30 May 2024

Posted on May 30, 2024 by simon

• July corn falls to support at $4:40-4.50; GFS midday weather forecast drier for NC Midwest, wetter Delta/NW Midwest; EU wheat prices correct

• Weaker Chicago prices are noted at midday with corn/wheat pacing the decline. July corn futures dropped to $4.40-4.50 support amid a correction in world wheat values while soybean futures are trying to hold on soy/grain spread unwinding. Traders have been active in securing corn/wheat on the expanding Black Sea drought and selling soybeans on a spread for over a month. End of month profit taking is featured today. The tone of the market is bearish on favourable Central US weather. A weaker Chicago grain close is forecast.

• Rusagrotrans (Russian rail operator) forecast a 2024 Russian wheat crop in a range of 77.5-84.0 million mt at a grain conference in Sochi with drought/frost impacting 40% of the winter wheat crop. Igor Pavensky, the head analyst at Rusagrotrans, estimated 2023/24 wheat exports at 50.5 million mt. No export estimate was offered for the 2024/25 season. The marketplace has digested 2024 Russian wheat crop estimates of 80-82 million mt with the southwest harvest to start in several weeks. Russian interior wheat prices have rallied above 18,000 Rubles. 

• Chicago brokers estimate that managed money has sold 6,200 contracts of corn, 4,600 contracts of wheat, and 3,400 contracts of soybeans. In the products, funds have sold 2,900 contracts of soymeal while being flat in soyoil.

• Reuters is reporting that US ethanol in SAF will be nonexistent in 2024, which is largely expected. That is not news. US farmers will be unable to meet the three Biden Administration qualifications for a 50% reduction of carbon production. However, the EPA has promised new measures for ethanol to qualify for SAF in 2025 as the GREET Model is updated. It is hoped that US farmers  will have to meet just one of the carbon reduction farming practices of; 1) The use of cover crops, 2) No till farming practices, or 3) Precision fertiliser applications. If true, this allows for a potential broader use of US ethanol in the production of SAF. Yet, we caution that 2024 is an election year and that the outcome of the November election will have an outsized impact on US biofuel regulations.

• US weekly ethanol production expanded to 314 million gallons, up 6% from last year, the largest production since March. US weekly ethanol stocks fell 42 million gallons to 975 million gallons. These stocks were 4% larger than last year. US gasoline consumption gained 1% to 9.15 million barrels/day. US ethanol margins are back in the black amid the recent decline in corn.

• The midday GSF weather forecast is drier across E Iowa, WI, and MI vs the overnight run. Showers/storms look to occur on near daily basis across the E Plains and the Delta with flooding likely across saturated soils of E OK, E TX, AR, LA. Some areas of the W Delta will see 4-6.00” of additional rain. The E Plains front slowly pushes eastward in a broad ridge/trough pattern across North America by mid next week. The NW upper air flow produces near to below normal Midwest temperatures. The extended range GFS weather model is hinting at the formation of a summer ridge, but its exact location is unknown. The models have a Western US lean for the ridge with expansion eastward during July. Pay close attention to extended range EU weather model updates.

• Seeded crops and 10 days of nonthreatening Central US weather is pressuring Chicago values. The soon to accelerate Northern Hemisphere winter wheat harvest will produce a new supply for end users, the key question is the price they will emerge with forward purchases. China priced 4-5 cargoes of Brazilian soybeans on the Chicago break but shows little interest in US new crop purchases. World crop sizes are in decline, but favourable US weather is keeping US yield ideas elevated. We see Chicago weakness into early June.

29 May 2024

Posted on May 29, 2024 by simon

• HEADLINES: Improving Central US weather pressures Chicago grains; Russian winter wheat weather importance in decline; Central US ridging to be watched.

• Chicago midday values are dull and lower with fund managers coming back to buy oil share as soymeal values decline. The buying of soyoil futures is more related to the drop in soymeal rather than any strong cash market influence. Illinois soyoil basis is trading at $2.50 under Chicago July with the W Midwest soyoil rail basis at $1.50 cents under, the same basis that has prevailed since  April. A year ago, rail C IL soyoil was offered at $3.00 cents over July.    

• Soymeal/soybeans are weakening on slowing US export demand. China continues to book Brazilian soybeans for August/September which is cutting into US new crop demand. The next level of support rests at $12.00-12.05 basis July beans.

