• Managed money continued with their buying ways last week (through Tuesday) with a net long US ag position of 22,000 contracts vs 30,000 last week, and long 64,000 contracts a year ago. The cumulative net weekly buying is calculated at 52,000 contracts. In corn, funds are net long 111,000 contracts through Tuesday. We estimate that funds are long 205,000 contracts at Friday’s close amid their massive late week buying. Funds are also net long 2,000 contracts of wheat and short 91,000 contracts of soybeans (as of Tuesday). Through Friday, we estimate that funds are net short 57,000 contracts of soybeans and long 18,000 contracts of wheat.

• Soybean traded higher on Friday and extended weekly gains. Soybean futures closed up a heady 40 cents higher on the week. The USDA reported a mix of old crop soybean sales and cancellations Friday morning. There were cancellations of 136,000 mt of soybeans to China, followed by sales of 130,000 mt to China and another 130,000 mt sold to an unknown destination. The net result was sales totalling 124,000 mt.

The CoT report showed that for the week ending Jun 11, funds had covered 2,200 contracts and were still net short 91,000. Hedgers bought 6,500 contracts and were net long 10,300. US farmers are working on getting soybeans planted ahead of the Jun 15 crop insurance deadline for IA and NIL. Producers in IN/OH are hoping the latest wet forecast does not materialise and they can beat their June 20 deadline. We doubt that farmers will take large amounts of PP on soybeans amid diminished payouts. Soybeans are a “me too” marketplace and are rallying with corn. Soy lacks a convincing supply story either via reduced seeding or yield.

• July corn rallied another 11 cents and gained 3 cents on December. Massive spread liquidation amid panicked ethanol user short covering has caused a reach for cash corn. Managed funds as of Tuesday were long a net 111,000 contracts. Since Tuesday, we estimate that funds have bought another 96,000 contracts taking their net long corn position to 205,000 contracts. By way of comparison, at the top of 2012′s rationing rally, managed money was net long 323,000 contracts.

The US weather pattern maintains unwelcome rains across IN/OH, but also features needed rain for the remainder of the Midwest with temperatures warming to near to above normal levels during the last week of June. US corn crop condition improvement is expected across the Plains and much of the Midwest next week. Volatility will stay elevated into the June 28 Stocks & Seeding report. Plains wheat is working into feed rations with a spread at a 23-cent wheat premium. This is a classic supply driven bull market!

• US winter wheat futures ended 3-8 cents higher. Spring wheat continues to weaken slowly amid excellent crop health as heavy rains lie in the offing for the Canadian Prairies. Totals of 1-4″ are offered to Saskatchewan and Alberta which will ease dryness substantially. Contacts indicate that dryness is trimming yield prospects in pockets the Southern and Volga regions in Russia yet their wheat crop estimates of 78-80 million mt are maintained. Some private estimates have been lowered from 83-85 million.

Funds through the week ending Tuesday bought a net 26,000 contracts in Chicago and are net long 2,000 contracts. Funds are net long CME wheat for the first time since September. Work suggests CME’s premium to KC is validated, but the US SRW market has priced itself out of the export market entirely. French, Russian and German wheat ended the week broadly unchanged, with Russian prices for August down slightly. A lasting high looks as if it will be scored in the next few weeks. The US/world wheat outlook is bearish on rising major exporter surpluses and an improving Australian climate forecast.

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Weekend summary 14 June 2019

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Fund positions disaggregated data

• Corn futures pushed to new highs this morning, while wheat and soybeans follow to more modest gains. Basis in the Eastern Midwest has been rising sharply as end users scramble for forward coverage. Spreads and flat price are taking on the chore of prying supply from the producer, and there is talk that ethanol margins are profitable in the E Midwest and above breakeven at current prices. Additional rainfall of 1-3″ is due across IN and OH this weekend and early next week. Prevent plant acres in the East will likely be record large.

• Additional Midwest rain is offering support, though export sales were again disappointing. Through the week ending June 6, US exporters sold a meager 6.6 million bu of corn. Following the USDA’s downward adjustment to 2018/19 US corn exports, a weekly pace of 23 million is needed. Soybean sales totalled 9.4 million bu, vs. 18.7 million the prior week. New crop wheat sales were a pitiful 1.8 million bu.

• US corn and wheat prices are well above all other origins, and in the case of corn Gulf origin is above Black Sea feed wheat and barley.

