies will be capped with price bounces tied to the arrival of China for US farm goods.

• WASDE estimated the 2020 US winter wheat crop at 1,255 million bu. The crop is down 49 million bu from last year, but it was above prior trade expectations. The US HRW crop was pegged at 733 million bu, SRW at 298 million bu with white wheat at 223 million bu. The US 2020 all wheat crop was forecast at 1,866 million bu, down 54 million from last year.

• WASDE forecast 2020/21 US wheat end stocks at 909 million bu with exports at 950 million bu. Such end stocks model out to a farm gate annual price of $4.60/bu which will limit rallies in KC spot wheat futures above $5.00. US wheat feed/ residual wheat use was placed at 100 million bu based on the cheap price of corn.

• 2020/21 world wheat production is forecast to be record large 768 million mt with the Russian crop at 77 million mt, Ukraine at 28 million mt, and Europe at 143 million mt. Russian and EU wheat crop cuts were as expected due to late winter and early spring dryness. China looks to produce a record large wheat crop of 135 million mt. The size of world production is bearish with the 2020 Australian crop estimated at just 24 million mt. The Aussie crop could be 2-6 million mt larger. World wheat stocks at 310 million mt is massive with world less China stocks at 150 million mt.

• US 2020/21 corn production is forecast to be record large at 15,995 million bu. This is the first time that the US has produced a 16 billion bu corn crop. The size of the crop allowed WASDE to raise their feed/residual total to 6,050 million bu. US exports were raised to 2,150 million bu with China to take 7 million mt. The farm gate price was forecast at $3.20 which consider to be $0.30/bu too high.

• World corn stocks were raised to 340 million mt (up 25 million) the largest since 2018/19. WASDE followed prior trendline consumption increases and did not make any adjustment for Covid-19. We expect that WASDE will be forced to trim world corn consumption/trade if the virus persists through the summer. The 2021 Brazilian corn crop was forecast at a record large 106.0 million mt with Argentina at 50.0 million mt. The Ukraine new crop harvest was pegged at a huge 39 million mt. Local currencies are fanning an accelerated world corn production trend.

• US 2020/21 soybean end stocks were forecast at 405 million bu assuming a crop of 4,135 million bu (up 568 million bu from last year). The yield was forecast at trend at 49.8 bushels/acre with seedings at 83.5 million acres. We expect that US 2020 soybean seeding will rise at least 1.5 million acres to 85.0 million acres. The forecast annual farmgate price was pegged at $8.20/bu which looks to cap rallies above $9.00 basis November futures. Note that US old crop soybean end stocks were raised to 580 million bu based on a cut in exports to 1,675 million bu. WE believe that US old crop soybean exports could be trimmed by another 75-125 million bu.

• The USDA May crop report held little for the bulls with US/World crop production and stocks more than adequate. A bullish outlook depends on adverse US weather. Traders are unwinding long soy vs short corn and long wheat vs short corn spreads. China demand is needed, and it can provide bounces. Corn remains the bearish drag with December rallies capped above $3.40. Soybeans could well bounce as much as 20-35 cents on (if) China buying.

• After a firm start Chicago turned mixed with soybeans higher while corn/ wheat futures were weaker. The volume of trade has been curtailed by the uncertainty surrounding Tuesday’s USDA Crop Report. Fund managers are squaring positions and waiting for the WASDE/NASS stocks/crop data. The May WASDE report incorporates the March Seeding Report and will provide the first WASDE blessed 2020/21 crop/stocks estimates. Traders are positioning long soybeans/ short corn and long oats/short corn. Corn appears to be the short leg of all spreads with WASDE to use 97.0 million acres of seeding until the final release of the survey in the closing days of June.

• We anticipate a lower Chicago close in corn /wheat with KC July wheat futures holding at key support from the 50-day moving average at $4.76. If July KC wheat futures closes below $4.7325, last week’s low, the selling pressure is likely to increase. Soybeans are firmer as China crushers have secured another 4-6 cargoes from the US for September/October keeping with last week’s program. Soybean/corn spreads should widen into early summer.