• Corn futures are sagging on improving Central US weather. Mother Nature is in control of Chicago with the key mid-June to late July timeframe to determine US 2024 corn yields. Key support should hold July corn at $4.40-4.50 with high corn crop ratings forecast for next Monday. Yesterday, the IA corn crop was rated 73% good/excellent with IL rated 72% good/excellent on individual state reports on Monday.

• Chicago brokers estimate that managed money has sold 7,700 contracts of corn and 5,200 contracts of soybeans, and 4,600 contracts of soymeal. Managed money has sold a net 900 contracts of wheat and bought 2,900 contracts of soyoil.

• Russian winter wheat crop progress is being discussed with June starting on the weekend. The SW Russian wheat area (North Caucasus and Southern District) accounts for 56% of the Russian winter wheat harvest. The 10-day forecast offers a few light showers, but not enough rain to alter prevailing short soil moisture. Nonetheless, the point is that beyond the middle of June, the importance of SW Russian rainfall is in decline in terms of its ability to help the crop. Wheat will start to change color in mid-June with the drought to date pushing crop maturity. Wheat has been a supply driven rally and the market likely topped either yesterday or will do so in the next week. Thereafter, it is all about demand and at what price do importers/millers step forward and take coverage. Russian spring wheat appears to be receiving enough rain for now for early plant growth.

• Central US crops are largely planted, and the mentality of weather has shifted to “rain makes grain”. The weather forecast in the weeks ahead will drive Chicago prices either up or down, and it is premature to argue that 2024 US summer row crops are made. Climate outlooks from late June into July offer heat, the big question is the mean position of a high-pressure ridge, and will it be located over the Plains or the Western US. The positioning of the ridge will determine rainfall and if a NW upper flow prevails across the Central US.

• The midday GSF weather forecast is drier across the Midwest. Heavy rain looks to drop across the Southern Plains with totals across Eastern Texas and Eastern Oklahoma reaching upwards to 4-6.00”. The southern branch of the jet stream stays strong with flooding to resume across the Gulf Coast States and Western Delta this weekend and early next week. A drier 11-15 day forecast is offered with warming temperatures for the Central US. A high-pressure ridge forms across the Central US on June 7 and progresses eastward into June 13 as a new trough drops south into the NW US. The ridge lacks stability and any Midwest heat will be fleeting. The extended range GFS weather model is hinting at the formation of a summer ridge, but its exact location is still being decided.

• Seeded crops and 10 days of improving Central US weather is pressuring Chicago values. It is Mother Nature who will direct US and world grain values for the next 8 weeks.  Late June/July weather is exceptionally important to US corn yield potential. As such, it is premature to be bearish with the US growing season ahead. Tightening global corn exporter stocks of grain makes a record US corn yield a must.

24 May 2024

Posted on May 24, 2024 by simon

• HEADLINES: US cash soymeal market gains on exporter demand; Rumours Brazil secures US HRW wheat; GFS Russian weather forecast is dry into June 5.

• Midday Chicago values are mixed with soymeal/KC wheat being the upside price leaders while soymeal/corn sag. The volume of trade has been better than expected on active KC/xcg wheat spreading and crush margins expanding. Cash soymeal basis continues to rally as short bought exporters cover their needs in the cash market. Also, there are rumours that Brazil has secured 3-5 cargoes of US HRW wheat for early autumn. The Brazilian flooding across RGDS will have a lasting impact on Brazil’s 2025 wheat crop. We look for a mixed close with traders discussing whether another strong rally unfolds in world wheat on Monday/Tuesday if the Russian weather forecast stays dry. Wheat continues to add weather premium to prices due to a shrinking Russian wheat crop. Chicago appears to be trading a Russian wheat crop of 81-82.5 million mt today. A crop below 80 million is possible should the drought extend into mid-June. The midday GFS forecast maintains an arid flow across Russian winter wheat areas into June 3.

• The USDA did not announce any daily sales which argues that China did not secure the 5-8 cargoes that were rumoured on Tuesday. We understand that China could have secured only 1-2 US soybean cargoes this week. The price rally is not aiding US exports as importers are unwilling to chase valuations.

• Chicago brokers estimate that managed money has bought 3,600 contracts of soymeal, 4,100 contracts of soybeans, and 3,400 contracts of wheat. Funds are flat in corn while selling 1,800 contracts of soyoil.