• For their respective crop years to date, the US has sold 1,905 million bu of corn, down 14% from a year ago, and 1,724 million bu of soybeans, down 16%. 2019/20 wheat commitments rest at 226 million bu, up 36% from week 1 a year ago. New crop HRW commitments are up 158% from last year at 96 million bu. SRW sales are up 47% at 33 million. HRS sales are down 4% from last year at 52 million bu. Summer wheat demand will move towards the Black Sea and Eastern Europe. Rallies in spring wheat futures continue to struggle as the Canadian Prairie weather forecast turns somewhat wetter moving forward. World cash wheat markets are down on last week.

• Exporters sold 175,000 mt of 2019/20 corn to Mexico this morning. However, new crop soy export commitments sit at just 66 million bu, vs. 244 million a year ago and the lowest since 2005.

• US and world energy markets are higher this morning following an attack on a tanker in the Gulf of Oman. Ethanol futures hit new rally highs, though forward ethanol futures are priced at modest premiums to gasoline. Summer ethanol grind will be robust, but it is new crop where there is concern.

• The Black Sea weather forecast continues to trend wetter in Ukraine and Central Russia. Coming rain will be too late to materially benefit winter wheat but will be timely for corn crops there. Russia’s forecast is also cooler than prior runs. Highs will be capped at the mid/upper 80s. Otherwise it is all weather, particularly in IL, IN and OH. A more favourable mix of rain/sun is projected elsewhere, but E Corn Belt crop ratings will stay well below recent years in the coming weeks.

• The midday GFS weather forecast is little changed into late next week but is much drier beyond June 22. The jet stream will be allowed to shift north in late June as high-pressure ridging expands aloft the Southern Plains and Southern Midwest. This pattern will be needed. In the near term, 5-day precipitation totals are still pegged at 1-3″ across IL, IN’ OH and MI. The drier extended range forecast needs to verify, but a more seasonal pattern is projected thereafter. The midday GFS forecast is in much better alignment with its EU and Canadian counterparts.

• Corn needs to close above prior highs to maintain fund buying. Whether the highs are in will be a function of crop ratings in the next 2-3 weeks.

• The June WASDE was a huge surprise for the marketplace, as the USDA made far larger than expected cuts to both harvested corn acres and yield. Downward adjustments were expected, but the changes were far more aggressive than even the most bullish traders had expected. Harvested acres were lowered by 3 million, and the yield was cut 10 bushels/acre to 166 bushels. June changes to either figure are rare, but the 2019 changes were both record large. The USDA’s June WASDE was much more exciting than anticipated! The USDA cut corn yield 10 bushels/acre based on planting delays. The USDA typically alters yield and acreage very slowly during the summer months, but unprecedented rainfall and planting delays this season forced a more proactive approach. Measuring US crop potential at this date is difficult, but there is little room for additional corn production loss.

• However, keeping the US corn market from entering a rationing phase is the recent and coming boost to non-US major crop production. Combined corn, wheat and soy production outside the US is pegged at a record 1.72 billion tons in 2019. This is up 2.6 million mt from the USDA’s May report and up 50 million mt from 2018/19. The message is that while substantial corn/soy yield risk is present, US end stocks are less certain as world trade flows are shuffled around and more wheat is fed globally. Choppy trade persists into late month. And there is no shortage of global wheat or oilseed supplies.

• The USDA’s updated balance sheet is close to what’s being used by the trade currently, but this was certainly not anticipated based on recent years’ protocol.

• The highlight in ag markets today was the 810 million bu drop in projected new crop US corn end stocks. Stocks/use is pegged at 11.9%, vs. 15.1% in 2018/19. Work suggests this correlates with Dec corn futures at $4.40-4.50. Coming yield risk will offer ample support on breaks. In addition, we expect even further tightening in the US corn balance sheet without ideal summer/autumn weather.

• Yet, focus should be kept on end stocks and whether the market’s perception of stocks/use falls below 10%, at which point the stocks/use vs. price curve steepens. Export and feed use will be cut along with production.

• Damage was done to the major corn exporter balance sheet by the plunge in US corn production. Major exporter corn stocks/use is estimated at 10.4%, the lowest since 2012. This will keep world cash corn values supported. S American corn prices will rise seasonally into autumn, and already the S American market is beginning to firm as world demand is funneled to Brazil and Argentina.

