24 April 2024

Posted on by
  • HEADLINES: US wheat prices rise on fund short covering; GFS weather forecast breaks out rain for SW Russia in 11–15-day forecast; Argentine farmers cut soybeans.
  • Chicago choppiness as fund managers adjust positions ahead of May deliveries;  May Paris wheat futures lower on the week on stable Russian fob wheat offers; Midwest corn planting is speeding ahead in areas that missed Tuesday’s rain.
  • Position adjustments are featured (again) today as money managers adjust risk downwards. Q1 trades of long equities, metals and being short of grains have performed well and fund managers are wanting to bank profits as the heart of the Northern Hemisphere growing season is ahead. Managed money bids have underpinned soybean, soymeal, corn, and wheat markets with the wheat market showing the most upside vigour. July soybeans pushed above their 50-day moving average which pushed July soymeal futures above $350. The volume of Chicago trade is down from recent days, but the flow of capital is to the buy side of the ledger on short covering. Getting smaller is the theme of large investors.
  • Chicago brokers estimate that fund managers have bought 4,400 contracts of wheat, 3,700 contracts of corn, and 4,800 contracts of soybeans. In products, funds have sold 3,500 contracts of soyoil and bought 3,900 contracts of soymeal. The soymeal market has pushed above its March high at $350.70/mt which makes the close important today. Chart based buying in soymeal is featured.
  • The Argentine farmer is reported to be making soybean harvest strides. The Argentine soybean harvest had been delayed due to excessive wet weather, but fields have dried, and soils have firmed enough to support large machinery. By the weekend, Argentine soy harvest progress is expected to reach 19-22%, up from last week’s 14%. Normally, nearly 50% of the Argentine soybean crop would be harvested by late April. The excessive wet weather has slowed Argentine soy product offers into the world market with Argentine fob soybeans offered at 20 cents under Chicago, and soymeal offered $5.00/mt over, and soyoil at $0.05 under. This compares to US Gulf soybeans at $0.55-0.60/bu over, and US soymeal at $21-24/ton over, and soyoil at $0.50 over Chicago. The return of Argentina as a massive soy product exporter implies new export competition for US soymeal. US soyoil exports are miniscule due to biofuel demand with export demand tied to US aid programs.
  • The US produced 280 million gallons of ethanol last week, down 9 million gallons on the week, and down 1% from last year. US ethanol stocks fell to 1,081 million gallons, down 14 million gallons from last week. Such ethanol stocks are up 6% from last year. US gasoline consumption fell to 8.42 million barrels a day, down a sharp 11% from last year. US consumer energy demand is wavering, a hint of economic weakness.
  • The midday Midwest GFS weather forecast is wetter with 2-5.00” of rain to fall across MO/IL/IA/AR/IN into May 4. The midday GFS forecast run appears to be the wettest each day with showers/storms falling in frequency from Friday into early May. The rain falls every 3-4 days with warming temperatures. Producers should be able to get seed in the ground this week, but the progress will be curtailed beyond Friday. Temperatures will be warming across the Central US with highs in the mid 60’s to the lower 80’s next week. The GFS forecast is consistent in keeping Western Kansas dry.
  • Flat price and spreads are reacting to fund de-risking. Brazilian farmers are selling cash soybeans on the rally while US farmers are focused on planting. Depending on how long the coming Midwest wet spell lasts, there could be a further shift out of corn to soybean acres. July Chicago wheat’s target is $6.25.

