- HEADLINES: Midday values turn mixed in battle of improved central weather vs. strong cash basis bids and a fresh China purchase of US corn; Chicago trade volume slows.
- Another large Chinese purchase of US new crop corn along with historically firm cash basis levels is lifting midday Chicago corn values, but wheat and soy futures are mixed to lower. Corn has been the upside leader because of the Chinese corn buying while soybeans sag on the slower US NOPA processing rate. US soymeal cash basis is leaking downwards, even with the slower NOPA member crush rate. This has traders rolling their July length backwards to November or early 2022 futures. The bull argument exists in the soy complex, but it is becoming a new crop, not a July/August futures story.
- US wheat futures are following Paris wheat futures gains along with a ridge of high pressure that is causing heat/dryness for SW Russia/W Kazakhstan. No crop damage has occurred following a wet weather pattern that has saturated the area. But traders note that high pressure ridges must be followed for the potential for summer heat/dryness. July KC wheat below $6.35 appears to be cheap enough, awaiting late spring and summer weather developments.
- The strength of old crop corn/soybean cash markets offers a peg of CBT support, but a sustained rally demands concerning weather for the Central US, Europe, Canadian Prairies, or the Black Sea. World exporter stock/use ratios are so tight that there is zero tolerance for any adverse weather.
- FAS reported that China booked another 1.36 million mt of US corn for new crop delivery. The purchase takes total known China US corn purchases to a record 6.8 million mt (270 million bu). Commercial sources maintain that China has booked a total of 8-10 million mt of US new crop corn, a record. If China imports 30 million mt of corn in 2021/22, we calculate that China will take 22-24 million from the US and 6-8.0 million from Ukraine. China is unable to import S American corn due to a lack of an import phytosanitary agreement. European sources report that the Ukraine has already sold China 1-1.5 million mt of corn of a 6-8.0 MMT total.
- Parana’s Deral has again lowered corn crop ratings due to drought. Good to excellent corn was cut to 23% (down 2%), while crops rated average were placed at 45% (down 1%), while corn in the poor or very poor category rose to 31%. The progress of the crop was that 51% of the crop is pollinating, 24% in the vegetative growth stage, with 21% filling kernels. 72% of the corn crop is in the reproductive stage of production. Back on April 6, Deral rated 92% of Parana’s corn crop in the good to excellent category.
- The US Wheat Quality Council HRW Tour kicks off today with scouts making their way from Manhattan to Colby Kansas. Crop yield estimates from Northern Kansas reporting districts will be available for release later tonight. The Tour was conducted virtually last May due to Covid-19 on a much smaller scale. It is expected that tour participants will uncover average yield potential depending on late spring and early summer temperatures. The Kansas wheat crop suffered from dryness that limited early growth potential from November into March.
- The Argentine Government has unveiled an emergency effort to bring down the cost of food amid ramped up inflationary pressures. The 30-day ban on Argentine beef exports will most impact China, but rumours are growing that the Government will be looking to raise export taxes on wheat. A tax would have the biggest impact on raising the price of wheat to Brazil, its largest customer. Whether it be Argentina/Russia or others, inflationary pressures are causing policy change.
- The midday GFS weather forecast is wetter across the Plains and the W Delta with rains of 1.5-3.00″. The jet stream stays active with showers/storms likely somewhere across the Central US each day. The heaviest rain falls across the SE US Plains impacting E Texas, E Oklahoma and Kansas with totals of 2-5.00″. The Northern Plains and NW Midwest will see 10-day rainfall totals of 0.5-1.50″. There is no evidence of any extreme heat as high temperatures will range from the 70′s to mid-80′s.
- Improving US weather is clashing with tight old crop supplies to produce a back-and-forth market. Option volatility is too high without adverse US weather. Our best advice is not to chase rallies or breaks until more is known about the US summer weather pattern. Old crop Chicago soybean futures are acting tired on rallies. We await Central US summer weather pattern certainty.