• 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.

• HEADLINES: Market continues trend of post-USDA liquidation; Export sales weak; Domestic margins rising.

• It has been an outright washout in Chicago, with corn limit down in mid-morning trade and old and new crop soybeans down 40-50 cents. US corn’s premium to Argentine origin and ongoing weak spot fob soy basis in Brazil has worked to slow nearby US export demand dramatically. Excessively overbought conditions had to be reconciled eventually. Otherwise, there has been no real catalyst for the break and domestic end user margins are improving. We should be prepared for massive volatility between now and the end of summer. This is and will remain a big market.

• Markets are transitioning from tight old crop supplies and the recent incredible basis push immediately into weather and new crop supply potential, and whether the USDA’s US supply forecasts are proved accurate. There are no glaring weather threats present across the Central and Eastern Midwest, but elevated yield uniformity is required to exceed trend. Exceeding trend yield, in turn, is required to prevent further corn and soy stocks/use contraction. The message is that price determination between now and August is left to Mother Nature. It will be difficult to prove both the bulls and bears yield cases until the middle part of summer. However, concern over intensifying drought across the Dakotas and Upper Great Lakes remains elevated.

• There is also still massive uncertainty surrounding the return of barge traffic along the southern MS River. Some commentators remain optimistic, but this afternoon the navigation committee will meet to discuss logistical priorities. Whether that includes the movement of grain will be closely followed.

• US export sales through the week ending May 6 featured net old crop corn cancellations of 4.5 million bushels as China/unknown cancelled 21 million bushels, and new demand was limited to routine business from Mexico, Korea and Japan. Old crop soy sales were 3 million bushels, vs. 6 million the previous week. New crop US wheat sales were a meagre 10 million bushels.

• Yet, the difference between near-term term and potential new crop demand is sizeable. China this morning secured another 680,000 tons of US origin, and additional purchases are said to be in the works. Adding recent known sales to China and Mexico, US new crop corn export commitments sit at a record high 7.3 million tons. We also note that new crop futures-based ethanol production margins have risen to $1.00 per gallon. New crop soybean crush margins have expanded to $1.35 per bushel. Breaks in the marketplace only work to boost consumption, which further raises the burden on Midwest yields this summer. This is a place to add to end user coverage.

• Model guidance has extended complete dryness in Brazil into May 27, and amid ongoing heat, there is no hope for salvaging safrinha yield potential.

• A complete lack of rainfall during pollination continue to suggest that a sub-95 million mt Brazilian crop is probable. A sub-90 million mt crop is possible, and at this point importers have no choice but to maximise purchases from the US and Ukraine between August and the middle of 2022.

• The midday GFS weather forecast is wetter in portions of the Dakotas and Southern Canada in the 11-15 day period but is otherwise consistent with this morning’s output. Confidence in extended range forecasts is low as model performance in the last 30 days has been poor. We also note that the better performing EU and Canadian ensemble forecasts maintain ongoing arid conditions across the N Plains, Upper Midwest and Canada into May 27. The GFS’s near-term forecast maintains soaking rainfall of 2-5″ across the Southern Plains, Delta and far Southern Midwest. Temperatures reach more normal levels beginning next Tuesday.

• Liquidation following monthly USDA reports has been a market theme since winter amid the USDA’s measured approach to raising US exports and cutting Brazilian corn production. This week is no different, but the arrival of the growing season has heightened price sensitivity. Weather/supply risks are unchanged and still very large.

• HEADLINES: USDA May report offers something for everyone; Bullish vegoils/soybeans and disappointment for corn/wheat; It is all about weather into July.

• The USDA May Crop Report was slightly bearish as the report cut US wheat, soybean, and corn exports far more than expected (relative to the current crop year). The US export cuts were made despite a 7 million mt cut in the 2021 Brazilian corn crop and the political obligation for China to secure at least $43.5 billion of US ag goods. Once again, the USDA is being conservative with its US ag trade forecasts, even as the world economy exhibits its best economic growth rates in a decade. Chicago grain/soy futures sold off on USDA report data. However, the need for US crushers and exporters to secure additional cash soybeans/corn from the producer is real. We would advise waiting for a deeper correction to make new purchases. This is no place to chase a rally, unless N American weather forecasts take a turn for the worse in coming days.

