** Sharply lower CBOT soy values have been the theme this AM with July soybean futures falling to test key support at $9.40-9.45. Corn has followed soy, with wheat trading both sides of unchanged.
The volume of CBOT trade has been active via a corruption charge that is evolving against Brazilian President Temer. The charges of corruption (against Temer) will likely to take down his position in office in coming weeks. The dramatic change in Brazilian politics and what it means for job’s legislation to help their economy has dropped the value of the Brazilian real by nearly 8% this AM with its value falling back to December 2016 levels at 3.38:1 USD.
The odds are high that Brazilian President Temer will be ousted! The question of whether 2018 Brazilian Presidential Elections will be pulled forward to late 2017 or whether the leader of the Upper House will take over the Presidency is far less clear? The uncertainty over the political fabric in Brazil has fueled new inflationary fears. Commodity futures in Brazil are sharply higher including BMF Bovespa corn and soybeans. Brazilian farmers have been active early sellers of cash soybeans. A lower CBOT close is expected as Brazilian farmers greet the 10% fall in the value of the real with sales. Cash Brazilian soybean sales have been more active than corn.
** CBOT brokers report that funds have sold 20,000 contracts of soybeans, 7,000 contracts of soymeal and 8,000 contracts of soyoil. In the grains, funds have sold 7,000 contracts of corn and bought 1,000 contracts of wheat.
** Brazilian farmers have been large sellers of soybeans due to their fear that President Temer will be offering his resignation letter in coming days. The Brazilian President is slated to speak this afternoon at 2 PM. ARC has no way of knowing what the President will be offering, but should Temer resign, the real is likely to rally.
** US weekly export sales for the week ending May 11th were; 23.5 Mil Bu of wheat (both crop years combined), 27.8 Mil Bu of corn, and 13.1 Mil Bu of soybeans. The sales were larger than expected and do not include the early week purchases.
** For their respective crop years to date, the US has sold 1,036 Mil Bu of wheat (up 277 Mil Bu or 36%), 2,078 Mil Bu of corn (up 487 Mil Bu or 31%), with US soybean sales at a record large 2,107 Mil Bu (up 383 Mil Bu or 22%). The sales data point to a US soybean export pace of 2,070-2,080 Mil Bu regardless of the cash selling by Brazilian farmers this AM. The US sales are unlikely to be shifted southward.
** The Texas wheat harvest is reporting some very low protein wheat of 10% or less. Such wheat is well below the min deliverable grade against KC at 10.5%.Millers hope that HRW protein levels improve going north, but this year’s HRW wheat crop is initially concerning from a quality standpoint. Some end users are looking to securing KC old crop wheat or Minn futures to assure themselves 11% or greater protein wheat.
** Midday GFS Weather Update: The forecast is slightly cooler/wetter in the Plains and the W Midwest over the next 5 days with severe weather to breakout this afternoon across the Plains. Any warmth will be peaking across the E Midwest with cooling from west to east into the weekend. The chill is expected to last into May 28th before some moderation. A warmer pattern is hinted at beyond June 1, but confidence so far out is limited.
** AgResource Market Comment: Trading politics in Brazil is more difficult than trading weather. Cash soybeans are moving in Brazil with huge fund selling being felt in Chicago. 2017 US crops are not off to a good start. Cold/wet weather will persist into late May across the Central US. Our advice is not to turn bearish on breaks or bullish on rallies. Our bet is that there will be weather scare rallies to sell this summer.