Higher has been the morning in Chicago, led by KC wheat amid surprising revelations from Egypt’s tender released Tuesday afternoon. The soy complex has followed for the most part, but grain market short covering is the feature.
Egypt secured a massive 295,000 MTs of wheat from the US, Russia, Ukraine and Romania. The lowest offer made to Egypt was US HRW at $185/MT (two cargoes), which further implies that the Gulf wheat market has become rather competitive following the recent break – and ARC hears that lower protein HRW basis at the Gulf is declining. Just as interesting, though, are offers made from other exporting countries. Russia offered 240,000 MTs at prices ranging from $198-205/MT, which suggests old crop price quotes as recently as 24 hours ago were much too low (our contacts’ best guess was about $185/MT), and now there are many questions surrounding the availability of Russian wheat for Jun-Jul shipment. The bottom line is that the US is very competitive in the world wheat market, even despite the US’s freight disadvantage, and prices today have responded.
US ethanol production through the week ending May 12th totaled 302 Mil Gal. This is up 6 Mil Gal from the previous week and up a hefty 23 Mil from the same week in 2016. Cumulative weekly US ethanol production through mid-May now rests at 11,080 Mil Gal, up 5.1% from a year ago, which at the least validates the USDA’s forecast – and the USDA may still be just a bit too low. The seasonal rebound from plant maintenance season this year has occurred a bit earlier than normal. Of course with higher ethanol production comes higher DDG production, but it remains that end users will opt to extend corn coverage on breaks.
US crude oil inventories (less strategic reserves) fell another 1.7 Mil Barrels, and now sit just 2% above last year. Crude stocks have fallen for six consecutive weeks. Energy supplies are still plentiful, but finally the market is working towards balancing supply and demand. Spot crude is up $.60/barrel at midday.
In other outside markets, the US dollar has extended overnight losses and has found even newer 6-month lows. The Brazilian real, Russian ruble, Canadian & Aussie dollars are all higher. EU milling wheat futures look to close with modest gains of €.25-.50/MT, but the real activity should be in Europe’s cash grain market this evening, as they too should react to Egypt’s tender.
US weekly export sales on Thurs should include 250-450,000 MTs of corn, 300-400,000 MTs of wheat and 200-350,000 MTs of old crop beans. No new sales were included in this morning’s FAS reporting system.
The GFS at midday is slightly wetter in the Eastern Midwest through the weekend, with totals in IL, IN, OH and KY now projected to reach 1.5-3.0”. Similar amounts are offered to nearly the whole of the Central US in the next five days, with localized totals pegged at 3-5” in TX, OK, AR, E KS and MO. The model also maintains a more southerly alignment of the jet stream next week, which will usher in much cooler air beginning early next week. Temps in the 6-10 day period are expected to be 5-15 degrees below normal
A relatively warmer pattern is hinted at beyond June 1, but confidence so far out is limited. Additional model runs will be needed for clarification. The GFS’s forecast for minimum temps next Monday is below.
AgResource Market Comment: AgResource maintains that this is no place to turn bearish. US wheat is competitive with Black Sea and EU origin through mid-summer. Ethanol production will rise seasonally through June, and Brazil’s cash soybean market continues to rise. Await more robust short covering rallies to extend old and new crop sales.