• The USDA estimated 2021/22 US corn end stocks at a larger than expected 1,507 million bu by cutting US corn exports 325 million bu compared to the old crop year. The 2021/22 US corn export pace is a conservative 2,450 million bu. US 2021/22 feed/residual use was left at 5,700 million bu, even with a US 2021 harvest that was 800 million bu larger. US 2021/22 US ethanol use was raised 225 million to 5,200 million bushels.

US End Stocks (million bu)

2019/20    2020/21    2021/22

Corn             1,919        1,257        1,507

Soybeans      525        120        140

Wheat           1,028        872        774

• NASS pegged US winter wheat production at 1,283 million bushels, up 112 million on last year, using a yield of 52.1 bushels per acre. Year-over-year yield cuts of 6-12 bushels/acre were made across the PNW. Year-over-year increases are expected in alt regions. If realised, NASS’s May yield projection will the be the third highest on record.

• Old crop US wheat end stocks were raised 20 million bushels on reduced exports. HRW, HRS and SRW stocks were increased 12 million each, with white stocks cut 11 million. New crop stocks are pegged at 774 million bushels, though USDA’s export and feed use forecasts are viewed as too tow.

• The US average corn farmgate price was forecast at $5.70/bu with USDA adjusting 2020/21 US corn exports up by 100 million to 2,775 million bu. The 2021/22 US corn farmgate price shows a gain of $1.35/bu compared to 2020/21.

• World 2021/22 corn end stocks were forecast at 292.3 million mt, up 8.8 million with China forecast to import 26.0 MMTs. The USDA raised their estimate of Chiina corn imports in the old crop year to a like 26.0 million mt. Brazilian corn production was estimated at a much too high 102 million mt in 2020/21 and a record 118.0 million mt next year. Brazil looks to export 43 million mt ofn 2021/22 corn, which appears high.

• The USDSA estimated 2021/22 US soybean end stocks at 140 million bu by cutting exports to 2,075 million bu. This is down 205 million from the current crop year and far too low. US soybean crush was raised to a record large 2,250 million bu on massive biodiesel demand. USDA forecasts that the US would consume 12.0 billion pounds of soyoil for biodiesel, up 2.5 billion pounds, while exports are cut to just 1,450 million pounds (down 850 million pounds). The USDA appears willing to cut US soybean exports to buy time to gauge ftnal US soybean seedings in June.

Global End Stocks (million mt)

2019/20    2020/21    2021/22

Corn            304.5        283.5        292.3

Soybeans    96.5        86.5        91.1

Wheat         299.4        294.7        295.0

• 2021/22 World soybean production was estimated at 366.5 million mt (up 23 million) while world trade only grew 1.5 million to 172.8 million mt. China looks to import 103 million mt of soybeans in 2021/22. 2021/22 world soybean end stocks are forecast at 91.1 million mt with a Brazilian crop of 144 million mt. This is up 4.6 million mt assuming the world weather is normal for a year. November soybeans at $14.75 and above is overvalued. This is no place to chase a Chicago rally.

• Major wheat exporter stocks are projected to rise only 840,000 mt in 2021/22, with stocks/use declining slightly amid enlarged export demand. Total world wheat trade in 2021/22 is forecast to reach a record 202 million tons, we note that world trade is very often understated in May. Exporter stocks of 62 million tons also assumes a Russian crop of 85 million mt vs. trade estimates of 78-81 million and a Ukrainian crop of 29 million, vs. 25 last year. Big wheat crops are needed to keep world wheat exporter stocks stable.

• The USDA has set the benchmark for new crop supply and demand. It is all weather going forward, and the adjustment in yield/production that follows. The USDA has bought itself (and the market) time to better understand North American, Russian, and Asian weather patterns with deep US/world export cuts. If the US finds additional planted acres in June, you can bet that US/world trade totals will enlarge. We see Dec corn below $5.70, November soybeans below $14.00, and July KC wheat below $6.60 as cheap, with the summer growing season ahead. We look to buy breaks into late May. The decline of 595 million bu of US corn, soybean and wheat exports looks too big amid a smaller Brazilian corn crop and pledges by China to secure $43.5 billion bu of US ag goods by year end. We estimate that China will book 40-44 million mt of US soybeans or 1,540 million bu meaning that “others” are all going to secure Brazilian beans.