• S America’s corn harvest this year has been raised to a record 150 million mt, and their exports are pegged at 135 million mt, vs. 105 a year ago. World barley production in 2019 will rebound 12 million mt to a record 152 million. A nuanced market lies ahead this summer as the battle between sharply lower US production and rising non-US production continues. We believe that neither sharp breaks nor rallies should be chased until clarity over July and early August weather is available.

• While the USDA shocked the trade with aggressive cuts to new crop corn acreage and yield, changes to the soybean balance sheet were far less intense, but nonetheless bearish. Old crop soybean exports were sharply lowered by 75 million bu to 1,700 million. There were no other changes to demand in the old crop balance-sheet, with crush held steady at 2,100 million bu. The lost export business was added to end stocks, which increased to a record large 1,070 million bu. The USDA cut the season average price forecast by $0.10 to $8.50.

• The USDA punted on the new crop balance sheet, leaving acreage and yield unchanged from May. Beginning stocks were increased by 75 million bu, and with no other changes to the new crop balance sheet, the 2019/20 carryout increased by the same amount to 1,045 million bu. The July WASDE will feature acreage changes according to the June survey, and WASDE analysts will make judgments around yield potential.

• Changes in both the old and new crop balance sheets hinged on the adjustment of just one item: old crop exports. The USDA noted slower than expected exports to China for the reduction, and also lowered their estimate for Chinese all origin imports by 1 million mt to 85 million. The annual soybean crush rate was unchanged from May at 86 million mt, down 4 million from last year, but still the third largest annual crush figure.

• Last week’s Export Sales report showed 6.7 million mt (245 million bu) of outstanding sales to China, with another 2.3 million mt (86 million bu) of outstanding sales to unknown destinations. US soybeans are still being loaded for Chinese ports, albeit at a very slow pace, and the USDA is likely justified in reducing their export figure based on the current pace. However, their track record for estimating annual exports in June shows that since 1990, the June estimate has been too low in 20 years (71%), and too high in 8 years (29%). A year ago, after making major cuts to the export outlook in July, the June estimate was still too low by 64 million bu. We have kept our estimate unchanged at 1,725 million bu, waiting to see more export data to determine additional changes.

• In the soy product balance sheets, the USDA lowered their soyoil yield and production estimate fractionally. Domestic food, feed, industrial, and export use was unchanged, but the USDA cut the biodiesel use estimate by 150 million lbs. Year-end soyoil stocks increased slightly to 1,950 million lbs, but the season average price was unchanged at 28 cents/lb. It is 2019/20 that holds a more bullish soyoil outlook when biodiesel demand is projected to increase by 500 million lbs (6%) to 8,700 million.

• In soymeal, the USDA went the opposite direction, slightly increasing the meal yield and production estimates. Domestic use was unchanged, while the USDA raised the export forecast by 25,000 short tons to 14 million tons. Historically, the USDA tends to underestimate annual meal exports in June, but data shows the current forecast is aligned with the pace of export commitments. The current export total is at a four-year high, while outstanding sales are down 7% year-over-year.

• US wheat balance sheet changes were mixed but ultimately are viewed as neutral. Old crop US wheat stocks were lowered 25 million bu on a similar boost to exports. New crop production was raised 6 million on higher HRW yields. New crop wheat stocks were lowered 69 million bu on lower carry-in supply and higher projected feeding. Still, US wheat stocks will stay above 1.0 billion bu. The US market currently is not positioned to boost its share of world trade. And work suggests the US HRW crop at 794 million bu is still understated by 10-15 million. Spring wheat crop ratings are the highest since 2010 at 81% good/excellent.

• The point is that there is no real threat to overabundant US wheat supplies. The world market will rise seasonally, if only to compete with EU/Black Sea origin, KC needs to trade below $4.55, basis Sep. US wheat needs demand to turn outright bullish above $5.25, spot Chicago.

• Major exporter wheat stocks were lowered slightly as higher projected domestic use offset higher production in Russia and Ukraine.

• World wheat prices appear to have forged their seasonal lows. But with major exporter production to be up 38 million mt from 2018, competition for world trade will be present well into late 2019. Our main concern since early June is that world markets have failed to follow US futures higher. Latest Russian fob offers are down slightly to $195-199/mt for Aug-Sep arrival. This compares to US Gulf wheat at $210-227. Better rains lie ahead for Australia into late June. Better rain is also offered to the Canadian Prairies beginning this weekend. Wheat will likely follow corn into mid-summer.

