14 May 2021

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  • HEADLINES: Chicago morning rally retreats on massive fund liquidation in July corn; US coast guard reopens the Mississippi River; Midday GFS weather forecast drier for N Plains/NW Midwest.
  • The US Coast Guard has reopened the Mississippi River with traffic trying to return to normal. The 1.5-day closure will have a limited impact on the US grain export industry. The I-40 bridge is seen as stable without a load factor and normal river navigation is resuming.
  • Chicago futures are sharply mixed at midday with old crop corn pushing lower on continued liquidation. The July/Dec corn spread has weakened by over 15 cents with July trading at a $1.00 premium to December. The selling in July corn is fund related. We see no evidence that China is pushing old crop sales forward or cancelling existing sales on the books. However, China continues to book US corn on weakness with another sale of 1.3 million mt announced this morning.
  • The USDA has confirmed that China has now taken 4.3 million mt of 2021/22 US corn with a total sale pegged by exporter sources at 6 million. We believe that the US has sold 8.8 million mt of corn for the 2021/22 crop year or 350 million bu to all importers. End users are aware of the December discount to July and the lack of Brazilian corn supply that will be available from August onward due to their drought. July corn has filled a gap on the weekly continuation chart at $6.58-6.61.
  • Domestic end users are seeing the corn break as a gift as they cover forward margins into 2022. The corn break has helped a host of users add to profitable margins in ethanol, livestock feed and food product demand. July corn under $6.50 and December corn under $5.50 are too cheap by our fundamental measures. But these are big ag markets, and price rises or falls further than it should. End users should use future declines as a longer term buy opportunity.
  • We hear that China has been a monster buyer of the past 2-day break in soybeans/corn locking in flat price on existing basis sales. China is said to be bidding again on new crop US corn with a purchase of 600,000-1.0 million mt rumoured. China could easily purchase as much as 10 million mt of new crop world corn by the end of May as they bid for US/Ukraine supplies. China does not have phytosanitary agreements with Brazil on corn imports. Most export sources argue that USDA’s 2021 /22 world corn export estimate of 26 million mt is far too low, but they all agree it is a place to start. The Brazilian corn loss and record large Chinese buying argue for that the USDA’s US 2021/22 corn export estimate is too low by 250-400 million bu.
  • Chicago brokers estimate that fund managers have sold 22-26,000 contracts of corn, and 1-2,000 contracts of wheat, while buying 4,200 contracts of soybeans. In the products, funds have bought 4,300 contracts of soyoil while selling 3,000 contracts of meal. The funds are big sellers of July corn which is where their length sits. Thursday’s break has fund risk managers exiting corn length (July) based on equity losses. This is the reason why July corn is so weak.
  • Market talk has the lnforma/Markit group estimating 2021 US corn acres to expand to 96.8 million acres and soybeans to 88.5 million. This would be a gain of 5.7 million acres in corn and 900,000 acres in soybeans vs NASS March Intentions. Research argues that US farmers will plant an extra 900,000 acres of soybeans (88.5 million) and 900,000 acres of corn (92.0 million) for combined record of 180.5 million acres. The guessing on what US farmers seed will persist through June.
  • The midday GFS weather forecast is drier across the N Plains and N Midwest with heavier rain south of the Iowa/Missouri border. The midday GFS forecast brings a tropical system onshore across Louisiana on May 23. Whether this tropical system is correct will determine the accuracy of the forecast beyond the next week. Our comfort with any longer-term Central US weather run is low, other than to state that temperatures will be rising via modest Central US high pressure ridging. It is going to become warm.
  • China’s need for world feedgrain/soy imports is massive into early 2022 on expanding demand and limited domestic stocks. Cash corn is trading at record highs in Brazil and China. Increasing. weather importance will be placed on N Plains/NW Midwest and Canadian Prairies dryness in the weeks ahead. This is no place to be turning bearish with record high cash basis bids not uncovering any Central US grain/soy movement.
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