• HEADLINES: Chicago rallies on strong Midwest cash basis; Fresh China purchase of US new crop corn; Drier central US weather forecast; Fall in Parana corn crop ratings

• Chicago grain/soy futures are sharply higher with old crop corn/soybeans pacing the gain. Traders are certain that the old crop summer row crops have a bullish story on the tightness of nearby cash supply. The USDA is not expected to raise or lower their 2020/21 soybean stocks estimate of 120 million bu, which is viewed as the bare minimum or pipeline. Old crop corn stocks are expected to fall due to rising export demand with USDA boosting China’s corn imports from the US as sold cargoes ship.

• Wheat and new crop corn/soybeans are following the strong gains in old crop summer row crop futures. November soybeans are back to challenging contract highs at $14.43 while May soybean futures have scored a new 8.5 year high at $16.48/bu. The discount of July futures (to May) will underpin old crop corn and soybean futures on breaks.

• We look for a higher close with the market risk to the upside on a cut in the 2021 Brazilian corn crop and boost in 2021/22 US corn exports. US 2021/22 soybean end stocks are forecast to be pipeline at 120 million bu. A sharp rally or a sharp break on Wednesday is likely to find traders that are willing to return to a large net long position or bank windfall profits amid the recent strong price rise. Fading the number will be a popular sport tomorrow.

• Chicago traders estimate that funds have bought 5,000 of wheat, 12,000 contracts of corn, and 9,900 contracts of soybeans. In the products, money managers have booked 4,300 contracts of soyoil and 3,900 contracts of soymeal.

• China appears to be clamping down on grain and crush information flow to the world. COFEED, a China ag statistical provider, has suspended release of its ag information. Chinese soybean crush rates have been expanding and have correlated well with monthly and annual totals. The COFEED shut down makes estimating China soybean imports even more difficult. The Chinese Government appears to be increasinly sensitive to domestic prices and trade. We note that Chinese domestic corn prices are reaching levels close to the early winter price highs.

• FAS announced the sale of another 680,000 mt of US corn to China in a new crop position. This takes China’s known US corn purchase commitments to 3.0 million mt, a record large amount with the start of the crop year still 3.5 months away. We hear that China is still bidding for US and Ukraine corn on breaks. It will be interesting to watch if China is a buyer on any bearish reaction to the May USDA report.

• Parana’s DERAL corn crop rating this week fell to 30% poor to very poor, with 45% of the crop rated average and just 25% of the crop rated good. Last week, 28% of the corn crop was rated good. On April 6, 92% of the Parana corn crop was rated good, which has declined sharply due to acute dryness. Further falls in ratings are forecast with rains absent in the forecast into late May at the earliest.

• The midday GFS weather forecast is slightly drier than the overnight run across the Northern US Plains, Canada, and the N Midwest. The prospect of rain is pushed further south into S Iowa, Northern Illinois, and N Indiana. Moreover, excessive wet weather is further west into C Texas and out of the key cropping areas of E Texas and Louisiana. The dryness across the N Plains, Canadian Prairies and N Midwest follows a weather trend that extends back into mid-winter. The GFS forecast maintains a cool to cold temperature trend for the eastern half of the US into May 24. The relative cool will slow emergence and further hamper crop development. The cool temperatures are starting to worry corn producers as the crop is slow to emerge and set a root structure.

• Monday’s Chicago decline was a mere “speed bump” in an overall bull market. The structure of the 2021 grain bull market is little changed with the Brazilian corn crop in decline, US cash basis bids remain strong for nearby delivery, and China continues bidding for US new crop corn. The only difference is that traders are wanting to take risk off the table amid the unpredictability of the upcoming USDA report. We expect that any sharp Chicago decline (should the report be bearish) would uncover end user pricing.

• HEADLINES: Chicago endures a correction day; Bull structure unchanged with midday forecast arid for Canadian Prairies, Northern Plains, M Midwest and Brazil.

• Chicago grain/soy futures are sharply lower at midday on fund liquidation ahead of the USDA May Report which will be out on Wednesday at 5pm UK time. Fund managers hold windfall profits on long Chicago positions and banking some of that profit makes perfect sense ahead of the unpredictability of a USDA report.

• However, the May USDA report will only include NASS production estimates of 2021 US winter wheat. US corn, soybean, and other spring grain production estimates are derived from using trend yields and the NASS March Seeding Intention estimates. They will also produce world 2021/22 balance sheets for the first time and estimate China’s corn/soy imports in the 2021/22 crop year.