23 April 2024

Posted on by
  • HEADLINES: Chicago wheat rallies on drier GFS weather forecast for the W Plains; Mato Grosso winter corn seeding down 10%; Oil share trade bottoming?
  • Firmer midday Chicago values are noted with early-day grain weakness finding support. Managed money grain short covering with SW Russian dryness lingering in the background while the GFS/European models are at odds over whether W Kansas/Oklahoma receives needed rain this weekend. Kansas wheat is in the jointing phase of crop development and enters the critical heading phase in 10-14 days. Rain is in immediate need. It is the heading and fill stage of wheat development that determines US HRW wheat yield.
  • Soybeans and corn are following wheat’s upside lead, but the oil share spread is bouncing off key chart support at 39%. The oil share spread should continue to perform as renewable and biodiesel demand seasonally increases, and Argentina becomes an aggressive exporter of soymeal from their expanding new crop harvest. The Argentine soy harvest is gaining speed which will restock their depleted cash pipeline from last year’s drought. July Chicago wheat is testing the 100-day moving average at $5.9775 with the next upside target being the 200 day at $6.28. Wheat has a bull supply story.
  • Chicago brokers estimate that funds have bought 3,100 contracts of Chicago wheat, 2,900 contracts of corn, and 2,400 contracts of soybeans. Funds have bought a net 1,300 contracts of soyoil and a net 3,400 contracts of soymeal.
  • Mato Grosso’s IMEA estimated that its farmers seeded 10% less winter corn than last year helping to confirm CONAB estimates that call for a 9% drop in winter corn seeding across Brazil. Mato Grosso farmers seeded less second crop corn due to negative profit margins amid large US stocks. Moreover, farmers cited the negative outlook and high cost of crop inputs. Some forecasts estimate the 2024 Brazilian corn crop at 116 million mt, down 21 million from last year. The decline is preventing Brazil from being an aggressive corn exporter with fob offers well above the US Gulf until August. A Brazilian corn crop under 120 million mt would make any loss of Argentine corn production due to corn stunt disease more important to US corn export estimates in 2024/25. We have raised our 2024/25 US corn export estimate to 2,300 million bu due to diminished S American and Ukraine corn production. Argentine fob corn offers are holding at 65-70 cents over May-June implying that US corn stays competitive in world feedgrain trade.
  • US farmers are racing to seed spring crops ahead of wet weather that starts on Friday. Farmer sources report that seeding is active across the Midwest and the Plains with the forecast calling for warming temperatures and rain next week. We look for US corn seeding to near 25-28% completed through Sunday. The push is to get corn planted before soybeans.
  • The midday GFS weather forecast is wetter for the Midwest with 2-4.00” of rain to fall across MO/IL/IA/AR/IN into May 6. The GFS forecast continues to show considerable run to run variability which reduces our forecast confidence. Showers/storms return with frequency on Friday and linger into the first week of May. The rain will fall every 3-4 days with warming temperatures. Producers should be able to get seed in the ground this week, but the progress will be curtailed beyond Friday. Temperatures will be warming across the Central US with highs in the mid 60’s to the lower 80’s. The warmth and rain will favour seed emergence. The EU model has been more consistent and close attention will be paid to see if rain reaches the W Plains this weekend.
  • It is a second Chicago rally day due to managed money being too bearish/short. The influence of a fund short can be felt as they try to buy their way out of existing net short positions. Dryness in the W Plains of the US and SW Russia needs to be closely followed as weather has become the topic of interest for traders. Too much rain looks to drop across the Midwest, but so far, US seeding progress is ahead of normal with farmers rushing seed into the ground.

