Ag Market View for May 25.23
Spot soybeans ended today’s volatile session almost exactly where it ended 24 hours ago. There was no new fundamental news to support the move from $.10 higher overnight, to $.20 lower at midday, back to unchanged by the close. I would not be surprised to see similar trade action tomorrow. July-23 soybeans held just above this week’s low of $13.04 ¾. Next support is last summer’s low of $12.99, which is also very near the midpoint between the Covid low in April-2020 to the high in June-2022 on the weekly chart. Nov-23 soybeans traded to its lowest level since Dec-21 before recovering a bit into the close. July-23 meal violated support at $397, trading to its lowest level since Jan-22 on the weekly charts despite today’s strong export data. Soybean exports at 4 mil. bu. were at the low end of expectations. YTD commitments at 1.868 bil. are down 14% from YA, vs. the USDA forecast of down 7%. Pace analysis suggests the USDA export forecast of 2.015 bil. is 10 – 25 mil. bu. too high. Old crop soybean meal sales were strong at 341k tons, helping fill the short supplies from Argentina. YTD commitments have caught the YA pace, vs. the USDA forecast of up 2%. The BAGE reports Argentina’s harvest has reached 78% complete, below the historical average of 92%. They held their production forecast steady at 21 mmt, vs. the USDA est. of 27 mmt. So far harvested yields have averaged only 1.5 mt/hectare, below the USDA yield est. of 1.8 mt/HA. Spot board crush margins pulled back $.04 today to $.84 bu. and remain very near their 12 month lows. While US weather will drive soybean valuations over the next 3 – 4 months, overall demand remains weak.
Prices range from up $.03 ½ in spot July-23 to down $.04 – $.05 in deferred contracts. While lawmakers maintain progress has been made in debt ceiling negotiations, the lack of a deal leaves markets nervous while stimulating a “risk off” mentality. Fitch Ratings has placed the US Triple-A credit rating on negative watch. Export sales at -3 mil. for old crop 2022/23 MY, and 2 mil. for 23/24 MY were in line with expectations. Old crop cancelations to China/unknown were nearly offset by new sales to Japan and Mexico. YTD commitments are down 36% from YA, vs. the USDA forecast of down 28%. I look for further cuts to the current USDA export forecast of 1.775 bil. as US prices remain at a $15 – $25/mt premium to SA. Early season dryness in the US is welcome in order to finish up plantings while also establishing a deep root system, however the risk is that early season dryness evolves into a full blown drought much like 2012. The BAGE held their Argentine corn production forecast unchanged at 36 mmt, just below the USDA est. of 37 mmt. So far harvested yields have averaged 4.6 mt/hectare, well below the USDA yield est. of 5.52 mt/HA. Harvest advanced to 27% complete. With US old crop exports likely to be cut another 50 – 100 mil. Bu, US ending stocks could easily rise above 1.5 bil. bu. barring a late season surge in ethanol production.
Prices closed mixed in choppy sideways trade with little trade news. The only rains of significance over the next week are limited to the southern plains and far western regions of the corn and soybean belt. Temperatures are expected to build to much above normal readings by the middle of next week. Not much change in today’s weekly US drought monitor, however that will change next week with much of the Midwest in need of moisture by then. MGEX was up $.06 – $.08, KC up $.03 – $.06, while Chicago was steady to $.02 lower. While KC July-23 made a new lows for the week, it has held the $8 level recovering to close higher. MGEX July-23 appears to be consolidating near the $8 level, while Chicago does the same near the $6 level. Export sales were weak with 2 mil. bu. in cancellations for 22/23 MY, and only 9 mil. in new crop sales. Old crop commitments slipped to 692 mil., down 3% from YA, in line with the USDA forecast. Ukraine’s Ag. Minister reports spring grain plantings have reached 97% complete. Total acres are expected to reach 5.5 mil. HA, down 7% from YA.
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