• July KC wheat futures have gained 15 cents on July Chicago wheat in the past 2 sessions amid rumours of Brazilian new crop demand. We hear that Brazil has secured 3-5 cargoes of US HRW wheat for September/October at $297/mt. Argentine wheat is offered at $290/mt for July, with no offers for September/October. Brazil has a clear need for HRW wheat imports amid acute RGDS/Santa Caterina flooding, but we would expect that Argentine new crop supplies that will be available in November will fill any future Brazilian import need. We doubt that Brazilian interest for US HRW wheat will being sustained.

• The US cash soymeal market is exceptionally tight with an active US export program competing with strong domestic demand and a slowdown in the US crush pace. Cash soymeal basis has gained $14-16/ton this week with cash crush margins back above $1.00/bu. Board crush is worked up to its best levels in months above $0.90/bu. Spot Argentine soymeal is offered at $16/mt over July with Brazilian 48% offered at $12/mt over and no US Gulf offers for June/July.

• The midday GSF weather forecast is slightly drier across the Northern Plains and the South-Central US. Eastern Midwest farmers scored solid planting progress this week and have either finished or nearly finished corn and soybean seeding. Showers are falling across S WI/N IL which is perfect timing for recently seeded crops. Following several rounds of rain on the weekend, a 5-6 day stretch of dry weather occurs next week. A new storm system is forecast for early June, but by then the market will see rain as helpful to yield. No extreme heat is forecast for the next 2 weeks.

• Paris wheat futures will be open on Monday and their direction will decide Monday evening’s Chicago opening. If the extended range Black Sea weather forecast is correct, a new push to the upside should occur early next week which allows corn/soy futures to follow. We would maintain that a seasonal top in wheat should be set by June 7 with corn/soy following. US weather is improving with 85-87% of the corn and 65-70% of the soybeans now seeded. Now  “rain makes grain” and the bulls will need a new period of adverse weather to sustain the rally.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 24 May 2024

23 May 2024

Posted on May 23, 2024 by simon

• HEADLINES: Market getting ready for rain makes grain mentality: China soybean purchases not confirmed; New highs fail in July soybean futures.

• Corn is higher with soybean/wheat futures lower at midday. July soybean futures pushed to a new rally high at $12.5825 before faltering. The inability of July soybean futures to accelerate above their prior May high produced a round of profit taking. Corn/soy spreading then became active which underpinned corn. World wheat futures are slightly lower amid supply and Black Sea weather uncertainty. Traders argue that current Chicago and Paris wheat futures are discounting an 81-83 million mt Russian wheat crop (20% yield loss of winter wheat yield) which is adequate. The decline in the Russian wheat crop has been the Chicago rallying cry during May. As the US winter wheat harvest starts and gathers steam during June, a new wheat supply loss will be needed to sustain the rally. We look for US corn/soy crops to be highly rated in June when traders will switch over to the thinking that “rain makes grain”. The recent worry has been seeding delays and switching out of corn to beans.

• The USDA did not announce a new US soybean sale to China (contrary to rumours) with commercial sources arguing that Sinograin may have bought 1-3 cargoes of US soybeans this week, not the 6-9 cargoes that had been discussed. China can secure Brazilian soybeans through July at prices below the US Gulf.

• Chicago brokers estimate that managed money has sold 3,400 contracts of soybeans and 1,100 contracts of wheat, while buying 5,300 contracts of corn. In the products, funds have sold 2,100 contracts of soyoil while being flat in meal.

• USDA export sales for the week ending May 16 were 9.0 million bu of US wheat, 35.9 million bu of old and 12 million bu of new crop corn, and 10.3 million bu of old and 2.4 million bu of new crop soybeans. China has yet to purchase a tonne of US new crop soybeans, a record slow start. Mexico remains the primary buyer of US corn.

• For their respective crop years to date, the US has sold 696 million bu of wheat (up 2 million or 1%), 1,940 million bu of corn (up 445 million or 30%), and 1,576 million bu of US soybeans (down 292 million or 16%). The US soybean sales pace is on target for an annual 2023/24 export total of 1,675 million bu.

