Morning Comments/Roy's (RJ O'Brien)
Corn: Corn opened higher Tuesday night, fell to trade lower in the overnight session but then recovered into the morning break to be up 4-9 cents with July leading the way. CU1 has intraday support at $5.91 and resistance at $6.03. Open interest in corn fell 23K contracts on Tuesday with July losing 32K to be just 322K. The forecast is still calling for 0.5 – 2.0” of rain to fall across dry areas in IA/MN/WI/IL/IN/OH/MI in the next 7 days with a continued cooler and wetter than normal bias for the 6-10 and 8-14 time frame. However, many of the top corn/soy states will see extreme heat first. At 8 AM, the USDA announced the sale of 153K tons of 21/22 corn to unknown. The EIA will release the latest ethanol data at 9:30 AM; the last 2 weeks have featured rising US production and stocks. However, ethanol margins have fallen back to close to breakeven levels in the last week following the report that the Biden Administration is consider providing “relief” to oil refiners complaining about the high cost of complying with US biofuels laws. Ethanol RINS credit prices have plummeted since the report’s release. South Korea’s KFA bought 60K tons of South American for Sep arrival. China will auction 37K tons of government held Ukrainian imported corn on Jun 18; it will be the 2nd such auction this moth to try to cool domestic prices. Japan imported 1.88 mmt of grain in May with 76% coming from the US; they also imported 299K tons of soybeans with 61% coming from the US. Those grain imports were down 11% from a year ago and the soy imports were little changed. Argentina’s government and meat industry are trying to wrap up talks to reopen the country to beef exports after the government instituted a 30-day ban to cool domestic meat price rises. The USDA defended a plan to provide $4 billion in debt relief to socially disadvantaged farmers amid multiple court challenges. Soybeans: November soybeans traded as much as 26 cents lower at one point overnight but bean futures have recovered to be down just 4-8 cents at the morning break. Oil futures are down 75-150 points, Meal is up $2-$3 per ton. Crush margins are mixed. Open interest in soybeans was down just 1K on Tuesday but July fell 8K to 156K. Meal open interest was down 4K but oil was up 1K. Soybean basis in the Midwest is stabilizing. China’s government said their pig herd is 24% larger than a year ago currently with the sow herd up 19% as it continues to recover from and fight against ASF. The government said that they are monitoring a sharp drop in hog prices that is making farmers unprofitable and will “carry out reserve adjustments…and promote the smooth operation of the live pig market”. Wheat: Wheat futures traded sideways for much of the overnight session but rallied into the morning break along with corn & soybeans. HRW up 1-5 cents. Intraday support for KWU1 is $6.23 and $6.35. HRW open interest dropped 3K on Tuesday but July was down 8K to 47K. Egypt cancelled their wheat tender on Tuesday after receiving only a few offers that included freight costs as those shipping costs have risen. After that cancellation, they changed a policy requiring ships used in tenders to be registered with the Egyptian Company of Maritime Transport; sellers will now be able to use their own freight in offers. Traders say some sellers will still be reluctant to do so because if their cargoes are rejected for some reason they would incur demurrage costs. A Reuters poll of analysts see combined wheat exports from Russia, Ukraine and Kazakhstan rising 5% in 21/22 to 66 mmt though their combined wheat production is seeing falling 1%. Russia’s new wheat export tax scheme and quality concerns in Ukraine (has been wet) could limit such exports. Last week, Russian wheat exports rose after the government lowered the tax level that is adjusted weekly. Outside markets are little changed as of this writing. The Federal Reserve will conclude a two-day meeting today with Chairman Powell to speak in the early afternoon. They will release a forecast of future interest rates which is expected to be more hawkish than their prior forecast (March) with the US economy recovering, COVID cases falling and consumer prices on the rise. The market will also be keen to see if the committee begins talks to “taper” the size of their bond buying scheme. At 9:30 AM, the EIA will release their weekly energy report; private group API reported a substantial 8+ mln brl fall in crude stocks that was partly offset with higher gasoline and distillate stocks. Crude oil has been moving higher in impressive fashion.