Written Commentary
Flight to Safety Supports the US Dollar
April 26, 2024
SOYBEANS
The soybean complex closed mixed with old crop soybeans up $.02 – $.07 while new crop was $.03 – $.08 lower. July-23 soybeans reached a new 3 week high before pulling back to the midpoint of today range. Soybean meal was also mixed with nearby contracts up $5 – $8, while deferred contracts were down $2 – $3. Soybean oil was 40 – 60 lower. July-23 oil stopped shy of resistance at its 50 day MA of 51.83. China’s soybean imports surged to just over 12 mmt in May-23 following a surprisingly low 7.26 mmt in April-23. Inspection delays likely shifted some imports into May. May imports were a record high for any month and bring YTD imports to 42.3 mmt, up 11% from YA vs. the USDA forecast of up 7%. Brazil’s exports for June-23 are expected to reach 13.1 mmt, well above the 9.95 mmt from YA. After a slow start to the year coming off Covid restrictions, the USDA Chinese soybean import forecast for 22/23 at 98 mmt is starting to look too low. Markets brace for a modest increase in old crop US ending stocks, likely due to lower exports. We’ve been looking for a 15 mil. bu. stock increase to 230 mil. bu. We do not expect any changes to the USDA 2023 production forecast of 4.510 bil. with so much growing season ahead. US census soybean exports in April reached 94 mil. bu., above expectations based on weekly inspection data. Census exports since Sept-23 have reached 1.819 bil. bu., still up 2% from YA, and 132 mil. bu. above inspections. Today’s census data reduces the odds of an export reduction in Friday’s WASDE report. Tomorrow’s export sales are expected from 5 – 20 mil. bu. soybeans, 175 – 450k ton soybean meal, and 0 – 10k tons soybean oil.
CORN
Prices finished $.04 – $.10 lower. July-23 continues to consolidate near its 50 day MA at $6.03 ¾. New crop is being pressured by the more favorable forecasts and expectations for higher production from Brazil in Friday’s USDA report. There are 2 chances for meaningful rain over the next week to 10 days with heavier accumulations favoring the southern Midwest and Delta regions with lower totals in the northwestern third. These rains are crucial in restoring lost topsoil moisture as much of the nation’s midsection has received only 25% – 75% of its normal rainfall in the past 60 days. Look for expanded and deepening areas of drought in tomorrow’s updated drought monitor. No extended periods of extreme heat is evident thru the end of June in today’s forecast run. Bull spreads were supported by stronger than expected ethanol production last week. Production jumped 1,036 tbd last week, the highest in 6 months and up from 1,004 tbd the previous week. Overall gasoline demand rose 1% to 9.218 mbd last week and was steady with this week YA. Corn usage at 104 mil. bu. however was still below the pace needed to reach the USDA forecast of 5.250 bil. bu. We’ve been looking for a 50 – 75 mil. bu. increase from the May-23 forecast of 1.417 bil. We do not expect any changes to the new crop production forecast just yet as June yield changes are usually triggered by wet springs and delayed plantings. Not the case this year.
WHEAT
Prices were lower to sharply lower in all 3 classes. Chicago was $.11 – $.13 lower, MGEX was down $.22 – $.24, while KC led the declines down $.26 – $.32. After weeks of steady rains helping ease drought conditions across the US southern plains, rainfall is expected to ease up a bit in the Texas panhandle over the next week providing improved harvest conditions. The WW CC index improved for the 4th consecutive week on Monday to 74.8, well above the 72.1 YA. My est. for WW production is 1.176 bil. bu. with an average yield of 46.5 bpa, up 46 mil. from the May-23 USDA forecast of 1.130 bil. My by class breakdown is HRW – 550 mil., SRW – 416 mil., and white – 210 mil. Census exports in April-23 at 56 mil. bu. bring YTD census sales to 704 mil. bu. down 5% from YA. In order to reach the current USDA export forecast of 775 mil. bu. census exports in May will need to reach 71 mil. bu. Algeria has tendered for 140k mt of optional origin feed wheat for early Aug-23 shipment. Export sales tomorrow are expected to range from 6 – 18 mil. bu.
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