• On May 31, the EIA will update its April US biofuel production/feedstock use. The report will be key to gauge if sub 50 cent soyoil prices spurred renewable diesel demand. Imported used cooking oil prices are equal to domestic soyoil values today, which is underpinning cash soyoil basis.

• The midday GSF weather forecast is slightly wetter in IL, IN, N MO and the Northern Plains through early next week and offers heavy rain to the TX/OK Panhandles May 30-June 1. Central and Eastern Midwest farmers will push ahead with seeding for another 24-36 hours before a new round of rain returns. Producers report solid progress this week in both corn and soybeans seeding. A drier weather pattern is offered next week which should allow producers to finish 2024 row crop seeding. Soil moisture levels are restored, and the new weather focus will be on Central US temperatures and the placement of a high-pressure ridge.

• Volatility will be a hallmark of the 2024 summer Chicago grain markets. That said, Chicago prices have rallied strongly off their early April lows and seasonal tops are normally formed by early June. Thereafter, a US weather scare is needed to sustain a further rally. Chicago wheat values are near post-harvest highs while soybeans will struggle above $12.60 July. corn has a longer-term demand story in US exports, but a highly rated crop in early June will be seen as negative. Be careful not to chase a new Chicago rally with new speculative purchases. Corn should gain on soybeans, while the wheat market could have one more price surge before a top is set before June 1.

22 May 2024

Posted on May 22, 2024 by simon

• HEADLINES: Chicago steady/higher at midday; Ethanol grind recovering seasonally; GFS weather forecast drier in Black Sea.

• Chicago futures are mixed are mixed at midday, with wheat pausing as contracts in the US and Paris continue to flirt with overbought charts, while corn finds support at July’s 20 and 100-day moving averages. Soyoil’s extended recovery has kept crush profitability intact.

• That there are more questions than answers surrounding Black Sea winter grain production, final S American crop sizes and the speed at which the last 15 million acres of corn and 25 million acres of US soy get planted suggests corrections will be shallow into mid-summer. We note S American corn yields won’t be available in bulk until mid-June. A large Mato Grosso safrinha crop is anticipated, but late-season dryness and abnormal heat in Mato Grosso do Sul and Parana are noted. High temperatures in the mid/upper 90s in Central Brazil in late April/May are atypical.

• We also highlight this week’s incredible strength in Ukrainian corn fob premiums. Basis for Jun-Jul delivery there is quoted at $0.50 over spot Chicago. A week ago, Ukrainian fob basis was just $0.05 over. US Gulf corn is highly competitive in the world marketplace through summer and recall weekly export sales of just 15 million bu/week are needed to hit USDA’s 2023/24 target.

• US ethanol production in the week ending May 17 totalled 300 million gallons, up 6 million on the prior week and up 4% from the same week a year ago. Ethanol grind’s seasonal recovery continues. Additionally, US gasoline use last week totalled 9.32 million barrels/day, vs. 8.88 million the prior week, and elevated gasoline use is most probable throughout the summer months. Industrial corn disappearance strengthens in June-July.

• Yet, WTI crude will struggle at $83-85/barrel amid this spring’s abnormally large build in stocks. Commercial crude stocks last Friday were 459 million barrels, vs. 457 million the previous week and up 1% from last year, and higher year on year for the first time in 2024.

• Other breaking news is largely absent. The Black Sea forecast at midday is drier in Ukraine and Southern Russia in the 11–15-day period, and so the GFS forecast mirrors EU and Canadian model outlooks in calling for a lack of rain into June 5. Heat returns to Russia after May 28, which adds to already elevated crop stress. A Russian wheat crop of 78-80 million mt is possible, and this assumes normal spring wheat growing conditions.

• In the US, the GFS forecast is wetter in IL, IN, TN and KY through early next week, and adds heavy rain to the TX/OK panhandles May 30-June 1. This wetter southern Plains forecast reflects a major shift from overnight/early morning runs, and so confidence is low in details.

• Open planting weather will be widespread for 24 hours. Heavy showers occur in the E Plains, Midwest, and mid-South Sat-Mon. Accumulation of 1-3” favours southern IA, IL, IN, OH, MO and TN/KY. A drier pattern is forecast May 28-June 3. Central US heat is absent.

• USDA’s May WASDE, floods in S Brazil, poorly rated winter crops in W Europe and rapidly developing Black Sea drought have collided to place an incredible burden on US yield performance in 2024. We maintain caution against chasing large daily moves, but normal seasonal trends suggest downside is limited between now and late June.