• Chicago traders estimate that funds have bought 3,400 contracts of soybeans and 1,800 contracts of soymeal, while selling 2,000 contracts of corn and 1,600 contracts of soyoil. Funds are flat in Chicago wheat futures’ trade.

• China crushers have booked another 4-6 cargoes of US soybeans to start the week. This is like what occurred last Thursday and is now expected become more “normal” as Chinese crushers cover their autumn import needs. We cannot confirm rumours that China’s is securing soybeans for its reserves. In fact, China announced to start the week that it will start auctioning off domestic Government surpluses of corn and soybeans on a weekly basis. The auctions are starting earlier than normal, based on abundant supplies in government stores. The Chinese purchases of US soybeans is what is underpinning Chicago soy futures.

• US export inspections for the week ending May 7 were; 52.5 million bu of corn, 18.2 million bu of soybeans, and 12.5 million bu of wheat. For their respective crop years to date, US corn exports stand at 984.7 million bu (down 457 million or 32% from last year), US wheat exports at 12.5 million bu (up 23 million or 3.5% from last year), with US soybean exports at 1,262 million bu (up 61 million or 5% from last year). WASDE is expected to trim their 2019/20 US soybean exports in Tuesday’s report by at least 50 million bu. China shipped out 2.5 million bu of US soybeans off the PNW last week.

• Russian fob wheat trades continue to leak lower with a trade reported at $194.50/mt for July. The recent rain has stabilised the Russian wheat crop.

• The forecast holds less rain for the Midwest with greater totals for the Plains/Delta. Midwest rain totals are forecast in the next 10 days in a range of 0.75-2.50″ which would be ideal for emerging summer row crops. The 11-15 day forecast holds another rain chance to keep crops well-watered. Temperatures start warming on Tuesday with highs reaching the 60′s, 70′s and 80′s by the last half of the week. The warmth persists into May 25 with near to above normal rain. The warm/wet weather is favourable with farmers to complete their spring planting by the weekend amid this week’s cool/dry conditions. There is no indication of any lasting extreme heat.

• China crushers have become regular buyers of US new crop soybeans now that Brazilian fob offers are rising, and Brazil has shipped out record soy tonnages since February. China has soybean import need from late August into early 2021, before Brazilian soybeans are cheaper again. Rains for the right areas of the Black Sea and Mato Grosso Do Sul are aiding world wheat/corn production outlooks. Our view stays bearish with WASDE’s old crop corn /soy stocks estimate likely to be larger than industry expectations for the report.

• Chicago futures are higher at midday based on US corn sale to China and hope that there is additional demand to follow. Chicago corn, soybean and wheat futures are rising on the return of China for US corn amid a cold weather threat for the E Midwest on Friday/Saturday mornings. Funds are buyers on midday short covering, but end users see no reason to chase a rally. We look for a firm Chicago close. Corn, soybeans and wheat have been trading in the same range for over 2 weeks awaiting new crop weather developments. Until more is known about late May and June weather, we look for the same range trade to persist.

• Chicago brokers estimate that funds have bought; 11,200 contracts of corn, 4,100 contracts of wheat, and 7,400 contracts of soybeans. In soy products, funds have secured 3,200 contracts of soyoil and 2,400 contracts of soymeal.

• USDA confirmed that China purchased 686,000 mt (27 million bu) of US corn that was largely split in an old and new crop position. The purchase is said to be part of the 1.5 million mt of TRQ allocation that was offered several weeks ago.

• We hear that there may another 200-300,000 mt of US new corn purchases that are working. To date and including the announced sale today, China has secured 1.25 million mt of old crop and 819,000 mt of new crop US corn. No one other than USTR/China knows their annual purchase (Feb 2020 to Feb 2021) pledges, but rumours peg the amount between 15-20 million mt of US corn in total. Note that China will not secure all the US corn at once, it will be a process into February 15. COFCO was the cash buyer in the Gulf overnight.