22 April 2024

Posted on by
  • HEADLINES: Wheat rallies against 100-day moving average: Weekly corn exports strong; Brazilian winter corn progress.
  • Wheat rallies sharply to 100-day moving average at $5.97 basis July Chicago where hedge selling is noted. A push above $6.00 July Chicago is unlikely until more is known about Western US Plains and SW Russian rainfall during May. Corn/soy follows with European corn planting to increase due to warming temperatures. Soymeal bear spreading reflects weakening US cash trend, Brazilian farmer selling additional stored soybeans. And 65-70% of the Brazilian winter corn crop either pollinating or soon to pollinate. Dryness for across North Central Brazil beyond May 5 can be a yield concern.
  • Chicago corn, soy and wheat futures are higher at midday. Wheat futures have posted their best daily gain since November when China was securing US SRW wheat. The rally is based on supply worry for the US W Plains and SW Russia where 6 weeks of below normal rainfall have left parched topsoil. European and Russian wheat are ahead of normal maturity schedules on recent late winter and early spring warmth. However, it is a bit too early for the crop to be tremendously impacted by dryness. It is May and the first half of June weather that impacts Russian/European wheat yields. The last time that spot Chicago wheat was able to rise above the 100-day moving average was January 2, 2024. It is premature to chase a wheat rally on April 23 as rain can mend yields.
  • Chicago brokers estimate that funds have bought 11,300 contracts of Chicago wheat, 6,400 contracts of corn, and 6,900 contracts of soybeans. Funds have bought 7,300 contracts of soyoil and a net 2,900 contracts of soymeal. US farm selling is stepping up in corn with Brazilian farmers selling soybeans.
  • US export inspections for the week ending April 18 were; 63.9 million bu of corn, 16.0 million bu of soybeans, and 16.5 million bu of wheat. For their respective crop years to date, the US has exported 1,193 million bu of corn (up 26% or 312 million), 1,414 million bu of soybeans (down 18% or 314 million), and 604 million bu of wheat (down 8% or 53 million). If the US exports like amounts of soybeans vs last year into September 1, the final US soybean export total would be 1,678 million bu. WASDE will adjust its soybean export estimates downward more slowly.
  • CONAB’s weekly crop progress showed that the progress of the second Brazilian crop reached where 80% of the crop is either pollinating or in the vegetative growth stage. This is right at the 5-year average with nearly 90% of Brazil’s soybean harvest now completed. The winter corn crop is in a vulnerable position if rains fail to return as the monsoonal flow has seasonally ended. The corn crop needs a few good rains with soil moisture largely depleted and much shorter than prior years. The point is that Brazilian weather matters for corn and a close eye should be kept on the future forecasts.
  • Frost talk is circulating for S Midwest SRW wheat. However, it will take at least 7-12 days to confirm any damage. We suspect that damage if any was modest.
  • Midday GFS weather forecast is wetter for the Eastern Plains and the Midwest with 1-3.00” rains for MO/IL/IA. The GFS forecast has shown considerable run to run variability which reduces our forecast confidence beyond the next 7 days. Limited rain is forecast to fall across the Midwest into Friday before showers/storms return with frequency. The rain will fall every 3-4 days with warming temperatures. Producers should be able to get seed in the ground this week, but the progress will be curtailed beyond the weekend. Temperatures will be warming across the Central US with highs in the mid 60’s to the lower 80’s. The warmth and rain will favour seed emergence. The EU model has been more consistent and close attention will be paid to see if rain reaches into the W Plains.
  • It is a big rally day due to managed money being too bearish/short last week. The influence of a fund short can be seen in days like today. We do not see much changing fundamentally. Argentine farmers are more aggressive in cutting soybeans. Uncertainty surrounds Brazilian/Argentine corn crops (corn stunt disease losses in Argentina).

18 April 2024

Posted on by
  • HEADLINES: Chicago futures fall to test February lows; GFS weather forecast dry/cool into April 25; SW Russian dryness to worsen.
  • Chicago futures mixed (AGAIN) in reversal of Wednesday’s trade as wheat holds; Summer row crop futures sag on new chart-based selling; Central US cash corn and soybean basis steady to firm on limited farm selling.
  • It is a mixed Chicago trading session with summer row crop futures weaker while wheat holds a modest rally. Morning trade volume has been better than recent days on new chart-based selling in soybean/meal futures. Soyoil is holding its February lows, but the selling in soybeans could push oil to new lows before a lasting recovery. Seasonally, bottoms tend to be formed in soyoil in the next few weeks as US biodiesel demand increases. Moreover, the price focus of the soybeans shifts from S America to the US as a new growing season is underway. Central US weather is cool/dry which facilitates seeding progress. The coming coolness will slow corn germination/emergence, but the market sees getting seed in the ground as bearish. May corn futures are back to testing key support under $4.26 while May soybeans test their late February lows. Grain traders always ask themselves the type of bottom that is being formed, a “V”, “L” or a “U”?  Traders will be watching the late February lows.
  • China cancelled two cargoes of US SRW wheat in the weekly export sales report and shipped out one cargo last week. China has open US SRW sales of 300,000 mt with 1.1 million mt of US wheat being shipped. The US old crop year in wheat is quickly coming to an end, but China should ship out remaining sales.
  • US weekly export sales of wheat were -3.4 million bu, corn was 19.7 million bu with soybeans at 17.8 million bu. For their respective crop years to date, the US has sold 688 million bu of wheat (up 7 million or 1% from last year), 1,758 million bu of corn (up 260 million or 17% from last year), 1,517 million bu of soybeans (down 324 million or 18% less than last year). If the US sells soybeans at the same pace as last year (record large Brazilian crop), the 2023/24 export pace will be 1,670 million bu, a future reduction of 30 million bu from WASDE.
  • The US Ag attaché in Buenos Aries dropped the 2024 Argentine corn production forecast to 51.0 million mt, down 6 million from their January estimate of 57.0 million mt.  The attaché report highlighted corn stunt disease as the reason for the crop cut and forecast that Argentine farmers will harvest only 48 million mt of corn in 2025 due to disease and La Niña. Private Argentine corn estimates are in retreat, but it will take actual yield data to gauge the final size of crop. WASDE has the Argentine corn crop at 55 million mt when just 3% of the Argentine corn crop harvested in the opening days of April. Back then, it was too early to make a disease adjustment to the crop. Spot Argentine May fob corn is holding firm at 70 cents over Chicago vs the US Gulf at $0.55 over.
  • Chicago brokers estimate that the managed money has bought 1,200 contracts of wheat, and sold 4,300 contracts of corn, and 5,100 contracts of soybeans. In the products, the managed money has sold 3,900 contracts of soyoil and 1,900 contracts of soymeal.
  • Limited rain is forecast across the Midwest into April 24, before showers/storms return with frequency. A trough digs southward into the SW US with a ridge in the eastern US which opens the flow of Gulf moisture flow. This ridge/trough pattern is favourable to rainfall across the E Plains/Midwest US in the week 2 timeframe. Cool temperatures prevail until then with highs in the 50’s/60’s and 70’s and lows in the 30’s/40’s and low 50’s. The relative coolness will slow germination and emergence. However, getting seed in the ground with rain following is a favourable start for 2024 row crop production.
  • Corn/soy futures are testing prior lows set back in late February amid favourable Central US spring planting weather. The bears will need to see a supply risk to shift price trend. Nearby, Russian winter wheat areas will be short-changed by rain with stress increasing. Wheat should bottom before corn/soybeans. We favour limited downside into May.