21 May 2024

Posted on May 21, 2024 by simon

• HEADLINES: Chicago corrects in diminished volume; Russian fob wheat price rises again; China returns to seek old crop US soybeans off PNW.

• Chicago futures are mixed at midday with summer row crop futures lower while US wheat futures hang in positive territory. Today’s volume of trade is far below yesterday with managed money backing off their recent purchase pace.

• We often suggest that the bulls need to be fed and there is just not much news available to push prices higher, outside of dry weather across the Black Sea grain belt. Russian 12.5% protein wheat has pushed higher to $246/mt bid with September bids at $251/mt. This is up another $5-6/mt as the Russian market tries to close the spread vs the EU. German HRW 12.5% wheat is bid at $273/mt spot with French 11% wheat offered at $275/mt. The point is that US SRW wheat at $265/mt is $10/mt under the EU market, but this price is well above ordinary Black Sea wheat offers at $235/mt. Russia/Ukraine can secure world wheat demand, but if their crop shrinks, there will be a need to close the EU price gap. Talk is growing that Russian spring wheat seeding is falling behind optimal planting dates.

• Rising world wheat prices have changed the dynamics of feed values with excessive bearish corn bets now needing favourable US/Chinese/EU weather and record US corn yield to push prices lower. We see July corn having strong support from $4.40-4.50 until the US summer weather pattern is known and US seeded acres are announced in late June by NASS. The immediate upside price target in the spot wheat/corn spread is $2.40 wheat premium with Europe likely to feed far more corn (possibly from Ukraine) in the months remaining in 2024. The wheat premium to corn pushes record world corn feed demand in 2024/25.

• The USDA/FAS announced 113,050 mt of US corn to Mexico (split between old and new crop), and 110,000 mt of US corn to Spain. We believe that additional Spanish corn demand is being worked with total purchases to amount to 400,000 mt. US corn is price competitively against S American offers. The US export competitiveness will boost US sales for late summer and autumn.

• Chicago brokers estimate that funds have bought 5,300 contracts of wheat and sold 2,300 contracts of corn and 3,600 contracts of soybeans. In the products, funds have sold 2,600 contracts of soymeal while being flat in soyoil.

• We understand that China has purchased 3-5 cargoes of US soybeans off the PNW for late summer with the buyer said to be Sinograin. China appears to be returning the US for late summer needs which could include the purchase of US soybeans for their reserve. Brazilian and Argentine soy premiums have been in a rally phase for most of May, and US competitiveness is seasonally returning.

• The midday GFS weather forecast is wetter from the Central Plains south with 10-day rainfall totals of 2-6.00”. Showers are also further west into KS with the weekend storm system. Soaking rain falling across IA/MN at midday with severe weather warnings issued. The GFS/European weather models under forecasting W Midwest rainfall in the next 24 hours.

• There will be a few days of drier weather from May 27-31 before better rain chances return. Any drying will be limited to 2-3 days, which will not be enough to firm soils. Spring seeding is occurring in the E Midwest areas that missed the overnight rain. Temperatures cool starting Thursday with below normal highs, 60’s and 70’s, limiting drying and GDD accumulations for N Midwest and N Plains crops. The upper flow is active with migration of the jet stream northward into the Midwest during June.

• It feels like a day of correction with volume well below Monday. Open interest surged yesterday with big gains in wheat, soybean and corn open interest which reflects that managed money is willing to go long. We doubt that Chicago breaks can be sustained with a drought deepening across the Black Sea which threatens wheat/corn crops. And too much rain looks to fall across the Central US while S American soy premiums hold firm.

20 May 2024

Posted on May 20, 2024 by simon

• HEADLINES: Wheat rallies hard with resistance at $7-7.25 July Chicago; Corn to follow planting progress with most looking for 70% finished; GFS weather forecast stays wet for the Midwest/Delta.

• Chicago futures are sharply higher at midday with the grains leading the advance. July Chicago wheat has rallied to a daily gain of 35 cents, the largest one-day rally since July of 2023, when the Russian’s were backing out of the Black Sea Grain deal. Corn/soybeans have followed wheat with concern over excessively wet Central US weather, a deepening Black Sea drought and that WASDE will cut S American corn crops again in June due to corn stunt disease in Argentina and the early withdrawal of the Brazilian monsoon.

