Monthly Archives: June 2021

30 June 2021

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  • HEADLINES: NASS Reports bullish for Chicago corn/soybeans; Combined 2021 US corn/soybean acres just 180.3 million; June stocks close to trade estimates.
  • The June NASS Stocks & Seeding Reports were bullish for US corn/soybeans with Chicago posting sharp to limit up gains. The only bearish surprise was wheat including a slight increase in new crop seeding. The June Stocks/Seeding report raises weather/yield risks for the remainder of the summer and opens the market to further gains.
  • NASS forecast US June 1 corn stocks at 4,112 million bu, 18 million bu decline from trade expectations, and the lowest US June stocks total in 8 years. We calculate the Mar-June feed/residual use at 882 million bu, down 109 million bu from last year. The Sept-June 1 2020/21 feed/residual use is pegged at 5,509 million bu, up 118 million bu from last year (+2%). USDA is forecasting a 197 million bu decline in US feed/residual for the 2020/21 crop year or -3.3%. The USDA should raise their 2020/21 US corn feed/residual use rate by 50 million bu in the July report.
  • US June 1 soybean stocks were 767 million bu, down 6 million bu from trade estimates and down 614 million bu from 2020, the smallest since 2015.
  • The March-June US soybean residual is calculated at a +89 million bu, up 11 million bu from last year. The enlarged residual helps to provide comfort in last year’s NASS soybean crop estimate. The soybean market was fearful of larger decline in the residual, compared to pre report estimates.
  • US final 2020/21 wheat end stocks were forecast at 844 million bu was down 17 million bu from trade expectations, and down 184 million bu from last year’s stocks total.
  • 2021 US principal crop acres rose to 317.2 million acres, the largest total since 2018 when 319.3 million acres were seeded. The big gains in seeded acres vs 2020 occurred in the Dakotas (North Dakota crop acres up 15.6% to 24.15 million with South Dakota up 8.0% to 16.8 Mil acres). Other Midwest States showed modest seeding gains of 0-2% with Iowa seeded crop acres unchanged from last year. Kentucky cropped acres rose 6% to 5.1 million acres while Nebraska acres fell 2.3% to 19.3 million acres. Kansas held the most cropped acres at 23.5 million acres.
  • Combined US corn/soybean acre were below the record at just 180.3 million acres. US corn seeded acre rose by 1.6 million acres from the March intentions to 92.7 million acres,while soybean seeding held steady. The big corn seeding gains (from March) occurred in N Dakota, S Dakota and Minnesota which showed a bump of 9.1%, 7.1% and 6.3%, respectively. This is the same area struggling with dire drought which hold bearish yield implications. These 3 states account for 18.1 million corn acres or 19.5% of the US total.
  • NASS estimated US 2021 harvested corn acres at 84.5 million acres, up 1 million from the March Intentions forecast. NASS stated there was 2.18 million acres of US corn left to be planted when the survey was conducted which suggests if there are any reductions, they will be to the downside when FSA data is included.
  • US 2021 soybean seeded acres held steady with March at 87.6 million acres, which was steady with the March intentions survey. Harvested acres were placed at 86.7 million acres. This was the third largest US soybean seeding pace on record, behind 2017 and 2018. Like corn, the big gains occurred in the Dakotas with North Dakota seeding 7.2 million acres, up 25% and South Dakota up 11% at 5.5 million acres. Texas, Mississippi, Georgia, South Carolina, and Wisconsin acres were also up on a percentage basis substantially. NASS indicated there were 9.84 million acres left to seed when the survey was completed.
  • US spring wheat acres were 11.58 million acres, up modestly from expectations. US total wheat acres were 46.7 million, a 600,000-acre gain from March. The wheat seeding gain is being overlooked amid worsening weather across the N Plains. US wheat futures are holding strong gains.
  • The USDA report is bullish and raises the stakes for rain for the drought-stricken areas of the N Plains/NW Midwest. The GFS midday weather forecast reduced totals for most of this area vs. the overnight solution. We maintain an outlook for new contract highs in new crop corn, wheat and soybeans.