• The report is one of the most important of the spring, and the recent conservative nature of the USDA regarding China has placed fund managers on the defensive. We look for a lower Chicago close, but spread price action between old and new crop futures argues for a late day bounce. We doubt that traders will want to position short ahead of the May USDA report.

• Chicago traders estimate that funds have sold 9,000 of wheat, 12,000 contracts of corn, and 4,900 contracts of soybeans. In the products, funds are flat in soymeal while selling 3,200 contracts of soyoil.

• The USDA/FAS announced the sale of 1,020 million mt of US corn to China in the 2021/22 crop year. This takes 2-day China corn purchases to 2.38 million mt on a known basis. China also cancelled 280,000 mt of old crop corn which is rumoured to be a large livestock producer in China. Export sources report that the cancelations are not COFCO, suggesting that most of the remainder of the old crop Chinese corn purchases on the books will ship. The cancelations are said to be part of TRQ purchases, not China’s State Trading entities.

• FGIS estimated weekly US export shipments for the week ending May 6 were 67.2 million bu of corn, 8.7 million bu of soybeans, and 20.0 million bu of wheat. For their respective crop years to date, the US has exported 1,778 million bu of corn (up 787 million or 79%), 2,046 million bu of soybeans (up 786 million or 63%) and 870.7 million bu of wheat (up 9 million or 1%). The US must average just under 70 million bu /week on a Census export basis to reach a record 3,000 million bu 2020/21 US export estimate. Last week’s US corn exports were revised upwards to 87 million bu. The US is on track to export 3,000 million bu of 2020/21 corn.

• It is difficult to accurately forecast the USDA report on a new 2021/22 balance sheet, but the Outlook Forum provided a starting point. USDA estimated 2021/22 US corn end stocks at 1,552 million bu and soybeans at 145 million bu with 2021 corn seeded acres of 92 million acres and 90 million acres for soybeans. NASS indicated 2021 US corn seeding at 91.1 million acres with soybeans at 87.6 million acres. NASS soybean seedings were 2.4 million acres (120 million bu less via trend yield) which means that the USDA will have to cut demand to leave stocks at pipeline (120 million bu.)

• The USDA cut 20/21 US corn end stocks in April to 1,352 million bu via an increase in ethanol/export demand which drops the Outlook Forum US 2021/22 corn end stocks total to 1,402 million bu. Making a further adjustment in 2021/22 corn production via smaller seedings drops 2021/22 stocks to 1,250 million bu. We do not see 2021/22 US corn end stocks of 1,250 million bu or US soybean end stocks of 120 million bu as bearish. By far, the new crop soybean stocks estimate is more bullish, but the loss of 5 bushels/acre of corn yield would justify December corn at $7.50-8.00. Therefore, anything but perfect weather holds a potent bullish price impact.

• The midday GFS weather forecast is drier than the overnight run across the Northern US Plains, Canada, and the NW Midwest. This follows existing weather trends and must be watched closely into late May. A dire drought is building across the N Plains and Canada that is highly concerning to yield.

• Today’s drop is a correction. Brazil’s corn crop is falling by the day while China is adding to forward feed coverage. US soybean stocks are measured at pipeline for TWO consecutive crop years. The market risk is to the upside on concerning N American weather trends. A bottom should form in Chicago values either today or by early Tuesday. Cash corn and soybean basis bids are strong and keep rising in the hunt for supply.

• HEADLINES: Early Chicago sell the fact break uncovers new fund buying; Corn/soybeans rally to new highs at midday; Weather to key Sunday evening trade.

• Chicago grain/soy futures are higher at midday as “sell the fact” corn trading had only a momentarily bearish impact. FAS/USDA confirmed that 1.3 million mt of US corn was sold to China. We believe that an additional 3-4 million mt were also sold to China on Monday/Tuesday with the total purchase of around 5-6 million (Gulf for Oct-Nov and PNW Dec-January). And that China is still asking for new crop corn and soybean offers this morning.

• China is behind in their US ag purchases and their booking of new crop reflects that their feedgrain shortage will extend into the new crop, when their farmers start their own domestic harvest. China normally slows or halts corn imports when their farmers start cutting new crop corn and focus on soybean imports. Like the US, China cannot withstand anything but perfect weather this summer without looming feed shortages.