16 April 2024

Posted on by
  • HEADLINES: Chicago soybeans/soyoil test chart support; Corn basis hot in the W Midwest/Plains; Brazilian farmers unload on the falling Real.
  • Russian GASC wheat offer drops $5/mt to $230/mt in the hope of securing sales: Chicago futures are weaker at midday with corn, soybean and wheat futures sagging to test chart support. Soyoil is testing its February contract low while May corn targets $4.25-4.27 support and $5.35-5.40 May Chicago wheat. The volume of Chicago grain trade is modest and cash bids on corn are rising across the W Midwest and the Plains on a lack of movement. Cedar Rapids is posting a bid of $0.20 over for spot corn with reported non publish bids as high as $0.25-0.30 over. Rumours of cash corn pushes are widespread as farmers focus on seeding, and slow or abstain on cash sales. The cash strength has rallied the May/July corn spread to 11.5 cents July premium. The push for cash corn is expected to push eastward next week. The strengthening US dollar combined with reports of active Midwest seeding late week has applied Chicago selling pressure. A lower Chicago grain close is expected today, but traders are trying to assess how much downside potential remains ahead of a new growing season. The risks vs the rewards are being tilted back in favour of the bulls.
  • Chicago brokers estimate that the managed money has sold 3,200 contracts of wheat, 2,100 contracts of corn, and 4,400 contracts of soybeans. In soy products, managed money has sold 1,300 contracts of soymeal and 3,400 contracts of soyoil.
  • Brazilian cash grain sources argue that farmers have been sizeable sellers on the weakening Real. The Brazilian Real has pushed out to 5.27:1 USD this morning, the weakest in over a year. The faltering Real has helped spur an estimated 7-8 million mt of corn/soybean sales from Brazilian farmers in the past 10 days, the largest cash movement since the start of harvest. Surprisingly, the sales have not had a sizeable impact on export basis with Brazilian soybeans offered for June at $0.10/over with soyoil trading at $0.035 below May futures. A year ago, these basis bids were far lower with soyoil $0.175 below Chicago and soybeans trading at $1.60 under. Brazilian crush demand is seasonally strong with active interest for soyoil from the domestic and export market. It is estimated that farmers have sold 42% of their soybean crop, which is equal to last year, but below the 10-year 57% average.
  • Russian fob wheat offers to GASC fell $5/mt to $230/mt with 180-day credit from the last tender. The cheapest offer was LDC for Ukraine wheat at $218/mt with other EU offers above $230/mt. GASC will have to decide whether to accept the $230/mt offer which is carrying an estimated $5-7/mt premium relative to reported spot cash offers. GASC does not want to secure Russian wheat on private basis as the government has pushed for public tender sales. We would expect that GASC will book the Ukrainian wheat but try to see if they can broker the Russian exporters to drop $2-3/mt to move size. We shall see.
  • The GFS weather forecast breaks out rainfall across some of the Midwest and Northern Delta from Thursday with rainfall amounts of 0.25-1.25” and locally heavier. Cooler and drier weather follows on the weekend and the first half of next week before a new southern branch storm system targets Texas and crop areas to the east. Corn/soybean seeding will advance at a normal rate. The extended range forecast calls for a new storm system in the 10–15-day period with warming temperatures.
  • Chicago grains are under pressure due to large Brazilian cash soybean sales while W Midwest/Plains cash corn basis bids firm. Russian winter wheat areas are turning parched, and attention will have to be paid soon and also be focused on the Black Sea. Soyoil futures are becoming technically oversold while July soymeal above $345/ton is overvalued as Argentine crushers come online with new crop soybeans. The Midwest farmer is seeding spring crops at a normal pace.
  • Our view is that there will be significant weather scares later this spring and summer.

