Monthly Archives: March 2021

3 March 2021

Posted on March 3, 2021 by simon

• HEADLINES: Chicago can hold a trend; Reverses Tuesday’s market with corn/wheat pacing the decline; Mato Grosso corn reseeding/soy crop quality issues on the rains.

• Chicago is in reverse at midday with corn, soybean, and wheat futures lower with the market taking back most of Tuesday’s gain. The fear of another week of slow US export sales on Thursday along with the inability to extend Tuesday’s rally has left Chicago in a sort of price direction limbo. Both the bears and the bulls have talking points in recent days.

• The selling started in wheat and then spread to corn/soybeans in modest volume trade. It is not taking much size to push Chicago values around with funds already long and waiting for the March USDA data before they can start adding to positions. China pricing which was evident on Tuesday has not returned into midday. However, world cash grain and soy markets keep climbing which is likely to underpin futures markets. And US farmers will not sell in a down market, so cash basis levels keep rising to secure grain. We believe the morning selling to be somewhat overdone to the downside amid shrinking S American crop ideas.

• Chicago brokers estimate that funds have sold 9,500 contracts of corn, 2,600 contracts of soybeans, and 2,700 contracts of wheat. In the soy products, funds have sold 1,400 contracts of soymeal and 200 contracts of soyoil.

• Mato Grosso is a big place (the size of Texas), but producer reports on soybean yield/seed quality is worsening. Producers report that soybean seed moisture ranges from 19-26% and is not declining amid the constant rain. Commercials are docking moisture laden soybeans by as much as 25% with soybeans said to be sticky. The moist beans make transportation difficult with end users worrying about heating/mould. Moreover, an estimated 10-15% of the already planted winter corn (IMEA estimated progress at 50% through Friday) will have to be replanted due to poor seed germination. The wet Mato Grosso weather is causing serious concern to producers who are fighting the calendar to get corn seed in the ground. The situation must be closely followed, and the latest yield data argues for a decline in the Brazilian soy crop as yield/quality disappoint.

• Central US cash corn basis levels are firming as Chicago declines and the cash market tries to pull supply from tight fisted farmers. Traders are debating whether China will ship all the corn that it has purchased from the US with weekly exports needing to average (to reach the USDA annual forecast) 65 million bu/week. This is a big export ask, but the US soybean export program last autumn showed that China is following through on its Phase One commitment. Moreover, with China not feeding 30 million mt of food waste, it needs the corn to replace the feedstuff. One should always question a big export program that is just starting, but the record high domestic cash basis level in Central IL tells us that China will likely export most of its purchases. And export sources report that China will book another 2-3 million mt of US old crop corn before the end of the 2020/21 crop year.

• The midday GFS weather forecast is wetter across S Brazil (RGDS), but otherwise unchanged with above normal rains for N Brazil and well below normal rainfall for Argentina. Both the excessive rain in N Brazil and the flash drought for Argentina is becoming increasingly concerning. Heat will remain a feature across Argentina and S Brazil with daily highs in the 90′s to the lower 100′s. The warmest period will be on the weekend when some Argentine and S Brazilian crop areas will endure highs in the mid 90′s to the lower 100′s. The combination of heat/dryness is really starting to take a toll on the Argentine and S Brazilian soybean/corn crops. S American crop sizes are in retreat amid unfavourable weather conditions.

• Chicago values are pushing lower on chart related selling as the bull’s tire of the back-and-forth trade. S American soy quality (too much rain in Mato Grosso) and quantity (too little rain in Argentina) are in decline. And vessels are having to wait 40-45 days to berth and load at Brazilian ports. Making matter worse are the low water levels of the Parana River which is increasing the cost to load a panamax of corn in Argentina. China shows no willingness to cancel or push back their corn purchases amid a strong domestic feedgrain market with import margins being extremely profitable. We see breaks like today as buying opportunities.

2 March 2021

Posted on March 2, 2021 by simon

• HEADLINES: Chicago reverses overnight losses on S American crop concern; China used the break to price; Record 19 million mt of vessels awaiting to load Brazilian soy.

• A Chicago turnaround is underway with corn, soybeans and wheat futures recovering from Monday’s decline. Adverse S American weather and talk of increased Chinese pricing of soybean/corn purchases has sparked the Chicago rally. China has locked down a considerable cache of Brazilian soybeans (estimated at 35-37 million mt) and US corn (estimated at 19.0 million mt including 1.4 million mt in the unknown destination category) which a modest portion was priced on the break. Chinese buyers use Chicago weakness to fix their basis contracts. This is placing a base of support under Chicago corn/soy valuations.

• We note that the focus on Northern Hemisphere weather is starting amid the dryness in the Western US Plains and extreme soil moisture surpluses in the Gulf States/Delta where corn seeding starts in a few weeks. The focus on Northern Hemisphere weather will be acute in coming months amid the pure EU grain stocks shortfall and forecasts for record low US soybean stocks. Mother Nature is going to kill the EU wheat and US corn/soybean crops several times which will hike volatility. We should be preparing for a further expansion of daily price ranges and volatility heading into the NASS March Stocks/Seeding Reports.

• Chicago brokers estimate that funds have bought 4,300 contracts of wheat, 8,900 contracts of corn, and 6,400 contracts of soybeans. In the products, funds have bought 1,200 contracts of meal and 2,200 contracts of soyoil.

• The 2021 March-May corn spread has pushed out to a 16 cent March premium. The last time that this spread pushed out to such heights was back in March of 2013 when the spread reached a 31 cent March premium. Chicago rallied into the March Stocks/Seeding report in 2013 with the corn stocks total being bearish. Forecasting March 1 US corn stocks with any accuracy has become increasingly difficult in recent years due to NASS stocks inconsistencies. The NASS report is a high-risk report for the marketplace.