• China is also rumoured to be booking US soybeans for private crushers in a new crop position with tonnages sold estimated at 4-6 cargoes. China appears to be returning to the US soybean market and will be a more regular soybean buyer in coming weeks. Brazil is quickly selling/shipping soybeans, and the US will have an open opportunity to fill world demand from September through January.

• Moreover, China was a buyer last week of US sorghum (65,000 my), US cotton (217,500 bales), US cattle hides (200,100 pieces), 1,400 mt of US beef and 40,200 mt of US pork. The Chinese are a continuing to secure US meat/sorghum.

• US export sales for the week ending April 30 were 9.0 million bu of wheat, 24.0 million bu soybeans and 30.5 million bu of US corn. For their respective crop years to date, the US has sold 962 million bu of wheat (up 23 million/2%), 1,478 million bu of corn (down 347 million/24%), and 1,459 million bu of US soybeans (down 190 million or 11%). WASDE should cut their 2019/20 US soybean export estimate by 25-50 million bu and corn by 25 million bu on Tuesday’s report.

• Stats Canada estimated that its 2020 all wheat seeding would rise 3.3% to 25.4 million acres, canola seeding would fall 1.6% to 20.6 million acres, while oat acres soared 6.3% to 3.8 million acres. Canadian total wheat stocks rose to 17.8 million mt, up 1.6% from last year. The Stats Can report was neutral to slightly bearish. The market is back to reacting more to weather/economic forecasts.

• The Central US weather forecast is wetter for the E Midwest that was offered by either the overnight GFS or the EU models. Our view is that the midday is once again too wet and errant. Limited rain will impact the Midwest allowing swift seeding progress for the next week. Cold temperatures on the weekend begin to moderate early next week. Near to above normal temperatures are forecast in the 9-15 day period.

• Chinese buying of US ag goods sparks modest short covering rallies in Chicago. However, it I s hard to have confidence on the US or world economic outlook with 33.5 million Americans unemployed while India’s unemployment surges to 122 million. Research maintains that China’s demand for US soybeans will become more regular in coming months.

• Chicago futures are weaker at midday in tepid volume. Markets opened mixed and quickly uncovered selling based on improved US/Black Sea weather and the decline in energy values. June crude oil will expire in a few weeks and traders are already discussing whether a negative price calamity could impact June futures. Traders remember the negative price trade of May crude futures days before expiration. With Cushing OK storage tight, such fears persist.

• Chicago values are moving to the orders. End users nor importers are compelled to make large forward purchases amid the ongoing vastness of negative economic news that prevails. We anticipate a lower Chicago close awaiting weekly US exports sales data Thursday morning. It will be key for July KC wheat to close above $3.76, the 50-day moving average.

• Chicago brokers estimate that funds have sold; 2,300 contracts of corn, 2,400 contracts of soybeans, and 3,200 contracts of wheat. In soy products, funds have sold 2,900 contracts of soyoil and 1,400 contracts of soymeal.

• US livestock processing plants are struggling to come back online with employee absenteeism elevated. Workers are fearful for their health amid Covid-19 infections and are just staying home. This is leaving livestock processing plants to slow chain speeds, which produces meat shortfalls. We are hearing that bonuses are being paid to employees, but employee absenteeism will become a structural problem for the US meat industry until health confidence is restored. US cattle and hog slaughter rates are woefully short of domestic needs and shortfalls are likely to persist.

• US ethanol production rebounded slightly to a 42% decline from last year with stocks falling to 1,075 thousand gallons vs 1,106 thousand last week, still a record for the week. The US ethanol industry is seeing margins improve to a negative -$.18/gallon, but it is not enough to spur plants to reopen. That requires plants to see sustained profitability over several months. Research suggests that Chicago ethanol futures are rather flat into mid-autumn amid demand uncertainty; what is the new world of normal driving in Covid-19 times.

• Summer holiday planners lack confidence in booking air travel, hotel stays or even rental cars unsure of the future path or longevity of Covid-19. Most are planning to visit relatives or staying close to home amid the virus. This does not bode well for the summer travel season.