15 April 2024

Posted on by
  • HEADLINES: Chicago sags on Brazilian soybean sales; NOPA crush record large at 196 million bu; GFS weather forecast starts rain later today across W Midwest.
  • Chicago grain futures are lower at midday with soybeans/soymeal pacing the decline. Crude oil futures are down over $1.20/barrel with gold off $6.50/oz which has added to the pressure. Friday was a macro buy day ahead to the expected Iranian aggression against Israel. Today is a sell day as these trades are being unwound. Soybeans/soymeal are giving back Friday’s gain while soyoil steady is holding on highly profitable biodiesel margins (vs fossil diesel and outright). We calculate that biodiesel margins are at their best levels in 7 years. The profitability of bio and renewable diesel underpins soyoil on breaks, but the trade is going to have to confirm better cash demand to turn futures. There is 7.6lbs of soyoil in a gallon of biodiesel which equates to a feedstock cost of $3.45/gallon at a cash soyoil price of $.0455/lb. Remember that the $1.00/gallon of blenders credit applies through the end of the year before it switches to a producer credit as of January 1. A weaker Chicago grain close is forecast with a turnaround forecast for Tuesday as this back-and-forth market continues.
  • The USDA confirmed the sale of 165,000 mt of US corn to Mexico with 135,000 mt in the old and 30,000 mt in the new crop position. Mexico continues to add US purchases to account for their dire drought which is persisting.
  • Chicago brokers estimate that managed money has sold 3,400 contracts of wheat, 6,700 contracts of soybeans, and 7,300 contracts of corn. In the products, managed money has sold 4,300 contracts of soymeal and 1,200 contracts of soyoil. The selling of soyoil has been more aggressive than early buying.
  • NOPA reported a record March soybean crush rate of 196.4 million bu which works back to a daily crush of 6.33 million bu. The daily crush back is just below that of February, but it is expected to hold above 6.2 million bu/day during April. NOPA member soyoil stocks rose to 1,851 million pounds, the largest since May. There have been reports of US soy processors struggling to move soyoil until fossil diesel prices jumped over the past few weeks. The seasonal jump in diesel prices pushed margins for traditional biodiesel prices to their best levels since 2017. Cash soyoil basis at plant started to gain on Friday.
  • US export inspections for the week ending April 11 were 52.4 million bu of corn, 15.9 million bu soybeans, and 20.2 million bu of wheat. For their respective crop years to date, the US has shipped out 1,129 million bu of corn (285 million or 34% more than last year), 1,397 million bu of soybeans (down 317 million or 18% less than last year), and 585 million bu of wheat (58 million less or 9%). We maintain that at the current pace, USDA will raise their 2023/24 export estimate of corn by 25-50 million bu by the end of the year.
  • The Brazilian Real reached 5.19 vs the USD which has sparked the sale of an estimated 800,000 mt this morning. The weak Real hiked farm profit margins.
  • The GFS weather forecast breaks out rainfall across some of the Eastern Central Plains and Western Midwest this afternoon with the showers spreading east into Thursday. Rainfall totals are estimated in a range of 0.25-1.50” and locally heavier. The forecast is similar to the overnight run with cold temperatures late week and on the weekend. Corn and soybean seeding will advance at a normal rate. The extended range forecast calls for a new storm system in the 10-15 day with warming temperatures.
  • Choppiness in a range bound trade is forecast with Chicago having questions surrounding S America crop sizes in terms of Argentina’s corn stunt disease and Brazil’s soybean crop. The Mexican corn drought is forecast to persist with feed demand (corn/meal) staying elevated. The downside potential in Chicago grain is limited amid WASDE understating the US soybean crush by at least 40 million bu. Central US and European weather will caps rallies, but it is premature to generate any downside until seed is in the ground and initial condition ratings are known. Sideways volatility is the theme.