• Managed money has been active buyers since the opening as funds cover net short grain positions. Amid worrisome world weather and the broadening Russian war in Ukraine and the attack on the key Russian export port of Novo, Chicago is adding risk premium to price. We look for a sharply higher close with the nearby upside price target in July wheat being $7.00-7.25, July corn at $4.75-4.90, and July soybeans $12.65-12.80.

• Chicago brokers estimate that funds have bought 7,300 contracts of wheat, 10,200 contracts of corn, and 7,800 contracts of soybeans. In the products, funds have bought 3,900 contracts of soymeal and 6,600 contracts of soyoil. Spot Chicago soyoil futures have rallied above the 50-day moving average and it will be interesting to see if the market can close above $0.4647/lb. We would also like to remind readers that the May options expire on Friday, which is causing some delta buying of futures today.

• US export inspections for the week ending May 16 were 47.7 million bu of corn, 6.8 million bu of soybeans, and 7.5 million bu of wheat. For their respective crop years to date, the US has shipped out 1,386 million bu of corn (up 309 million or 29%), 656.6 million bu of wheat (down 48 million or 7%), and 1,460 million bu of US soybeans (down 311 million or 17%). The US soybean export pace argues for a final of 1,675 million bu, 25 million bu below the May WASDE estimate.

• 2024 US corn seedings are being debated with producer surveys suggesting a 1-1.5-million-acre shift from corn into other crops, namely soybeans in the June USDA Final Plantings report. Last Friday, the Nutrien CEO indicated that US farmers would seed 3 million acres less corn; that appears to be too large as of today. However, if wet weather were to continue across the Central US into June, a 3-million-acre corn seeding loss becomes likely. US Prevent Plant acres will be increasing but will not be defined until late summer. The point today is that a seeding shift from corn into soybeans is occurring due to wet weather. The drop in corn seeding tightens US 2024/25 US corn end stocks below 1,600 million bu.

• The midday GFS weather forecast is drier in KS/NE but otherwise consistent with the morning run. Near daily showers exist this week with heavy rain targeting MO, AR, IL, MN. The forecast models have been willing to shift the areas of heavy rain south and east, but there is no hint of a lengthy period of drier weather until the closing days of May, which is too far out for any forecast confidence. One storm system is pushing through the Midwest today, with another due midweek and a third on the holiday weekend. There could be a few dry days after May 28 with another storm system targeting the Midwest on June 1-2. The overall upper flow stays active with migration of the jet stream northward into the Midwest during June.

• There are numerous weather concerns, Russian, Ukraine and Australian dryness and excessive Central US and Western European rain. Wheat is the crop at the biggest production risk with at least 15 million mt lost due to adverse weather.  However, a decline in US 2024 corn seeding opens the upside in feedgrain prices. And soybeans are supported by short bought end users and the narrowing basis bids between the US Gulf/Brazil/Argentina. July soybeans above $12.70 are overdone nearby but China is said to be asking for offers on new crop US soybeans. Chicago breaks will be well supported.

17 May 2024

Posted on May 17, 2024 by simon

• HEADLINES: Grains sag on spread unwinding; Soy oil extends recovery; Black Sea, Mexican droughts to worsen.

• Chicago ag markets are mixed at midday with the wheat market unable to hold an overnight rally. The drop in wheat has caused a sag in corn futures and an unwinding of recent long grain/short soybean spreads. Wheat futures rallied overnight on dry weather forecasts for the Russian winter wheat areas and an attack by Ukraine against Crimea, and a Russian military installation.

• Soy futures are higher on Chinese pricing and the strength of Brazilian cash soyoil which is firming on strong demand. Brazilian soyoil is trading at a 2-cent discount to July futures with the US Gulf offered 0.5 cents under. This is as a tight a spread between Brazilian fob soyoil and the Gulf looking back to 2021. US soyoil export opportunities are increasing while US soymeal export demand is strong as Argentine meal is sold out through June as the new crop harvest stays well behind normal. July soybean futures will close the week higher on firming S American basis bids.

• Chicago brokers estimate that funds have sold 5,800 contracts of corn and 2,800 contracts of wheat, while buying 2,800 contracts of soybeans. In the products, funds have purchased 3,200 contracts of soyoil while selling a net 900 contracts of soymeal.

