- HEADLINES: New crop corn/soybean futures push to new contract highs; Brazilian winter corn crop cuts expected under acute drought; cold temperatures for Plains HRW.
- Midday Chicago futures are mostly higher with a correction underway in oil/meal spreads. New crop corn and old crop May soybeans have been the upside leaders for their own fundamental reasoning. The 2021 Brazilian corn crop is being threatened by acute dryness and a widening yield loss while the ability of US soybean crushers to replace stock is becoming extremely difficult, no matter the amount of the basis push. The contract high for May soybeans is in sight at $14.56 while December corn pushes to new highs. Wheat has been a tag along with traders closely following the midday forecast to gauge how cold temperatures become in the next 2 mornings, and damage to HRW wheat. A firm Chicago close is expected with traders wanting to secure a 5-15 cent break.
- The midday volume of trade has slackened following an active opening. December corn futures were able to push above $5.20 which was acting as early resistance. We see nothing magical about $5.20 December corn with research suggesting that new crop corn as undervalued relative to its fundamentals. New crop corn should pace this week’s Chicago rally, even if US farmers are able to seed more aggressively next week due to warming temperatures.
- Brazilian corn production losses are highly important to US corn exports from August through January. What Brazil suffers from the drought losses will be pushed directly to the US in a new crop export position. The US is the residual supplier of corn to the world.
- The issue is with US 2021/22 corn end stocks near or below 1,000 million bu, there just is no cushion of supply for the US to export an additional 8-15 million mt of corn {relative to losses from Brazil). Somehow the market must embark on a deeper demand rationing rally in new crop corn futures. Therefore, if the Brazilian corn crop is down 9 million mt to 100 million as our weather/yield research would suggest, then December corn futures are undervalued by $0.30-$0.50.
- Since the opening of the Chicago day session, brokers estimate that funds have sold 1,500 contracts of wheat and 2,500 contracts of corn while buying 5,600 contracts of soybeans. Managed money has bought 2,700 contracts of soymeal and sold 2,900 contracts of soyoil. The volume of trade has been modest with the activity expected to pick up just before the close.
- US export inspections for the week ending April 15 were 60.0 million bu of corn, 6.8 million bu of soybeans and 22.6 million bu of wheat. For the respective crop years to date, the US has shipped out 1,545 million bu of corn (up 705 million or 84%), 2020 million bu of soybeans (up 814 million or 67%), and 809 million bu of wheat (even with last year). Last week’s US corn inspections were raised 6 million bu with the weekly average needed to achieve the USDA annual export total being 47 million bu.
- The midday GFS weather forecast is similarly dry across Parana, MGDS, Goias and Southern Mato Grosso for the next 10 days. The forecast has stopped pushing out the prospect of rain forward and is equally dry in the 10-15 day period. The deepening flash drought for Central Brazil will have an adverse impact on winter corn yields. With Brazilian winter corn starting to reproduce in late April and early May, the yield losses could be substantial. And unfortunately, the extended range forecast maintains an arid weather trend in May. The dry season may begin then. High temperatures range from the 80′s to the lower 90′s which are a few degrees above normal. The 2021 crop year is starting to mimic 2005 and 2016 when Brazil winter corn yields plunged 20-30%. Our weather concern is high.
- The market senses a deepening Brazilian flash drought that will severely drop corn yields, which opens the upside for Chicago new crop corn futures. December corn has scored a new contract high of $5.215 while November soybean futures have followed to $12.87. It is going to be cold across the Central Plains tonight with lows in the mid to upper 20′s which raises cold damage for HRW wheat. And there is no meaningful rain for the Dakotas/ Prairies. It is all about adverse weather in a year of shortage!. Adding on top of the adverse weather is that basis pushes of 90 cents over May soybeans is not producing much cash movement from Illinois farmers. The lack of supply worries May soybean shorts ahead of first notice day next week Friday.