12 April 2024

Posted on by
  • HEADLINES: Sharp rally on early managed money demand; Cash end users/importers cover soymeal; Cash soyoil awaiting biodiesel demand; GFS weather forecast wetter E Plains.
  • Cash, mysteries, and speculative demand underpin market, Chicago futures rallied sharply in the first 45 minutes of the day session on managed money buying. No one knows for sure why the funds came out so aggressively in securing bull spreads or outright grain futures, but it produced a strong Chicago rally with limited selling from the US and Brazilian farmer. There has been cash movement from the Brazilian farmer as the soy harvest pushes near 82% completed, but to the surprise of the market, Brazilian farmers were better sellers of corn from Mato Grosso/Goias. Amid the strength of the US dollar and weakness of the Brazilian Real, we would have expected Brazilian farmers to dump cash beans if they were storing all this newly harvested supply. It just did not occur. Brazilian cash premiums firmed on the rally which lent further support to Chicago short covering. Chicago corn, soybeans and wheat are higher at midday with the close being important heading into the weekend. A close at the higher end of the range will fuel additional short covering early next week.
  • Chicago brokers estimate that the managed money secured 4,200 contracts of wheat, 10,200 contracts of corn, and 7,200 contracts of soybeans. Funds also bought 7,200 contracts of soymeal and a net 1,100 contracts of soyoil. Speculative buying of soyoil was much larger than the selling that has since followed.
  • The cash mystery is tied to US seasonal soy crush downtime for maintenance, cash soymeal coverage and cash soyoil availability. We noted that there is a large amount of statistical uncertainty in the grain’s vs prior years amid record USDA/CONAB crop production differences in soy/corn, Argentine Exchange cuts in corn due to a disease called corn stunt, and a surprisingly low Indian wheat stocks estimate at 6.9 million mt for a population of 1.4 billion. The statistical uncertainty places a bid under Chicago on sharp corrections.
  • There are supply mysteries in cash soy. Traders understand that US soybean processors will be taking a lengthy period of seasonal downtime due to sliding US crush margins and the record large crush to date. Soymeal end users foresee a bearish landscape due to new crush capacity coming online (Platinum Crush in Alta Iowa in June) and the arrival of Argentina as more significant exporter due to this year’s big harvest. Importers/domestic soymeal end users have limited forward coverage expecting weekly cash bids to drop.
  • However, slowing US soymeal production has caught end users flat footed with CIF basis jumping to $30 over this morning, up $8-10/ton on the week. EU soymeal end users are also thinly covered, and they are buying US soybeans for the draw back on US soyoil under the $1/gallon blenders credit. This leaves Chicago futures to sharply rally for short periods of time. The cash mystery is when will end users gain enough forward coverage to feel comfortable heading into new growing season. And why are cash soyoil supplies ample when traditional biodiesel producers hold their best margins in nearly 7 years. US soyoil demand should be seasonally rising amid strong biofuel production margins.
  • Private Russian grain exporter RIF/Grain Flower continues to struggle to export grain. They have 6 wheat vessels that are either loaded or waiting to load without phytosanitary certificates. RIF/Grain Flower has halted their interior grain origination due to the export halt. The longer the wait the more likely that the Russian government will take control of RIF.  We note that the halting of RIF interior grain origination raises the prospect of wheat supply shortages and a further rise in export offers. Russian fob wheat ended the week at $213/mt according to European traders. Grain Flower may have to shift their wheat sales to the EU or issue a force majeure.
  • The GFS weather forecast breaks out rainfall across some of the Eastern Central Plains, but we are doubtful that the rains will make into the heart of HRW crop areas. Otherwise, the forecast is slightly drier for the Midwest which favours spring seeding. We have little trust in a forecast longer than 10 days as April tends to be a period of transition due to volatile weather patterns.
  • Choppiness in a range bound trade is forecast with Chicago having questions surrounding S America crop size and Brazilian soybean selling. The final size of S American crop impacts 2024/25 US corn and soybean export forecasts. We see new crop corn exports being far larger than WASDE at 2,300 million bu (up 150 million) on diminished S American corn production and Ukraine war disruptions on trade. Wheat will be the upside leader on smaller EU/Black Sea harvests.
To download our weekly update as a PDF file please click on the link below:

