MARKET HEADLINES
GRAINS HEADLINES
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New month, new money, Chicago traders say. The start of June certainly bought strong support to grain
markets, in contrast to the late-May selldown.
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Thursday’s price gains took a series of contracts back above key psychological levels surrendered earlier in
the week. Chicago wheat futures for July-23, up 2.8% in late morning deals, climbed back above the
$6.00/Bu mark, as did corn futures for July-23, in gaining 1.1%.
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Chicago soybean futures for July-23, up 2.3%, regained a $13 handle, while in Paris, milling wheat for
September added 1.2% to return above €220/t. August-23 rapeseed futures rose by 1.2% to trade back at
€400.00/t in late deals.
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European market gains, which also saw UK feed wheat for November-23 rebound by 1.7%, proved relatively
restrained in part thanks to a reversal of some currency market moves.
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The euro gained 0.4% against the dollar, cutting the affordability of eurozone exports, while sterling rose by
0.7%, trimming UK export competitiveness, after US Federal Reserve officials downplayed the prospect of a
US rate rise this month.
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More supportive to grain markets overall was a 1.7% rebound in Brent crude, in part at in relief over the US
interest rate comments, as well as over the clearing by the House of Representatives of the US debt ceiling
deal.
GRAINS HEADLINES
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Also encouraging buying in grains was a slight deterioration in the Corn Belt weather outlook, which
indicated dry down for the next 10 days, encouraged by high weekend temperatures as well as a lack of
rain.
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Weekly US ethanol data for last week were mixed, with output up 21K barrels per day at 1.004M barrels per
day, a little above market expectations, but stocks up more than forecast too, by 291K barrels at 22.33M
barrels.
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Wheat markets also found support from signs of price falls attracting buyers, with Saudi Arabia tendering for
480Kt of the grain, and South Korean importers making a series of purchases. There remains talk too of US
buyers eyeing up further purchases of EU wheat.
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Meanwhile, Kiev claimed that the Black Sea grain export deal had been halted again because Russia
blocked registration of ships to Ukrainian ports.
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The worries over damage to China’s wheat crop from heavy rains, as noted earlier this week in CRM’s
Grains weekly, have also gained in prominence. Weather models are divided as to whether the top growing
province of Henan will receive more rainfall over the next week.
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There is some talk too of excessive rains in Russia’s Caucasus winter wheat-growing area, while spring
wheat-producing areas stay dry.
WHEAT HEADLINES
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While the wheat market posted a low to high bounce of $0.40 above the Wednesday low, we see the
recovery action as primarily profit-taking on shorts which resulted in a wave of technically based stop-loss
buying.
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Certainly, a supply threat against Chinese wheat from flooding in production areas is supportive but not a
major threat to global wheat supplies.
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Furthermore, recent rains have tempered dryness but have not markedly repaired the extreme drought
throughout the growing regions. Going forward, US weather looks to be generally bearish. But the forecast
precipitation is unlikely to break the drought.
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On the other hand, negotiations to renew/extend the Black Sea grain corridor look to be intense with the
Russians demanding the removal of grain and fertilizer exports sanctions.
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However, given the ineffectiveness of sanctions thus far, an EU aversion to a return to high wheat prices and
given the dire economic conditions in the Ukrainian economy, it is possible that negotiators might allow
Russian exports in exchange for an opening of the grain corridor.
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Obviously, the Black Sea grain corridor is a potential major development for the wheat trade, especially with
initial very favorable weather in Ukraine increasing the prospects of a good crop. However, there is the issue
of restricted fertilizer availability in Ukraine and shortages of diesel fuel.
CORN HEADLINES
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With December corn technically breaking out and reaching the highest level since April 27th yesterday, the
charts have improved and could discourage fresh sellers.
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As indicated in other grain market coverage today, the forward US weather forecast is bearish but residual
concern from a dry pattern last month remains in place until there are noted and widespread rain events
from several weather fronts in the forecast.
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However, temperatures remain above normal in the near term but that is mostly offset by two potential rain
events predicted for next week.
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A classic bearish fundamental development from yesterday came from a resilient 2022/2023 crop forecast
from StoneX as they raised the corn crop to 133.7 million tonnes from a previous forecast of 131.5 million
tonnes.
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Furthermore, the company raised their Brazilian 2nd corn crop forecast to 102.9 million tonnes from a
previous forecast of 100.8 million tonnes.
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In addition to a recent pattern of strong US ethanol production profitability, the corn market might see less
negative spillover pressure from petroleum prices versus earlier this week.
SOY HEADLINES
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While the soybean market has managed a two-day low to high bounce of $0.45, there have not been many
fresh supportive and more important significant bullish fundamental developments.
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However, the US dollar appears to have made a significant top and could be poised to forge noted declines
ahead as the fear of a US default apparently lifted the dollar throughout the month of May and that limiting
element has seemingly been reversed.
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Unfortunately for the bull camp, it will take significant dollar declines to increase the attractiveness of US
supplies.
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While the forecast favors the bear camp, residual dry weather concerns remain in many regions,
temperatures will continue to run above normal for the next 10 days and the trade is not sure dry conditions
will be markedly alleviated with periodic shower events next week.
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Furthermore, above normal temperatures are expected over the coming days keeping some crop concerns
in place.
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In a positive outside market development (beans have seen a tight positive correlation with crude oil) the
crude oil market recovered from its recent washout and that should turn spillover selling into spillover
buying.