• The USDA’s June WASDE leans bullish corn, bearish beans, slightly supportive Chicago wheat and less supportive KC.

• WASDE in this year’s June report was much more aggressive in altering US corn production, and took an axe to both US corn acreage and yield. Planted US corn acres were lowered 3 million. Yield was lowered a massive 10 bushels/acre to 166. Both changes are record large for June. Old crop corn stocks were raised 100 million bu amid reduced exports. New crop US corn stocks were lowered 810 million bu (33%). New crop corn stocks/use at 11.8% pushed up the season average cash price to $3.80, vs. $3.30 previously.

• US soy and wheat balance sheet changes are far less exciting. Old crop soy stocks were raised another 75 million bu to 1,070. New crop soy production was left alone. New crop US soy stocks were lifted to 1,045 million bu, vs. 970 Mil projected in May. The goal of the market is to further shift US farmland away from soy to corn.

• Old crop US wheat stocks were lowered 25 million bu on better than expected physical export shipments in April and May. New crop wheat production was raised 6 million as a boost to HRW yield offset a modest decline in SRW. New crop wheat stocks are pegged at a more than adequate 1,072 million bu. Chicago’s premium to KC has widened to $.58/bu, basis spot, new contract highs.

• Changes to world balance sheets mostly reflected changes in the US. New crop world corn stocks were lowered 24 million mt. Argentine production was raised 1 million mt to a record 50 million. World corn stocks/use less China this month is pegged at 11.6%, the lowest since 2012.

• New crop global wheat and soy stocks were little changed, but the world wheat balance did include a boost in non-US production worth 3.2 million mt.

• Russian wheat production and exports were raised 1 million mt. Ukrainian wheat production was also raised 1 million mt, with exports raised 0.5 million. The Black Sea’s exportable wheat surplus is pegged at 64 million mt, up 3.3 million on last year and the second largest on record.

• The midday GFS weather forecast is wetter in the Southern and Eastern Midwest in the 6-15-day period. The GFS is probably too wet, but it advertises cumulative totals of 3-5″ across MO, IL, IN, OH and KY June 19-25. Such totals will renew concerns of ponding and elevated waterways. The near-term outlook features a mix of rain and sun through the weekend.

• The corn market’s task without ideal weather is to raise domestic wheat feed use and shift marginal world demand to S America and the Black Sea. Weekly highs should be scored today or Wednesday morning as the USDA was much more aggressive than anticipated. It is all about weather and crop conditions over the next 4-5 weeks.

• The morning session in Chicago has largely been one of consolidation. Soybeans have found strength on enlarged weekly export shipments to China, while corn and wheat flirt with either side of unchanged. This afternoon’s Crop Progress report will again be very WASDE-like in that the numbers are important to future production prospects. Following recent dryness there is a bit less certainty in predicting last week’s planting progress. The season’s first corn condition rating will be traded overnight at least briefly.

• US weekly export inspections through the week ending June 6 were better than expected in soybeans but uneventful for corn and wheat. Soybeans inspected for export last week totalled 26 million bu, vs. 19 million the prior week. Of this total, 14.8 million were inspected for loading to China. China continues to slowly chip away at its large outstanding sales total. There is nothing to suggest China won’t take a majority of its remaining 6.67 million mt of beans secured from the US.

• Weekly corn inspections totalled 33 million bu, vs. 29 million the prior week. An average pace of 45 million bu of corn inspections is needed to hit the USDA’s target. Wheat inspections totalled 17 million bu, vs. 22 million the prior week. For their respective marketing years to date, the US has shipped 1,582 million bu of corn, down 2% from this week a year ago; 1,284 million bu of soybeans, down 26% from last year; and 15 million bu of wheat, down 5%.

• China imported 7.36 million mt of soybeans in May, down 24% from a year ago and the lowest May import total since 2015. Tariffs and Swine Fever continue to weigh. We mention that China has been on a spree of buying from S America into early autumn, with larger monthly import totals forthcoming. However, cumulative Jan-May China soy imports are down a hefty 12%. Forward crush margins in China are slightly below breakeven.

• EU wheat futures settled €1.00-2.00/mt lower at new three-week lows, and in spite of a weaker €uro at midday. Saudi Arabia reportedly is testing Russian wheat quality for viability moving forward. The Western/Central European weather pattern also remains broadly favourable to wheat and early corn development. Heat expands into France, Germany and Poland, but above normal precipitation also continues there. Otherwise world cash wheat prices don’t seem concerned about soil moisture drying in June across E Ukraine and Southern Russia.