11 April 2024

Posted on by
  • HEADLINES: USDA April report uninspiring, WASDE holds Brazilian soy crop at 155 million mt; Chicago choppiness to persist; N Hemisphere weather drives direction into May.
  • The USDA April WASDE report was uninspiring. WASDE left its estimate of the 2024 Brazilian soybean crop at 155 million mt, implying that the spread to CONAB’s April estimate (released this morning) will widen out to a record large 8.5 million mt. WASDE has held a better track record in recent years, but such a large crop disparity will not be resolved until Brazilian export and crush data identifies which government agency is correct by September/October.
  • WASDE left its Brazilian corn crop estimate at 124 million mt and decided to hold fast on their 2024 Argentine soybean crop forecast at 50 million mt but trimmed the Argentine corn crop by 1 million to 55 million mt. China’s 2023/24 soybean imports were unchanged at a record large 105 million mt.
  • The Brazilian corn crop estimate spread (WASDE vs CONAB) is 14 million mt, while two Argentine commodity exchanges argue that WASDE is too high on its corn production by 2-4.5 million mt for a total of 16-18.5 million mt. Admittedly it will require additional time and harvest data to better understand Argentine corn stunt disease. But from a market perspective, the differences between S American crop estimates are massive for April.

  • The USDA raised feed/residual use and the ethanol grind by 25 million bu for a bump in total US corn demand to 14,605 million bu. We argue that WASDE is still too low on its annual feed/residual estimate by 50-75 million bu. No change was made to US 2023/24 corn exports related to the limited change in S American corn supplies. The average US cash farmgate price is $4.70/bu.
  • US 2023/24 soybean exports were cut 20 million to 1,700 million bu on the slow export and sales pace. No change was made on the US crush rate which is surprising considering record large monthly crush data. The March crush rate will now loom large for the May WASDE report. WASDE trimmed US soybean imports by 5 million bu and adjusted seed/residual down by 11 million bu. The average farmgate price eased by $0.10/bu to $12.55.
  • US soyoil stocks rose by 45 million pounds on a modest gain in production of 45 million pounds while imports rose 50 million pounds while exports gained a like 50 million pounds. The net result was 2023/24 US soyoil end stocks at 1,627 million pounds, up 45 million pounds from March.
  • Global end stocks of corn, soybeans and wheat were virtually unchanged from March with only modest adjustments in demand. Global corn and soybean stocks are large, but wheat stocks are forecast to decline in 2024/25. The USDA April reports will not hold the attention of the market beyond today. Unfortunately, choppiness is likely to persist until there is a clear supply risk via weather.

  • April WASDE wheat data leans slightly bearish as US residual use was trimmed by more than expected. 2023/24 US feed/residual was cut 30 million bu, with US end stocks raised to 698 million bu, vs. 673 million in March. Imports were lowered 5 million. We view USDA’s lowering US feed/residual as too aggressive, but this debate will go unresolved until end stocks are published in June. The additional old crop supply provides a buffer against weather/yield issues, but we note that it was spring, white and durum balance sheets that loosen. US SRW stocks were left unchanged at 119 million bu, and it remains that record yield is needed to prevent SRW stocks contraction in 2024 due to lost acres. US HRW end stocks were lowered 5 million to 277 million bu.
  • Exporter wheat stocks increased 1 million to 61.6 million mt. 2023 European production was raised 500,000 mt. Stocks in Kazakhstan were increased 500,000 mt amid lower projected export demand. That US and exporter stocks were lifted isn’t bullish of price today, but nothing in USDA’s April report was market changing. We maintain that the exporter balance sheet tightens in crop year 2024/25 amid reduced carryover and as production will be steady/lower amid lost winter acres in the US and W Europe. The duration of dryness in the US Plains and Black Sea remain top priority.
  • World ag markets’ reaction to USDA’s report is understandably muted. N Hemisphere is a big deal amid CONAB’s commitment to sharp declines in Brazilian output and an Argentine corn crop no bigger than 52 million mt due to disease pressure. Funds are carrying a record large net short position in the 2024 growing season. Don’t take your eye off Mother Nature!