• We look for a higher Chicago close with the upside leader being the soy complex/soyoil as world vegoil prices surge. Whether it is palm, canola, rape, sun or soyoil, world spot vegoil supplies are extremely tight while demand rationing shows no evidence of starting. The morning break in corn occurred on shrinking volume, a close above $6.30 December corn sets an initial target of $6.60-6.80 while November soybeans look to target $14.50-14.70/bu on tight 2021/22 stocks.

• Chicago brokers estimate that funds have bought a net 4,200 contracts of corn and 5,300 contracts of soybeans, while selling a net 1,300 contracts of wheat. In soy products, funds have bought 1,100 contracts of soymeal and 3,900 contracts of soyoil. The fund buying returned on the morning dip.

• The USDA/FAS announced that 1.36 million mt of US corn were sold to China with another 188,468 mt to an unknown destination.

• Statistics Canada estimated their all-wheat stocks at 16.2 million mt, canola at 6.6 million mt, and oat stocks at 1.8 million mt. The wheat, oat, and canola stocks were slightly under trade estimates and in the case of canola, some 34% below last year. The April Canadian stocks were mildly bullish with Canadian farmers not selling grain due to Prairie drought concern. The dry weather is hampering seeding and emergence, and causing farmers to slow cash sales. Any loss of the new crop Canadian wheat/canola crop will have a massive impact on world prices.

• Another week ends with Brazilian winter corn struggling without rain. The 2021 crop year is likely to go down in the record books as being the driest in 50 years of weather records. The lack of rain during pollination along with rising temperatures has caused some corn fields to be zeroed out. Producers are abandoning fields which complicates the overall sums in determining production.

• The biggest hope of end users is a bearish USDA May report. However, we doubt that the May Report could be bearish enough to end the bull market. In fact, record low US new crop corn/soybean stock/use ratios could accelerate the rally. Moreover, there is a chance that the USDA could revise Chinese grain/corn stocks lower, which would help justify a larger import estimates in 2021 /22. May is normally the report where the USDA engages in long term statistical housecleaning.

• The midday GFS weather forecast is like the overnight run, but compared to the Canadian and EU models, the GFS is too far north with rain into lowa/N Illinois. The bias of the Ensemble models is to keep the N Plains and N Midwest dry over the next 10 days. There is rain hinted at in the 11–15-day period, but the models have had a very poor track record beyond the next 10 days.

• The loss of 12-20 million mt of Brazilian corn supply makes the world corn exporter balances sheet exceptionally bullish. Add on top of that the ongoing dryness across Canada/US and you end up with a dynamic bull market with fund managers adding to purchases. May was supposed to be the month of improving soil moisture, it is turning drier much like April. Stay with a bullish bias as any weather problem in the US, Black Sea or Canada will shoot values to new highs. Seasonal highs are not expected until sometime in July or August.

• HEADLINES: New crop Chicago futures maintain leadership; Talk of Chinese corn demand; Brazilian drought continues.

• Chicago grain/soy futures are mostly higher at midday with new crop soybeans and corn scoring new contract highs. Funds are adding to net long positions as the Brazilian corn crop shrinks and Central US weather is far from perfect. We need to remember that anything short of near perfect US weather is unacceptable with corn/soybean stocks expected to be historically tight. Tight stocks not only impact US corn and soybeans, but also the world. It is right to say that the world grain cupboard is bare, and it will take multiple years to replenish supplies with China actively starting to seek new crop supply. We expect a higher Chicago close today with the market backing and filling on Friday. Trade next week will depend on upon Brazilian/North American weather.

• Chicago brokers estimate that funds have bought 6,700 contracts of corn and 8,300 contracts of soybeans, while selling 2,300 contracts of wheat. In soy products, funds have bought 4,600 contracts of soymeal and 3,900 contracts of soyoil. It is interesting that there just is not much selling above the market. US elevators report that Midwest/Plains farmers have already sold their largest percentage of a US crop in a decade. The Chicago rally has coaxed farmers into selling which they have done in some volume.

• FAS reported that for the week ending April 29 the US sold -3.5 million bu of old crop wheat and 14.7 million bu of new crop, 5.4 million bu of old crop corn and 4.2 million bu of new crop, and 6.1 million bu of old crop corn and 7.1 million bu of new crop. The sales of soybeans were as expected while corn and wheat were light. For their respective crop years to date, the US has sold 2,671 million bu of corn and 2,252 million bu of soybeans. The US remains on pace to export 3,000 million bu of corn and 2,350 million bu of soybeans in the 2020/21 crop year.

