Written Commentary
Ag Market View for June 2.23
June 2, 2023
SOYBEANS
The soybean complex was mixed with soybeans up $.04 – $.08 closing near session highs, meal was $2 – $3 lower, while soybean oil was 80 – 100 higher. There were no deliveries in the soybean complex. Favorable weather along with weak demand continues to weigh on soybean values overnight before recovering following news of the Russian drone attack. July-23 soybean broke support at last week’s low, however held above the Mch-23 low of $13.83 ¾. The gap between US and Brazilian soybeans has narrowed to $75 – $85/mt for June/July however should continue to keep new US exports minimal and a lid on rally attempts. July-23 meal traded down to its lowest in 5 months before recovering. Argentina’s 3rd currency incentive program has so far yielded farmer sales of 2.33 mmt, down from the 4.13 mmt sold at this stage in December’s 2nd program. StoneX held their Brazilian soybean production forecast steady at 157.7 mmt, vs. the USDA at 154 mmt. Export sales tomorrow expected between 5 – 18 mil. bu. soybeans, 75 – 350k tons of meal, and 0 – 15k tons of soybean oil.
CORN
Both July and Dec corn traded into new lows overnight before the morning reversal. Futures closed with gains of $.07 – $.11. Weak demand along with favorable planting conditions in the US continued to weigh on corn values overnight. The rebuilding of “war premium” in feed grains was sudden and swift as markets reacted to the apparent drone attack on the Kremlin in Moscow. No word yet on how the incident may impact scheduled talks on Friday in Moscow to discuss an extension to the Black Sea Grain Initiative that’s set to expire in just over 2 weeks. Obviously today’s developments will not help an extension being reached. US corn prices have remained $20 – $25/mt over SA for June/July. Healthy planting progress should be made in the ECB this week as temperatures warm with precipitation light. Ethanol production last week rose to 976 mbd, up from 963 mbd the previous week. 98 mil. bu. of corn was used in the production process, below the pace needed to reach the USDA forecast for the 9th consecutive week. Ethanol stocks slipped to 23.4 mil. barrels, the lowest level in 5 months. Implied gasoline demand plunged 9.4% last week and was down 2.7% from the same week YA. I look for a 25 – 50 mil. bu. reduction in the current USDA usage forecast of 5.250 bil. bu. in next Fri. WASDE report. StoneX raised their Brazilian corn production est. to 131.6 mmt, up .3 mmt, vs. the USDA forecast of 125 mmt. The market should be well braced for the potential of exports tomorrow being negative tomorrow given China’s cancellations last week. Expectations range from -15 – 25 mil.
WHEAT
Prices surged to close $.30 – $.45 higher across all 3 classes after showing modest losses overnight. Obviously no one knows how this is going to play out over the next several weeks (or months) but the uncertainty fueled today’s short covering surge. Egypt’s recent purchase of 655k mt of wheat from Russia and Romania for June/July was priced at roughly $276/mt for June and $270/mt for July. Speculation yesterday was it may have been done as cheap as $255-$260/mt. The heaviest rains over the next 7 days are in the eastern half of KS and southern MO. Rains for western KS appear to have been pushed north into NE leaving this area little if any additional moisture into mid-May. An Oklahoma crop tour yesterday projects their winter wheat crop at only 54.3 mil. bu. with an average yield of 24.6 bpa. This compares to YA production of 68.6 mil. and yield of 28 bpa. My crop condition model suggests OK production at 68.5 mil. bu. with an average yield of 26.8 bpa., just below the 28 bpa yield from YA. An outside day up in both CGO and MGEX July-23 contracts.
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