10 April 2024

Posted on by
  • HEADLINES: Chicago mixed with European wheat closing strongly; Soybeans sag on bearish US soy export expectations; Drier GFS weather forecast for Northern Plains next 10 days.
  • Positioning for the USDA/CONAB Reports. Chicago grain futures are mixed at midday with soybean futures weaker while the grains hold in the green. The USDA April report will be released Thursday, and pre-report positioning is featured this morning. Traders are betting that USDA will cut US 2023/24 soybean exports by 20-40 million bu due to S American sales competition and slowing US export sales. Moreover, traders expect that WASDE will raise US corn ethanol demand by 25 million to a record 5,400 million bu and adjust 2023/24 US corn feed/residual upwards by 50-75 million bu due to near record September-February US corn feeding rate that was expressed in the March 1 Stocks report. Price (the market) is doing its job by initially building US corn domestic use. US 2023/24 wheat end stocks are forecast to be slightly larger on a potential cut in feed use of 10-15 million bu. The report lean is supportive to corn, neutral to slightly bearish wheat, and bearish soybeans.
  • We would argue that WASDE must also raise its 2023/24 US soybean crush rate by 20-30 million bu which would nearly offset the entire export decline, but WASDE may wait until the May report before raising crush in their wanting to make sure the US soybean processor is able to maintain a margin. US crush margins are floating just about profitability depending on the age of plant. We see soybeans as a sell the rumour and buy the fact opportunity.
  • The USDA announced the sale of 254,000 mt of US soybeans that were sold to an unknown destination for the 2023/24 crop year. The buyer is rumoured to be the EU that is securing/importing US old crop soybeans, crushing them and then drawing back the soyoil into the US for various carbon and blender’s credits. The spread between Brazilian and the US Gulf is just 28-35 cents/bu for mid to late summer which favours US soybeans if soyoil is exported back to the US for subsidy. We understand that 500,000 mt of old crop US soybeans have been sold in recent days to EU crushers to profit from like transactions. Spot Chicago soyoil is testing key chart support at the 50-day moving average and bottom of a flag formation.
  • US ethanol production was 310 million gallons last week, up 10% from last year, but down 5 million gallons from last week. US weekly ethanol stocks were 1,101 million gallons which was up 4% from last year as it nears a seasonal peak. The strong US usage season for ethanol is just ahead and stocks will soon start to be draw down on the return of 15% ethanol blends across the Central US. We would argue that WASDE should raise the US 2023/24 corn ethanol grind by 25 million bu either tomorrow or in May. Seasonal downtime is ahead, and the size of the decline will define if additional corn grind increases are needed. US ethanol margins are profitable, and the swap market argues that cash ethanol prices are rising on demand. The weekly production of US ethanol is record large.
  • Chicago brokers estimate that managed money has sold 4,600 contracts of soybeans while buying 1,900 contracts of wheat, and 4,100 contracts of corn. In soy products, managed money has sold 3,200 soyoil and 2,500 contracts of meal.
  • Additional heavy rain will drop across the N Delta and the Gulf States for another 24 hours where corn seeding windows are closing. The system pushes northeast through the Eastern Midwest with rainfall of 0.4-1.50”. The Plains and the W Midwest stay dry with warming temperatures.  A new system forms over the E Plains on Monday and slowly lifts northeast. The model is slightly further east with less rain compared to the overnight run and more like the EU model, though it is wetter through the Eastern Dakotas with rainfall of 0.25-1.00”. This storm lifts northeast into Thursday with cold and dry weather encompassing the Central US into the next weekend.
  • Chicago grain futures are awaiting the April CONAB/WASDE reports tomorrow. The reports are expected to be non-inspiring, and the focus of traders quickly shifts back to Central US and world weather. Planting will accelerate across the Plains/W Midwest, but N and W Plains dryness causes worry for wheat.