• The Russian Grain Union estimated that Russia could export 47.9 million mt of wheat in the 2024/25 crop year, down from this year’s 53.5 million on declining crop production due to frost/drought. No crop forecasts were offered, but the Grain Export Union will offer export estimates on a weekly basis until production normalises. We estimate that 47.9 million mt of exports would come from an all-wheat crop of 84-86 million. Russian weather stays parched, and a deepening of the drought is feared heading into June. Russian fob wheat prices gained $0.38/bu this week to $241/mt. Further gains are forecast next week to narrow the spread between Russian and French fob export offers. North Africa has limited forward wheat coverage due to the recent world price rally.

• Nutrien, the largest US fertiliser supplier, reduced their estimate of 2024 US corn seeded acres to 87 million, down 3 million acres from the NASS March 1 intentions report. CEO Ken Seitz indicated that the corn acre loss was switched into soybeans, cotton, and other grains. The smaller US corn harvest area will cut the firm’s nitrogen sales. The smaller seeded area would drop 2024 US corn production by 550 million bu using WASDE’s 181 bushels/acre yield. Such a crop loss would be dramatic to the 2024/25 US corn end stocks with our estimate of stocks at 1,800 million bu using an export forecast of 2,300 million bu.

• The midday GFS weather forecast is drier in IN/OH but otherwise consistent with the morning run. Open weather persists into Sun/Mon, with warming temperatures to accelerate drying/aid fieldwork. Near daily showers return next week, with soaking precipitation to target NE, MO and the Upper Great Lakes. 10-day totals of 3-5” are offered to MN, WI, northern IL, and northern IN. Near normal temperatures are forecast into late month. Unfortunately, zero rain is forecast in the HRW Belt, where windspeed of 20-30 mph and high temperatures in the 90s develop late in the coming weekend.

• Soyoil’s finding of export demand is important, while end of week profit taking plagues corn and wheat values. We would caution against chasing breaks in grains as the US corn export outlook remains bright as a Russian crop at or below 80 million mt becomes reasonable if the Black Sea weather pattern fails to change in early June. Black Sea forecasts are trending progressively warmer beyond May 25. We would also note drought is building rapidly in Mexico amid extreme heat there.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 17 May 2024

16 May 2024

Posted on May 16, 2024 by simon

• HEADLINES: Grains, soy weaker at midday amid short-term planting window; GFS weather forecast wetter in s Russia; Soy oil market finding export demand.

• Chicago ag markets are mostly weaker at midday, save for soyoil, as modest weather premium is extracted. The GFS forecast at midday is slightly drier in IA into May 25 and Central US planting should be widespread over the next 2-3 days amid dryness and warming temperatures. The GFS forecast also hints at better rain chances in key areas of southern Russia beyond May 24-25. Scattered showers are offered to Ukraine. This along with unchanged Russian fob prices this morning has triggered another round of profit taking in US and European wheat futures. We would note that an outright pattern change in the Black Sea is not indicated, and it is imperative that the GFS forecast verifies in southern Russia, but wheat is in a full-blown weather market. Volatility is certain.

• Weekly export sales are viewed as mixed, positive for corn, neutral for beans and a bit negative for wheat.

• Corn export sales in the week ending May 9 totalled 30 million bu, vs. 35 million the previous week, but which compares to net cancellations a year ago, as Brazil and Ukraine dominated trade in late spring and summer. Soybean sales were 10 million bu, vs. 16 million the previous week. New crop wheat sales totalled 11 million bu, vs. 15 million the previous week and slightly below the same week a year ago for the first time since early March.

• For their respective market years to date, the US has sold 1,905 million bu, up 27% year on year, 1,565 million bu of soybeans, down 16%, and 120 million bu of new crop wheat, up 66% from last year.

• Soy oil has been the bright spot this week, demand-wise, amid April’s decline in NOPA stocks and as export demand is being found. Soyoil export sales in the week ending May 9 totalled 20 million lbs, have been above 15 million lbs in each of the last 4 weeks, and already US export sales account for 83% of USDA’s annual forecast. Rapeseed oil in northern Europe is quoted at $0.48 per pound, and so US soyoil remains competitive globally. The oil market is expected to add premium into summer amid seasonally rising US fuel consumption and as the US market must keep exports minimal.

