Written Commentary
MORNING AG OUTLOOK
Corn:
The market is weak this morning as energy prices pull back and both the US and Iran continue to say a peace deal is near. Significant flash sales on Friday to Mexico and Unknown are evidence of strong demand on breaks but without energy support, the bears have grabbed the near-term edge. Significant spring rains have boosted soil moisture in the major production states of Iowa, Illinois and Indiana and although the 2-week outlook shows below normal precipitation for the central and eastern belt, private forecasters are not yet concerned about crop stress. If the pattern extends into mid-June and beyond, that could quickly change. The EU is suspending duties on nitrogen fertilizer imports for the year. Argentina will be lowering their corn export tax 0.25% per quarter starting in January. Brazil will raise their ethanol blend next month from 30% to 32% if the measure is approved this week. COT data showed Managed Money net longs dropped 2% to just over 293,000.
Soybean Complex:
The long holiday weekend did not produce a completed peace deal with Iran, but both sides still indicate they are close and most believe the worst of the war may be over, which has pushed crude oil sharply lower overnight. The soy complex is weaker even though a much drier pattern is set to move into the Midwest over the next 2 weeks with above normal temperatures for the northern half of the region. The significant uptick in soil moisture recently across the Midwest has given the newly planted crops in the major production states a cushion to withstand temporary periods of dryness. The pattern needs to be watched closely to see how long it stays in place but for now, traders seem unconcerned. Meal is lower as well this morning following a large morning flash sale on Friday to Unknown. Meal shipments for the season are running nearly 10% above the USDA pace. COT data showed minor fund selling in beans and bean oil while fund longs in meal rose 12.5%. Managed money is still holding a significant long position across the soy complex and there is long liquidation risk if prices begin to breach support.
Wheat:
A lower start across the wheat complex this morning after selling off most of last week. Crude oil is weaker on the potential for an end to the war and that will be a headwind early this week along with a seasonal tendency for prices to weaken into HRW harvest. SovEcon says Ukraine wheat stocks are rising and exports could jump significantly this year to 21.2 million tonnes, up from 13.2 the previous year. Russia and Ukraine exchanged heavy attacks over the holiday weekend. Russia’s export price this week is up $5 to $245 a tonne. Over the next week, the northern half of the Plains will be mostly dry and precipitation will be limited to the southern tier of states. COT data showed Managed Money reduced their net short in Chicago wheat to just under 4800 contracts and also reduced their KC net long to just over 30,000. Open interest rose on the pullback last week and the bears have the near-term edge.
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