• We believe that China has secured about 2.0-2.5 million mt of US new crop corn in recent days. With COFCO being the buyer, it is uncertain when it will be announced by FAS since COFCO is a registered US grain merchant and the announcement only needs to be made when the corn is shipped overseas.

• Moreover, China is also seeking to start Phase Two negotiations for the period beyond January 15, 2022. The Phase One Agreement that was signed in January of 2020 was a two-year agreement. The willingness of China to start new negotiations reflects their desire to enhance future food security. Moreover, China’s Premier called for China to work on building its food security in the year ahead with farmers being encouraged to boost yield and plantings. We doubt that China’s call to boost production will have much impact.

• We hear that Brazilian farmers are looking to abandon 2021 winter corn fields on poor pollination. Corn is being disked down in the hope of rain and planting a winter wheat crop. The yield outlook stays poor.

• The midday GFS weather forecast is similar to the morning run but still at odds with the better performing EU and Canadian models. The GFS forecast maintains a more northward bias with Midwest precipitation over the next 4-5 days. Cumulative rainfall of 1-3″ will favour the whole of Iowa, Illinois, Indiana, Ohio and Michigan. Recall the EU model places soaking rainfall across the far Southern Midwest, mid-South and Delta, leaving the core of the Great Lakes region dry. Key is whether the afternoon EU run follows the GFS with its northerly precipitation bias. We note that soaking showers are indeed needed across the Great Lakes region amid deeply negative soil moisture anomalies there.

• The trade is at long last better understanding the severity of Brazilian corn production loss, which is a big deal. Nov soybeans also appears to be digesting enlarged corn seedings,  rather than soy, which even a mid trend yield confirms another year of pipeline US stock levels. We continue to strongly advises against being short as the growing season begins in earnest in the next 2-3 weeks.

• HEADLINES: New crop corn, soy extend rally; Midwest forecast colder in mid-May.

• Chicago grain/soy futures are mostly higher at midday with any selling being in old crop corn futures and tied to China cancelling out of 140,000 mt of old crop corn. The USDA also confirmed that Mexico booked 184,100 mt and an unknown buyer of 147,320 mt of US new crop corn. We believe that China has booked 1.5-2.50 million mt of new crop corn for delivery this autumn. Traders are wondering if China is rolling some of their old crop corn purchases to new crop with the July-December spread reaching $1.10/bu yesterday. We doubt that old crop cancellations/rolls will be widespread with China having already booked a considerable amount of ocean freight for May, June, and early July.

• Soybean and wheat futures have been followers of the corn market this morning. Old/New crop soyoil spreads have been under pressure as Cargill added to their deliveries of soyoil by putting out another 201 contracts with Bunge/CHS the stoppers. The Cargill deliveries in soyoil have pressured nearby spreads at the same time, cash basis and bids remain firm. Traders argue that Cargill is rolling renewable biodiesel hedges backwards to the much cheaper December soyoil futures contract. The cash concern for US soyoil supplies develops as the US soybean crush rate slows amid a lack of local soybean supplies.

• Chicago brokers report strong bear spreading in old/new crop corn and old/new crop soybeans/soyoil as Central US weather becomes a focal point of traders. The cheaper new crop futures appear to offer a lower risk position to be long with Chinese buying likely to be focused on new crop corn and soybeans this summer.

• Managed money has been active on the buy side of the marketplace. Brokers estimate that funds have bought 2,100 contacts of wheat and sold 5,900 contracts of corn and 2,900 contracts of soybeans. In soy products, funds have bought 1,200 contracts of meal and sold 3,900 contracts of soyoil.

• The US aviation/biofuel industries met with a US House panel on Tuesday to discuss ways to expand the production of low carbon aviation fuels. Several major US airlines met with US President Biden back in February to discuss the tax incentives for a low carbon jet fuel. An aviation industry movement is underway to uncover alternatives to fossil fuels that are favourable to the environment. US renewable biodiesel demand is quickly ramping up and there will not be enough vegoils/tallows (or other feedstocks) available that could meet expanding jet fuel demand.

• The US weekly ethanol grind was up slightly with production of 280 million gallons. EIA indicated that last week’s production was down 8% from 2019, but up 2 million bu from last week. US ethanol stocks rebounded to 859 million gallons, up 30 million from the week prior, but down 20% from 2020. There is no indication of corn price demand rationing in US ethanol production with ethanol prices rising.