• The USDA reported a 175,000 mt US corn sale to Japan. This was the first daily sale reported in weeks. Last Thursday’s USDA weekly export sales report was bearish due to the Asian Lunar New Year. We expect that this week’s totals will be larger and with US soybean sales accounting for 98% and corn 88% of their annual USDA forecast, weekly totals do not have to be large to be bullish. In the future, it is going to be difficult for the FAS weekly sales data to be bearish. Due to adverse S American weather, any weakness on the sales report will be purchased heading into the weekend.

• Cash basis levels are firming amid limited US farm sales along with a continued record large US soybean crush rate. And China’s soyoil prices are at multi-year highs which makes pulling world crush margins lower very difficult.

• The midday GFS weather forecast is like the overnight solution with meaningful/heavy rain for N and C Brazil. The regular rains will slow the soy harvest and seeding of winter corn. Most N Brazilian farmers are against seeding corn after March 10 as seasonal tropical rains seasonally stop in late April or early May. Even 95-day maturity corn will not get post March 10 corn to pollinate before the dry season starts.

• The midday Argentine weather forecast maintains dryness with warm to hot temperatures with highs in the 90′s on most days. The 6-10-day period will be exceptionally hot with highs in the mid 90′s to lower 100′s. The Argentine heat/dryness will accelerate stress on reproducing corn/soy crops. Our concern for S American weather is increasing amid the N Brazilian wetness and Argentine drought.

• Chicago values bottomed overnight and are pushing back to chart-based resistance. If the S American weather forecast stays wet across N Brazil and dry across Argentina/S Brazil early next week, a push to new rally highs could occur heading into the March 9 USDA report. The two week forecast into Mar 16 shows a continuance of the existing/concerning pattern. It is S American weather and the resulting supply impact that drives Chicago. There is a record 19 million mt of vessels waiting to load soybeans in Brazil which is testament to strong world oilseed demand.

1 March 2021

Posted on March 1, 2021 by simon

• HEADLINES: Chicago futures sag at midday on fund long liquidation; S American weather forecasts threatening; Traders want crop damage confirmation.

• It has been a mixed morning of Chicago trade with corn/soybean futures trading on either side of unchanged while wheat sags on large KC wheat deliveries and lacklustre US wheat export demand. The new month should produce new investor interest, but with Brazil now exporting 2.5-3.0 million mt of soybeans/week, the US demand driver has been lost. Cheaper Argentine corn and Brazilian soybeans are stealing the demand lustre from the US. This means that rising Chicago values demands a S American crop loss (supply) and tightening US cash markets.

• Research forecasts a mixed Chicago close with old/new crop spreads deflating. Today’s bull story is in the new crop and whether US farmers will seed a combined record 182 million acres of corn and soybeans. The old crop bull market demands adverse S American weather that boosts US old crop corn /soybean sales/exports. Traders are loath to trade Argentine dryness until it is clear that crop conditions are in retreat. That confirmation could come out Thursday afternoon with a new weekly statistics of Argentine corn/soybean progress/ratings. Last week’s Argentine crop ratings improved which is giving a pause to fresh Chicago buying.

• Chicago brokers estimate that funds have sold 10,500 contracts of corn, 5,400 contracts of wheat and 2,200 contracts of soybeans. In soy products, funds have sold 2,400 contracts of soyoil and bought a net 2,100 contracts of meal.

• For the week ending February 25 the US exported 64.5 million bu of corn, 32.3 million bu of soybeans, and 10.0 million bu of wheat. Weekly US corn/soybean exports were above trade expectations. Last week’s US soybean exports were revised upwards by 3.0 million bu to 29.5 million. And China shipped out 11.3 million bu last week or 38% of the US soybean export total. We look for the US corn export pace to keep rising in the weeks ahead and reach 70-100 million bu routinely through June as China begins its shipping program into S China livestock areas.

• For their respective crop years to date, the US has exported a record 1,906 million bu of soybeans (825 million or 76% more than last year), 1.010 million bu of corn (451 million or 81% more), and 663 million bu of wheat (29 million less or 4.2%). Today marks the mid-point in the US corn/soybean 2020/21 crop year while the wheat market is in its last quarter. The US wheat export pace is disappointing which could lead to a USDA reduction on 9 March.

• The corn market has the potential for a 1-2 bullish punch from S American weather. Already the first Argentine corn crop was hurt by extreme December heat/dryness during pollination. Now the second and more important crop is being stressed by like weather and could see significant yield losses. And Brazilian winter corn seeding is the slowest in a decade with losses likely.

• Mother Nature looks to be “unkind” to S American corn crops which will have an impact of accentuating US corn export demand. The Brazilian winter corn crop is of utmost importance to world corn valuations in ApriI/May.

• The midday GFS weather forecast is like the overnight solution with any meaningful rain north of RGDS in Brazil and through all of Argentina. The Argentine forecast maintains warm to hot temperatures with highs in the 90′s on most days. The 6-10-day period will be exceptionally hot with highs in the lower 90′s to lower 100′s. The Argentine heat/dryness will stress reproducing corn/soy crops. And above normal rainfall will further slow the Brazilian soybean harvest and winter corn seeding. Weather leans bullish.

• Supply driven markets are more volatile/sloppy than a demand driven bull with futures at 8-year highs. Dec corn and Nov soybean futures are supported on the need to incentivise record large US summer row crop seeding. And the only way to measure China’s ASF hog feed impact is through China’s weekly crush pace. Post-holiday Chinese crush rates are always tepid as the herd is rebuilt. It is the loss of Argentine corn/soy crops which drives values higher late week. Weekly price lows should be scored early Tuesday. The bull market is not completed, it is just taking a rest.