- HEADLINES: Corn rallies on elevated China state buying in the US; NOAA 30 and 90 day forecast hints at coming summer heat; Central US forecast non-threatening.
- The corrective Chicago price phase appears to have ended with China buying additional US corn (again). FAS announced the sale of another 1.224 million mt of US corn to China for the 2021/22 crop year. The US sale takes Chinese purchases of US corn to a known 12 million mt (commercials rounding up their US total purchase estimate to 12.5 million) and 14-14.5 million mt from all world origins. The sales pace for US corn is record large
- China had purchased a known 5.1 million mt of US old crop corn through May13 with another 7.0 million being sold/announced thereafter by FAS. It appears that China will have no trouble reaching 15.0 million mt of world corn purchases by the end of May. This is a record purchase pace for any month, with all the demand occurring in just 10 days. China has booked nearly 500 million bu of US new crop corn or some 2.8 million acres of US corn production assuming trend line yields of 179.5 bushels/acre. We estimate that the US has sold a record 650 million bu of corn (16.0 million mt) of new crop corn through today. This is a record sales pace of US new crop corn and reflects the rush by China and others to discounted US new crop corn pricing/availability. Brazilian crop losses are likely push others to do the same. Corn has again returned as the Chicago bull leader.
- For their respective crop years through May 13, the US has sold 942 million bu of old crop wheat (down 34 million or 2% from last year), 2,677 million bu of US corn (up 1,126 million or 72%), and 2,258 million bu of soybeans (up 741 million or 49%). US old crop corn and soybean sales are record large. China did not cancel or roll forward any old crop corn as was rumoured late last week.
- China shipped out 39.7 million bu (1.010 million mt) of US corn last week and has 397 million bu (10.1 million mt) of old crop sales that are open on the books. US exporters forecast that China will export most of these purchases with the Chinese state being the buyer. China old crop corn exports will be spread out over the remaining 15 weeks of the crop year which equals out to a weekly export pace of 25.7 million bu/week. If China exports this amount of corn, it will raise 2020/21 US corn exports above 3,000 million bu, a record. This in turn drop US corn end stocks to 1,025 million bu without a needed 50-75 million bu bump in the US corn ethanol grind. The US 2020/21 corn end stock total appears to be on its way below 1,000 million bu.
- NOAA forecast that any lasting heat/dryness will be located over the Western US with heat leaking into the N Plains and W Midwest with frequency this summer (30–90-day forecasts). The forecast of temperatures is always more reliable than precipitation, but the point is that the odds are elevated of a West Central US high pressure ridge in June and July. Traders will be hanging on every 10–14-day model run starting in early June, following the release of weekly US crop condition ratings. Every bushel of production means that much.
- The midday GFS weather forecast targets Iowa and Illinois with heavy rainfall into May 30. Rain totals are estimated in a range of 1.5-3.00″. The Northern Plains and the Central Canadian Prairies will be short-changed with rainfall of 0.25-1.25″. A high-pressure ridge holds across the South-Central US with a deep trough of low pressure just west of Hudson’s Bay. This trough maintains a wet flow with showers/storms through the Midwest on a near daily basis amid a static cold front. There is no indication of any extreme heat/dryness through June 4. Any high-pressure ridging stays well to the south of key corn/soybean and Northern Plains spring wheat areas.
- Saskatchewan farmers have planted 74% of their spring crops, the best pace in a decade. The coming rains will be ideal. China’s corn buying has the attention of traders, but sustaining a rally requires adverse Central US weather. So far, the forecast is favourable but could become too wet with a static jet stream. Our view on corn, soybeans and KC wheat is bullish, but there is no reason to chase a rally without an adverse Central US weather forecast.