PM Comments May 20 2025
Good afternoon. Grain markets at the CBOT saw higher closes for a second consecutive day on Tuesday, as speculative short-covering helped send corn futures back near last Monday's highs and wheat futures back to the upper end of their May trading range. Soybeans and the products mostly came along for the ride throughout the day, but the grains were clearly the upside leaders on improving chart considerations and what many in the trade felt like were below fair-value prices.
CN closed Tuesday at 4.54 and 1/2, up 7 cents. CZ was up 6 and 3/4 at 4.48 and 1/2. SN finished at 10.53, up 2 and 1/4. SX was up 4 cents at 10.41. WN finished at 5.46, up 17 cents. Products were higher, July soybean meal closed at 292.60, up $1.50/ton, and July soybean oil closed at 49.50, up 6 points. Outside day higher for meal after making new lows for the move, and an inside day for bean oil. Livestock markets were quiet/mixed, June live cattle closed at 213.17, up 20 cents, August feeders closed at 297.50, up 2 cents, and June hogs closed at 100.02, up 77 cents. Outside markets are trading mostly lower, crude oil futures are up 5-10 cents/bbl, the Dow Jones index is down 150 points, and the US$ index is down 30-40 points; the S&P500 is down 30 points and the NASDAQ is down 100 points. Inside day for crude oil. Gold futures are having an outside day higher and are up around $60/oz.
Spreads were mixed/higher, corn spreads closed unchanged to 2 and 3/4 cents higher, and soybean spreads closed down a penny and 3/4 to up 2 and 1/2 cents. CN/CU was unchanged on the day at 19 and 1/4, and SN/SQ closed at 2 and 3/4, down 1/4 of a cent.
Action in the ag space was focused in the wheat market on Tuesday, with spot Chicago futures closing the day up more than 3% and also nearly 40 cents off their lows made last week. There wasn't a single, specific reason for the pop, but rather a combination of several factors that seem to have led the market to possibly scoring an early seasonal bottom. First on this list, like we mentioned at the top, is short covering by managed money traders who likely pressed their position a little too far too fast with a lot of weather both here and around the globe still ahead. To that end, drought concerns in China remain present, while recent weather in the US has raised disease concerns here. We also see the recent wheat purchase by Saudi Arabia announced yesterday as a potential friendly factor, as the timing is interesting following President Trump's visit to the country last week. Like we mentioned to start, we cannot point any one of these developments as the sure-fire reason for today's rally, but it would appear the buying and subsequent pop was the result of a combination of several factors that had been brewing for some time.
There was an otherwise lack of fresh news again throughout the session, as the recent mix of rain and sunshine has largely caused rallies over the last month or or so to be fairly limited. That said, we see the recent bounce as warranted, but don't know that we're overly optimistic regarding a further up move in prices from these levels. It's just tough to work much towards $5 with Brazil harvesting a record safrinha crop and the prospects of 95+ million US corn acres and an average yield above 180 still being at least theoretically realistic. That funds flipped from a fairly sizeable net-long position to a net-short position in a matter of a couple months is telling in our opinion.
And in the case of soybeans, it seems traders are paralyzed by the prospects of a deal with China and have had reluctance to take positions in either direction until more is known on that front. From the bull's standpoint, nobody wants to get long and then wake up one morning too a falling out in relations and a proverbial "no deal", while on the other side of the fence in the bear camp, there are also very few people who want to get short only to wake up one morning to a Truth Social post that China has agreed to buy x amount of tons of US soybeans on an annual or any other basis. The situation has made for difficult trading, and unfortunately, we don't see a resolution coming in the near future. Remember, it took dozens of face-to-face meetings during Trump's first term in office to produce the Phase One Trade Agreement; while we recognize there are differences between then and now, we find it unlikely that one, or even two, such meetings would produce any kind of similar result nearby.
There continues to be not a lot new on the weather front for Tuesday, as a few days of cool/dry weather are expected for the Midwest following the exit of today's low pressure system later tonight/tomorrow morning. The Central Plains and mid-south see additional rain/thunderstorm potential then Friday/Saturday and lasting into the first part of next week, but there then appears to be a dry window opening with little/no precip forecast for the Corn Belt through most of next week. Week two forecasts into the first week of June then still show a drier bias for most of the northern US, while the Gulf coasts and East coasts continue to see above average precip potential. Mid-day temperature runs were again little changed as well, with the 5-10 day outlook showing continued cool weather in the east, with a warm-up to more normal levels then still seen in the 10-15 day period.
Global weather shows cooler temps in China's growing areas for the next few days, but then a quick return to above average temps by early next week. Precip will be a mixed bag, with growing areas in the south seeing better rain chances than those in the north in the short term, while both areas see a drier trend in the extended period. Concerns in Europe remain minimal, as forecasts into next week show cool and wet conditions through most of eastern and northern Europe including the Black Sea region, while dryness is limited to just the far western parts.