CHICAGO, April 30 (Xinhua) — CBOT agricultural futures were in an upside trend last week, as the Russia-Ukraine conflict had been intensifying and hope for an early end of the fighting faded, according to Chicago-based research company AgResource.
The U.S. Federal Reserve will surely raise rates in May, and the country’s inflation is not expected to peak until June or July, said the firm, adding it stays bullish of commodities, but warns against chasing a rally.
Corn futures rallied to fresh contract highs as Central U.S. weather added bullish fuel via delayed seeding process. Volatility rises further in mid/late spring as market focus has begun to shift from old crop supply to new crop production potential, said AgResource. This transition has proven bullish as abnormally wet and cold weather will arrive across most of the Central United States in late April and May. 2022 will be a late planted year, which requires ideal weather in June-August to maintain trend yield potential.
The world market would not tolerate even minor supply dislocation amid the Russia-Ukraine conflict and record low combined U.S. and South American stock. AgResource said it fears U.S. yield potential is being capped at 175-177 bushels per acre, as against U.S. Department of Agriculture’s (USDA) previous forecast of 181 bushels. And there is no sign that demand is slowing amid profitable ethanol margins. Soaring barley and feed wheat prices will keep record-large aggregate global corn consumption intact.
Downside risk is limited until or unless a lasting period of U.S. warmth and dryness is established in the second half of May.
U.S. wheat futures ended mixed based on U.S. weather. Weather forecast abruptly added the needed heavy rain to key portions of the Western Plains, and the arrival of the moisture will stabilize hard red winter (HRW) wheat crop health. However, crop ratings will only be stabilized at near-record low levels, while longer-term weather forecasts maintain high odds of warmth and dryness across the HRW Belt in May and June, noted AgResource, suggesting yield loss of 12-15 percent in Texas, Oklahoma and Colorado, which pulls HRW stocks to or below 200 million bushels. The HRW balance sheet will be extremely tight.
Supply issues, namely late seeding, also exist in northern America and Canada; plus searing heat in India and long-term drought in the Middle East. Global supply loss will collide with the return of importer demand in late spring and early summer, and the downside risk remains limited. Harvest pressure will be shallow and brief, the company added.
Soybean futures consolidated recent gains and closed higher last week. China continued to book U.S. soybeans, the export of which in the week ending April 21 totaled 26 million bushels, compared with 107 million bushels in Brazil. Yet Brazilian soybeans export in April was 28 percent less than a year ago, marking a three-year low.
USDA reported that U.S. soybean planting progress was just 3 percent complete last week, as against 7 percent last year. Weather forecast has shown widespread and heavy rains across all parts of the Midwest over the next 10 days. Rains are welcomed in the Western Plains where a dire drought has prevailed.
AgResource maintained a bullish soybean outlook on early summer breaks due to the need to ration U.S. soybean supply. U.S. soybean export demand for 2021-2022 is being undercounted by USDA to 75-100 million bushels. China has been securing U.S. soybeans and new crop sales already reached record high. Old crop futures will lead the advance.