Ag Market View for May 17.23
The soybean complex was lower across the board with soybeans down $.20 – $.27, soybean meal down $2 – $5, while soybean oil was 50 – 100 lower. July-23 soybeans filled a long standing gap from last summer. Next support is last summer’s low at $12.99. Nov-23 broke support at $12 trading down to its lowest level since Dec-21. While Nov-23 soybeans are technically oversold, fundamentally history suggests they may not be. The year most comparable to the current 2023/24 MY in the past decade was 2016/17. Ending stocks that year were 302 mil. with stocks/use at 7.2% with this year currently forecast at 335 mil. and 7.6%. Nov-16 soybeans price May-16 thru expiration ranged from $9.34 – $11.86. Nomura cut their 2023 GDP forecast for China to 5.5%, down from 5.9% previous citing weaker than expected economic data in April as their post Covid recovery losses steam. Spot board crush margins did firm up $.12 today to $1.09 per bu. Brazil’s soybean exports in May-23 are expected to reach 15.7 mmt, above the previous forecast of 15.3 mmt. This would represent a record high for the month, and the 2nd highest for any month. Meal exports for May-23 are expected to reach 2.6 mmt, up from the previous forecast of 2.3 mmt. Export sales tomorrow are expected to range from 5 – 20 mil. bu. for soybeans, 150 – 400k tons soybean meal, and 0 – 10k tons soybean oil.
Prices plunged another $.06 – $.20 today. On the weekly chart July-23 has plunged to its lowest level since Nov-21. $5.64 for spot corn represents a 50% retracement from the Covid low in the Spring of 2020 to the high from last Spring, shortly after the Russian invasion of Ukraine. Dec-23 has violated the $5.00 level, dropping to its lowest level since Oct-21. China cancelled an additional 272k tons (11 mil. bu.) of corn purchases from the US. Last week’s export sales report showed outstanding sales of 111 mil. bu. to China. Of those, 11 were cancelled last week, with another 11 today. Ethanol production rebounded to 987 tbd last week, up from 965 tbd the previous week. Despite the increased production corn usage was below the pace needed to reach the current USDA usage forecast of 5.250 bil. bu. Overall gasoline demand fell 4% from the previous week and was down 1% from YA. To me, today’s announced 60 day extension of the BSGI is only psychologically damaging as it will likely have little impact on global corn trade. Ukraine likely has little old crop left to sell, while the extension will not take us to their new crop harvest. Perhaps the market is discounting the agreement will continue to be extended beyond another 60 day, no matter what Russia says. In the past decade 3 years jump out as most similar to 2023/24 as currently projected by the USDA. Those years being 2016, 2017, and 2018. Those years ending stocks ranged from 2.141 bil. – 2.294 bil. vs. this year’s projection of 2.222 bil. Stocks/use those years ranged from 14.5% – 15.7% vs. 15.3% this year. The price range for Dec corn those years, May thru expiration, on average were a low of $3.31, with the high average of $4.32. While we are a long way from achieving the current USDA production figures, (corn or soybeans) history does suggest considerable downside price risk exists despite the current oversold status. Corn exports tomorrow are expected to range between -5 – 20 mil. bu.
Prices were lower in all 3 classes as with Chicago and MGEX down $.18 – $.22, while KC finished $.10 – $.12 lower, unable to sustain early strength on disappointing crop tour results. July KC spread over Chicago surged to a new record at $2.75, before pulling back to $2.60 on the close, still up $.08 for the session. KC July spread over July corn reached $3.45 intraday before pulling back to $3.24 at the close. This spread was as low as $1.60 in early May-23. Day 1 of the Kansas wheat tour estimated yields at 29.8 bpa, down from YA est. of 39.5 and the 5-year Ave. of 45.4 bpa. The USDA forecast’s the ave. yield for Kansas at 29 bpa. Tour participants cite drought and freeze damage as negatively impacting yields and triggering high levels of abandonment. They will issue a production forecast at the conclusion of their tour on Thursday. Separate crop tours in NE est. winter wheat production at 30 mil. bu. vs. USDA at 33 mil. A tour in CO est. WW production at 54 mil. bu. vs. USDA est. of 49.5 mil. The extension of the BSGI will likely have more impact on wheat than other commodities as Ukraine’s wheat crop will be harvested starting in July. Despite Ukraine’s wheat production forecast at 10 mmt, less than half from just 4 years ago, combined Ukraine/Russian wheat exports represent 26.5% of the global trade, down from 27.6% YA.
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