• Like the EU/Canadian models, the midday GFS weather forecast has shifted any meaningful rainfall southward into the southern half of the Midwest. The N Plains, Canadian Prairies, and the Northern Midwest (I 80 north) hold in a below to much below normal rainfall pattern. Near to below normal temperatures look to prevail with lows ranging from the mid 30′s to the mid 40′s with highs in the 50′s and 60′s. The cool temperatures look to slow emergence and crop growth.

• New crop futures are pacing the rally on the concern of summer dryness and cooler than normal temperatures for the next 2 weeks. The tolerance for US corn or soybean yield losses is zero with end stocks already projected to be as tight or tighter than old crop. To date, there is no evidence that $15.00 soybeans or $7.00 corn is producing demand rationing or imports that would prevent localised shortages by July or August. And we are doubting that the soyoil rally is over with cash markets holding strong. July soyoil futures have strong support between $61-63.00 cents.

• HEADLINES: Chicago expands overnight rally; Delta, southern Midwest forecast too wet.

• Chicago grain/soy futures are sharply higher at midday amid unrelenting cash basis levels and a lack of change in climate patterns across the US Plains. Canada and Brazil. Other breaking news is absent, but there remains no indication that supply issues will be solved for any length of time.

• The early morning surge has been led by July corn, which has broken through $7.00 surprisingly easily. Spot Gulf corn prices are no doubt slowing summer export demand relative to prior expectations, but any material decline in the pace of corn sales will be short-lived on ongoing historic Brazilian dryness. Importers will be forced to return to the US marketplace in August, when Brazilian exports typically arrive in bulk. However, this year Brazil’s domestic market will absorb the early safrinha harvest. We note that domestic Brazilian corn prices remain perched above $7.80 per bushel. Additionally, Census May corn exports were a record 347 million bushels, and the corn export market’s physical demand pull will stay intact into summer.

• Safrinha corn in Parana in Southern Brazil this week is rated at just 28% good/excellent, vs. 40% last week. Crops rated as poor jumped to 27%, vs. 18% a week ago. We fully expect Parana good/excellent to drop to or very near zero by mid-May as subsoil moisture is depleted almost entirely. Temperatures across the southern third of Brazil in the next 10 days will be routinely in the upper 80s and low to mid-90s. Still no rain is advertised in any region of Brazil’s safrinha corn region into May 20.

• Brazil’s forward cash soy market is also finding strength. Brazilian fob soy basis for August delivery is now quoted at $0.90 per bushel over Sep Chicago, and indeed Brazilian supplies will be dwindling rapidly in the months ahead. Brazilian exporters shipped a record 17.4 million tons of soybeans in April. FebruaryApril shipments total 33.5 million tons, or roughly 40% of the USDA’s full annual forecast, vs. 30.6 million last year. Brazilian soy exports typically peak in April and decline rapidly beginning in August. Recall a year ago, Brazilian soy fob basis soared to $2.50 over spot futures during the autumn months once supply was exhausted.

• The message is that enlarged Northern Hemisphere crops are required to satisfy global corn and soy demand over any 12-month period.

• September Paris milling wheat has expanded its early morning rally to €3.75 per ton ($0.12 per bushel}. Global rapeseed/canola futures are sharply higher as spot EU rapeseed oil scores a new all-time high equivalent to $0.71 per pound. Rising vegoil markets have sustained profitable oilseed crush margins worldwide.

• Compared to its overnight run, the midday GFS weather forecast is drier in Indiana and Ohio but much wetter in Missouri, southern Illinois, Indiana and Kentucky. The overall pattern into mid-May maintains active showers across the Delta and Eastern Midwest throughout the next 10 days. Lasting delays in seeding will be only regional in nature.

• Unfortunately, meaningful rainfall across the Northern Plains will bypass major crop areas, while drought intensifies across the far Southern Plains and Canada. Soaking rain will be needed across the Dakotas and Canadian Prairies no later than mid-May. Already there is talk of producers in ND switching from spring wheat to corn amid insurance date considerations.

• Upside old crop targets have been hit. However, US and world corn balance sheets continue to tighten on a complete lack of Brazilian rainfall and positive soy crush margins. Breaks in wheat will be short-lived until Northern Hemisphere row crop production is known.