• Another 36 hours of complete Midwest dryness is expected before light precipitation returns to IA/MN. A broad NW upper air flow will be established Wed-Sat. This will funnel elevated rain chances into IA/MN and the Great Lakes through the period. Heavy accumulation of 1-2” is offered to NIL and WI. However, this pattern won’t be lasting. The GFS weather forecast has a poor track record beyond five days, but a more zonally flowing jet stream returns during the middle of next week. Heavy precipitation thereafter is centered on AR, MO, TN and KY, while only scattered showers impact IA, IL, IN and OH. Central US temperatures lean a bit cool, but major anomalies are not indicated.

• Crop progress this evening is key. Exactly how WASDE handles corn acres in Tuesday’s report is awaited, but we expect the market to dismiss US production forecasts after a few minutes. Weather and yield potential take over into late July.

• Fund buying/short covering in corn, wheat and soybeans has been sizeable in the last four weeks. In this period managed funds have bought or covered a net 510,000 contracts. Funds’ combined position in corn, soy and CME wheat is a net short 13,000 contracts. At its peak, the managed fund short was just under 540,000 contracts. Substantial yield risks will remain intact, but rallies will be more measured/choppy moving forward.

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Weekend summary 7 June 2019

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions disaggregated data

• Chicago markets have reversed to the upside as his week’s back and forth continues. The midday recovery has occurred despite negative weekly US corn sales and began prior to the midday GFS weather run. Chicago wheat has led the rally. It seems doubtful that neither bull or bear trends will be sustained in the near term. Improved Central US weather through the end of next week will cap rallies. Buy yield uncertainty is unprecedented and until crop conditions begin to correlate with actual yield (late July), the risk that corn yields fall sharply below trend in areas most affected by excessive rainfall will limit new farmer selling. The battle between falling production and falling demand will sustain volatility.

• US export sales through the week ending May 30 included net cancellations of 0.35 million bu of corn, new crop wheat sales of 18 million bu, and soybean sales of 19 million. The cancellation of prior corn commitments was seen as disappointing. And there simply wasn’t much activity in the corn export market last week. Light cancellations made by Central America offset similarly light demand from Japan and Mexico. Interest in US corn is limited. Newswires today carry stories that validate recent Mexican purchases of Brazilian origin corn.

• For their respective crop years to date, the US has sold 1,899 million bu of corn, down 13% from a year ago; 1,715 million bu of soybeans, down 16% from last year; and 949 million bu of wheat, up 9% from last year.

• We would also mention that official Census trade date in April featured US wheat exports of 105 million bu, a bit higher than expected. Final 2018/19 US wheat exports will likely be revised upward by 10-15 million bu. Weekly wheat shipments have been much improved since mid-spring.

• The midday Black Sea forecast maintains a hot and arid pattern across far Eastern Ukraine and Southern Russia. High pressure ridging looks to breakdown beyond the next 4-5 days, but the upper air flow thereafter does not allow meaningful rain to impact the drier areas of Russia’s winter wheat belt. Russian wheat crop estimates have been in decline, but many remain at or slightly above 80 million mt, vs. USDA’s 77 million.

• EU wheat futures are up a more modest €0.25-0.50/mt ($0.01-0.02/bu). Russian fob offers have been little changed this week despite volatility in the US. Russian wheat is still easily the cheapest milling origin in the world.

• The Canadian Prairies are in dire need of rainfall. Planting is nearly finished in Saskatchewan, yet soil moisture there is rated as 78% short/very short. The GFS forecast includes regionally better rainfall in Southern Canada, but confidence in the GFS’s N American output remains low.

• The midday GFS weather forecast is consistent with the morning forecast, and so the major forecasting models will stay in disagreement on the 6-15 day outlook. Warmth and dryness will persist into the second half of next week. The GFS then advertises the return of daily showers to NE, IA and N IL June 14-20. Cumulative totals then are projected as high as 2-5″. Climate work does suggest above normal rainfall returns, but not until beyond June 20.

• July corn nearly filled an open chart gap left at $4.04 on May 24. It is possible that this gap may be filled but this reflects strong chart-based support into late June. N Hemisphere weather remains top priority in the near term.