• The weather forecast is slightly wetter for the Plains including some of the driest areas of the HRW wheat belt. Several storm systems look to push eastward along a cold front in the coming 7 days. These systems will produce heavy rain for the S and C Plains and the S Midwest. Cumulative totals range from 0.75-2.50″. The Midwest will see rains of 0.25-1.25″ with a warming temperature pattern after the weekend. Near to above normal rain is forecast in the 10-15 day period along with above normal temperatures. The coming warm/wet weather trend will aid 2020 US summer row crop yields.

• Favourable Midwest, EU and Black Sea weather look to keep pressure on Chicago values. China’s State buyer needs to start securing US soybeans for its reserve before there is any confidence of Phase One adherence. End users are not willing to chase rallies.

• Slow/mixed with limited interest best describes midday Chicago price action. Corn, soybean and wheat futures have not changed much from the 8:30 opening with a new US soybean sale to China and corn sale to Mexico offering only background support. Traders will be watching closely to see if China steps up their US ag/energy purchases beyond their Labor Day holiday which ends on Friday. Traders are also trying to balance out the improved outlook for 2020 US crops along with the additional 19.7 million acres of seedings as Prevent Plant optionality will be sharply curtailed by favourable spring weather. The sizeable new crop outlook will cap Chicago rallies while the downside will be defined by the arrival of (or lack of) Chinese demand for US ag goods. We anticipate a mixed Chicago close in uninspiring volume.

• Chicago brokers estimate that funds have bought a net; 800 contracts of wheat, 1,900 contracts of soybeans, and 2,100 contracts of soybeans. In the soy products, funds have sold 1,100 contracts of soymeal and bought 700 soyoil. The sharp rise in crude oil prices has slowed fund manager grain sales.

• FAS announced the sale of 378,000 my of US soybeans to China in a mostly new crop position. And Mexico secured 109,135 my of US corn that was split between old and new crop years. The US soybean sale is said to be to private crushers that are securing their autumn crush needs.

• The US/EU announced that they will accelerate trade negotiations for a free trade deal that boosts investment and trade with both parties. The talks will be held virtually and will involve nearly 30 different groups. US and UK agriculture are both net exporters of farm goods, and a market changing increase in US grain or meat demand is not expected.

• Canada announced that it will spend $252 million Canadian Dollars to help their farmers and food processors that were hit with a decline in demand due to Covid-19. The funding is likely only an initial step, and Canada will also launch a food purchase program much like the US’s CCC buying. The assistance is needed as Canadian agriculture relies heavily on exports which are fading. The new funding will aid Canadian farmers which are now seeding a new crop.

• There has been much discussion related to EU and Black Sea grain crops following weeks of winter and early spring dryness. The recent rains have provided crop stability and improvement in yield potential. The unknown is whether the more favourable weather pattern last into late May and June. EU/Russian wheat crops are made in June and that is when weather will be critical to yield/ production. Key to world wheat price trends will be June weather conditions.

• The new May EU monthly weather forecast for N America shows no lasting heat or dryness through September. The forecast calls for generally favourable growing conditions for N American crops in coming months. Research agrees that any Midwest warmth or dryness will be limited into late July.

• The forecast is slightly wetter for the E Midwest over the next 10 days. The model has added some 0.5-1.25″ of rain across the E Midwest late in the 10-day forecast. We suspect like prior midday runs, that the GFS is too wet. This model has a wet bias that is not confirmed by either the EU, Canadian or prior GFS runs. And, any sub 32-degree temperatures will be confined to the N and E Midwest. No frost or freeze is expected for the C Plains.

• The surge in crude oil prices has added support to Chicago. Crude has rallied back to $25/barrel on declining OPEC/Russian production that started on May 1. But the USDA May WASDE report looms on the 11th which will likely lower US 2019/20 soybean exports and estimate decade large US 2020/21 corn stocks. US farmers are speeding ahead with seeding, but temperatures are cool under a low-pressure trough.