• Spot WTI crude at midday is up $0.44/barrel at $79.10. The US dollar is slightly stronger. The Dow is up another 65 points at another record high.

• The midday GFS weather forecast is less intense with projected rainfall in IA but is otherwise unchanged from this morning’s solution. Meaningful precipitation into Sun-Mon will be isolated to the Delta/Southeast, TN and KY. Near daily showers return to the E Plains and Midwest May 21-27. We note the GFS and EU models remain at odds over the placement of heavy rain, with the GFS favouring the N Plains and Upper Midwest and the EU favouring the southern Midwest. Wet weather lies ahead, but confidence is low as to where planting delays resume. A normal/above normal temperature pattern is forecast into late month.

• The overhang of 2 billion bu old crop US corn stocks has kept resistance in place at 200-day moving averages. World wheat demand has not yet shifted from Russia to others, and the market must see/feel balance sheet changes to sustain rallies. Yet, EU/Black Sea weather risk remains massive, and work maintains US corn’s export potential is bright longer term. It is soy demand that remains concerning amid China’s ongoing absence from the US market in a new crop position. We would currently expect both the bulls and bears to find opportunity this summer.

15 May 2024

Posted on May 15, 2024 by simon

• HEADLINES: NOPA soy crush in April well below trade guess; Dec corn pauses on 200-day moving average; GFS weather forecast features excessive Midwest rain.

• Chicago ag markets at midday are steady to slightly weaker, with new buying absent in wheat and corn following the opening of this morning’s session and with the soy complex flat. Our short-term thesis is one of choppier sessions as a majority of funds’ sizeable short has been covered, geopolitical risks remain elevated and as the row crop growing season is imminent. Today there are more questions than answers, the size of S American crops, Black Sea weather in June, and US planting dates, and we should be prepared for wide-swinging markets. Dec Chicago corn has been unable to trade above its 200-day moving average. Wheat is extracting premium following positive reports from day one of this week’s tour of KS, and as the trade has largely digested the potential for a Russian crop of 85-87 million mt.

• NOPA member crush in April was a shockingly low 166 million bu, the smallest since Sep and some 20 million below trade expectations. Large oil stocks in March and prolonged mediocre crush margins are noted.

• However, we note cumulative NOPA crush is up 5% from last year, which remains aligned with USDA’s annual forecast. Soyoil stocks on April 30 totalled 1.75 billion lbs, down 202 million year on year amid reduced production and a slight jump in disappearance relative to April 2023. Oil stocks decline seasonally in summer, and so it will be difficult to supply the US biofuel industry longer term without improved crush rates moving forward. July Chicago soyoil at midday is up $0.60.

• Exporters sold 180,000 mt of soybeans to unknown destinations. 120,000 mt of the purchase is scheduled for old crop delivery. This is positive given S American origins beans remain below US Gulf quotes into Aug/Sep.

• US ethanol production continues its seasonal recovery. Production in the week ending May 10 totalled 294 million gallons, vs. 284 million the prior week and the largest since earl April. Ethanol stocks are adequate at 1,029 million gallons, but the ethanol swap market is working to improve margins in late spring/early summer. The swap ethanol market this week is quoted at $1.80/gallon. The cash ethanol market in March traded between $1.48-1.57/gallon. Margins are positive assuming cash corn at $4.60-4.80, basis spot, and typically ethanol production expands seasonally into mid-July.

• US CPI in April was 3.4%, which reflects month on month improvement but remains a far cry below sub-3.0% targets. Our bet is that the Fed neither raises nor trims lending rates through summer. The US dollar is weaker. The Dow at midday is up 250 points.

• The midday GFS weather forecast is much wetter in eastern Plains and Central Midwest next week, which aids in validating NOAA’s call for excessive rainfall May 20-27. There will be opportunities for planting into the weekend, but thereafter heavy showers are advertised on a near daily basis into May 27-28. Notice that 10-day totals upward of 3-5” are forecast in MO, IA, IL, IN and MI. Dryness outlines the HRW Belt, where are there hints of temperatures reaching into the 90s Sat-Thurs.

• Adverse weather has allowed for new elevated price ranges, but it is back to choppiness within these ranges until clarity emerges over N Hemisphere winter wheat production and US/EU row crop planting dates.