• Overnight losses have been sustained in Chicago this morning. Trade focus is centred on the drier Central US forecast offered by the EU weather model, which features little/no rainfall across the Central Plains and Western Corn Belt into June 14. The debate over Prevent Plant acreage totals and yield potential goes on, but more weather info is needed before clarity over US production is available.

• Informa this morning pegged new crop corn planted acreage at 84.9 million, down 7.9 million from NASS’s Intention survey. New crop US soy acreage is pegged at 85 million, vs. NASS’s 84.6. Informa estimates 2019 corn yield at 174, vs. USDA’s 176, but estimates new crop soy yield at an elevated 51.1 bushels/acre, vs. USDA’s 49.5. We are unsure why above-trend soy yield is being used, but new crop US soy stocks will exceed 1.0 billion bu without adverse summer weather.

• Informa’s published estimates are just some of many. Some in the trade are lowering US corn yield to 165, with 2019 corn end stocks put closer to 1.0-1.2 billion bu. There is only agreement, that being US production is highly uncertain.

• The primary question is whether new market highs lie in the offing in the next few weeks. Work suggests that as corn seeding reaches 85-90% by mid-June, concern over area will be in retreat. There is little/no room for lasting heat/dryness in late Jul/early August, but the US weather pattern in the meantime won’t be overly threatening. A mix of rain, sun and near normal temperatures is expected into late month. Initial corn crop ratings will be below recent years, but early ratings correlate poorly with actual yield potential.

• This week’s EIA report leans bearish energy prices. US ethanol production through the week ending May 31 totalled 307 million gallons, vs. 311 million the prior week. US ethanol stocks were unchanged at 949 million. This is a record total for late May, however. US crude stocks, less strategic reserves, were up another 6.8 million barrels to the highest level since July of 2017. US motor gasoline supplies continue to build. Spot WTI is down $2.30/barrel at $51. Gasoline and ethanol markets are following.

• US tariffs on Mexican goods are scheduled to take effect next Monday. There are indications that the Senate plans to block tariff implementation. Key will be whether there is enough support to override a Presidential veto, which no doubt occurs if Congress blocks the Administration’s initial tariff schedule. Political anxiety will be high in the coming days.

• Germany’s farm co-op has raised Germany’s 2019 wheat crop estimate to 24.7 million mt, vs. 24.3 last month and 20.3 million a year ago.

• Heat and dryness will persist across much of Southern Russia over the next two weeks, but EU and Ukrainian crops will continue to thrive. EU wheat futures are down another €3.75/mt, bringing EU wheat losses since May 29 to €11.25/mt ($.35/bu).

• The midday GFS weather forecast is wetter in IA and IL in the 6-10 period. The GFS solution remains rather erratic. We note that the midday Canadian model did not follow this change, and in fact trended much drier across the heart of the Corn Belt into June 14.

• The GFS forecast keeps heavy rain isolated to the Southern Plains and Delta/Southeast into next Wednesday. A frontal system then sweeps across IA, IL and the Great Lakes next Thurs-Fri. Widespread rainfall lingers across the E Plains and Midwest June 15-19. The GFS forecast is threatening, but confidence in its output is low. It is our belief that improving Central US weather will cause rallies to struggle near term. Yield may be an issue, but not until mid-July.

• The lack of model agreement and the second slowest pace of soy seeding on record was supportive. We expect the pace of seeding to accelerate this week across the Plains and Western Midwest. Key thereafter will be whether soaking rains delay planting further across the E Midwest in mid-June. The GFS weather forecast is rather wet, but our expectation is that the drier EU model verifies. Planters are rolling today. Interior US basis is following seasonal trends, but has not been overly impressive on the rally, or at current Chicago values. An intermediate high in basis is expected in the next few days.

Interior cash prices in Southern Brazil have rallied $30/mt since early May despite a strengthening currency. Farmgate prices in Brazil are down only 7% from last year, vs. US losses of 15%. The trade is beginning to debate potential expansion in S America. We lean towards expansion of 3-4% as S America holds captive the world’s largest buyer. Nov futures will struggle above $9.35 unless US yield is threatened. Otherwise, price direction comes from S America’s cash fob market.

• Chicago corn remains stuck between competing weather models and elevated weather risk. The afternoon EU weather model keeps meaningful precipitation throughout the next ten days confined to the Delta/Southeast and parts of IL, IN and OH. Planting progress resumes elsewhere. Confidence in the wetter GFS solution is low. There is also strong talk that Southeastern feeders have purchased 40 million bu of corn from S America in recent days. Gulf corn’s premium to Argentine origin has widened to $22/mt ($.56/bu). This is the largest US premium to S American origin since 2013, when the US market was still reeling from the 2012 drought.

Final planted acreage in the US will be a combination of improved weather moving forward against various government inventive programs, both to plant and to leave acreage unplanted. We would suggest that Dec futures above $4.50 accounts for US crop loss of 1.7-1.9 billion bu compared to the USDA’s forecast. Downside is limited until the US summer climate is better known. Planters will be active in the West this week.

• US wheat futures ended lower, led by KC, on profit taking in the US and abroad. There are hints that better rain lies ahead in mid-June across Central Russia. We would point out that the EU weather model did not follow the GFS’s call for improved weather in Russia with its afternoon release. However, improved weather is forthcoming in Australia. US HRW crop ratings Monday afternoon were bearish.

European wheat futures have struggled this week, despite Russian dryness. The US rally has far outpaced those in other markets. It is unlikely that the US market will lead for any length of time as the US’s share of world trade has fallen sharply in the last decade. The rally was overdone without knowing more precisely the size of EU and Black Sea crops. Weather will maintain top priority in the near term. But like in the case of corn, the drier EU model forecast bodes favorably for US wheat.

• Russian winter wheat crop concern due to hot/dry weather forecasts and the excessive rain for US winter wheat later this week sparked a sharp rally in US wheat futures, which pulled corn/soy futures (temporarily) this morning. The wheat market is worried about lower wheat supplies in two key exporting regions, but what is not being discussed is the potential for a record large EU wheat crop that would buffer those losses. We look for a mixed Chicago close going home with US corn/soybean planting progress to provide additional market fireworks on Tuesday.

• Fund short covering in soybeans/wheat remains a key market theme, but as US summer row crop seeding expands, the risk of sharply higher Chicago prices is being diminished. Chicago option volatility measures have started to retreat.

• US weekly export inspections for the week ending May 30 were; 29.2 million bu of corn, 18.3 million bu of soybeans, and 21.8 million bu of wheat. The wheat and soybean exports were in line with trade expectations.

• For their respective crop years to date, the US has exported 1,548 million bu of corn (down 10 million or less than 1%), 1,257 million bu of soybeans (down 463 million or 27%), and 910 million bu of wheat (up 35 million or 4%). China shipped out 9.8 million bu of soybeans last week or 54% of this week’s total. If China rolls forward late summer US soy purchases to new crop or washes out existing sales due to the worsening US/China trade rhetoric, US 2018/19 soybean exports could slide below 1,700 million bu, down another 75 million bu from the May WASDE forecast. This would raise US soybean stocks to well over 1,000 million bu.

• Questions abound on what another two weeks of warm/dry weather might mean for the 2019 Russian wheat crop. Most producer and crop observers estimate that 2-3 weeks of hot/dry weather could drop Russian winter wheat yields 3-9%. A steeper yield decline is not expected amid the advanced maturity of the crop. We need to remember that around 50% of the Russian crop year each year is winter and 50% spring. The 2019 Russian spring wheat crop is in good to excellent early condition. It is the winter wheat crop where recent heat/dryness issues have emerged. Thus, a cut in 2019 Russian winter wheat crop by 9-10%, would drop Russian wheat production by 3-4 million mt or a 2019 all Russian wheat crop of 78-81 million mt. The USDA has the crop in May at 77 million mt and is unlikely to change this forecast in June.

• The midday GFS weather forecast remains the wettest model of the day, and we would argue that midday GFS has been too wet for weeks, and such is the case again today. Yet, the GFS forecast is farther south with late week rainfall and is more like the EU model overnight. There remains a window for US farmers to advance corn/soy and spring wheat seeding this week from the N Plains into the northern half of the Midwest. The rains start on the weekend with some help from a potential tropical disturbance. This tropical disturbance would increase rain potential for the SE Plains and the Delta if it is correct. The 11-15-day forecast is wetter than the overnight, but our confidence this far out is low.

• US planting progress will be key to Tuesday’s price direction with a June 1 corn seeding estimate above 74% deemed as bearish and a number below 67% being bullish. Soybean seeding will advance this week with producers reporting that they will expand their seeded soy acres from March intentions. USDA is likely to remain quiet on MFP payments on Prevent Plant acres. It looks doubtful that that any decline can be sustained until 85% of the US corn and soy crop is seeded.