29 June 2021

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  • HEADLINES: Chicago markets mixed ahead of NASS data; Spring wheat weak on profit taking; Canola market sharply higher.
  • Chicago futures are higher at midday with spring wheat futures reversing early gains on profit taking ahead of the NASS Stocks/Seeding Report. Corn and soyoil futures have traded mostly higher on tightening old crop cash markets and ongoing dry weather for the N Plains and the NW Midwest. The midday tone of summer row crops is cautiously bullish with S American firms estimating that a hard freeze overnight likely caused the loss of 2-3 million mt of winter Brazilian corn production in Parana and MGDS. 75% of the Parana corn crop was vulnerable to a freeze due to latent corn seeding dates in early March.
  • 50 contracts of Chicago soyoil receipts that were cancelled this morning which added to the need of the bears to cover net short July soyoil positions. Cash soyoil is priced 5-5.5 cents over July futures on the Illinois rail which will keep shorts nervous heading into first notice day.
  • July corn futures returned to a $1.35 premium to December which argues that the NASS Stocks estimate will be bullish on Wednesday. Such a heady old crop spread premium argues for US 2020/21 corn end stocks of just 850 million bu or less which makes the need for extra US 2021 corn acres more important.
  • Brazilian corn futures are up the limit and will likely trade at a second limit later today following a cooling off break. This would produce record high Brazilian corn futures with the cash market difficult to define. The hard Parana/RGDS/MGDS freeze caught the March seeded corn crop at a delicate time of development, either late pollination or the milk stage. The freeze will produce low test weight corn that is likely to carry a considerable amount of mould. The impact on tonnages is preliminarily estimated at 3-4 million mt with us now pegging total 2021 Brazilian corn production at 87-88 million mt. This would be 10 million under the June USDA estimate. The 2021 Brazilian winter corn crop appears to be cursed, late seeding, drought, and now widespread frost/freeze damage across the south. Making export grade quality could prove difficult.
  • Stats Canada pegged 2021 crop seeding at 23.3 million acres of all wheat, 5.5 million acres of durum and 22.5 million acres of canola (rapeseed). All were right on pre-report estimates with the data considered neutral. If there was a surprise, it was that 2021 oat seedings were 3.42 million acres compared to forecasts of 3.6 million and barley acres at 8.3 million acres compared to forecasts of 8.3 million acres. The big concern is not seeded acres in Canada, but the deepening drought and coming heat that looks to produce acute stress on the canola crop. Canola/rapeseed does not do very well under extreme heat with highs in the 90s to lower 100s to produce acute stress across Saskatchewan and Alberta. It is the potential loss of canola yield that has rallied Chicago soyoil to sharp daily gains.
  • Chicago brokers estimate that funds have been buyers of corn, soybeans and soyoil. Managed money has purchased 2,000 contracts of corn, 900 contracts of soybeans, and 5,500 contracts of soyoil. Funds have sold a net 2,300 contracts of soymeal and are net flat in wheat (early buyers/midday sellers). Profit taking and technical selling has been witnessed in Minneapolis wheat.
  • The midday GFS weather forecast is wetter across Minnesota/Wisconsin with dry weather holding across the remainder of the N Plains and the NW Midwest. The Canadian Prairies and the PNW stay arid without meaningful rain for the next 10 days. Temperatures stay hot across the NW US with that heat pushing east this weekend. The Plains and W Midwest endure widespread 90′s to low 100′s mid next week with such heat adding to the accumulating crop stress. The forecasts have been very consistent in recent days in bringing back the old May and early June weather patterns.
  • Brazil’s second corn crop is still in sharp decline with a frost/freeze adding to crop losses and quality concern. Spring wheat futures have fallen on pure technical trading and profit taking ahead of tomorrow’s NASS report. We look for the USDA reports to be positive on US corn stocks and we doubt that combined 2021 US corn/soybean acres will add up to more than 183 million acres. We estimate 2021 US corn seeding at 93 million acres.

28 June 2021

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  • HEADLINES: Corn/Soy rally sharply on S American cold; China buying of PNW soybeans for October; Covering before the NASS stocks/seeding report.
  • Chicago futures are sharply higher at midday with corn and new crop soybeans the upside leaders. Spring wheat futures have sagged from fresh contract highs on profit taking ahead of the Stats Canada Seeding forecast that will be out Tuesday morning. Traders are also debating flooded/drowned out crops in Northern Missouri/Central Illinois along with frost/freeze coming from Brazilian corn is providing the upside price lift. And traders are coming to understand that Friday’s SCOTUS decision to allow EPA waivers in a non-consistent fashion will not have much of a demand impact under the pro biofuel Biden Administration. No renewable biodiesel construction is being slowed or halted which is the driver of new crop crush demand.
  • Dec corn has rallied sharply to test initial chart-based resistance at $5.40-5.50 while Nov soybeans are back above $13.10. Soyoil futures have recaptured all of Friday’s losses. However, the big change is that world soymeal demand which is shifting back to the US amid the sharp rise in Brazilian/Argentine export premiums. And US soybeans off the PNW are again competitive with Brazilian offers on a landed basis into China. With Chicago soymeal open interest at its lowest level since 2009, end users are making new forward purchases.
  • Brazilian corn is facing frost/freeze losses that will add on top of drought yield reductions. Brazilian corn prices are rising sharply this morning on the cold weather threat with freeze warnings out for Mato Grosso, Mato Grosso Do Sul, and Parana overnight. We note that in Parana, 14% of the corn crop is pollinating, 61% filling with 24% mature. The frost catches that March seeded corn crop at a vulnerable stage. We estimate the 2021 Brazilian corn crop at 87-88 million mt based on early harvest yield prior to the freeze. We also note that 9% of the Parana winter wheat crop is in germination and 91% in the vegetative growth stage, also vulnerable.
  • US export inspections for the week ending June 24 were; 40.0 million bu of corn, 3.8 million bu of soybeans, and 10.5 million bu of wheat. The corn exports were below vessel counts and trade expectations which we see at 53-57 million bu. We note that last week’s US corn loadings were raised to 69.9 million bu, an increase of 11.6 million bu. Someone is underreporting exports via market considerations. And remember that Census US corn exports are 153 million bu larger than FGIS inspections through April.
  • We understand that China is back bidding for US new crop soybeans with 3-6 cargoes said to be sold off the PNW this morning. The Chinese have started a routine autumn US soy buying program. We look for USDA to confirm new sales in coming daily reports. Brazil has rapidly sold old crop soybeans/soymeal with Chinese demand now shifting to the US PNW.
  • Chicago floor brokers estimate that managed money has purchased 4-5,000 contracts of wheat, 10-12,000 contracts of corn, 7-7,500 contracts of soybeans, 3-4,000 contracts of soymeal and 6,500 contracts of soyoil this morning.
  • The midday GFS weather forecast is wetter across Illinois/Indiana /Missouri and drier across the Southern Plains. The last thing that Central Illinois requires is additional heavy rain amid widespread reports of flooding. Crops witnessing flooding would be best served by cool temperatures, sunshine, and winds to promote rapid drying. The midday forecast maintains arid weather conditions across the N Plains and NW Midwest. Iowa will need 1-1.50″ of rainfall each week to prevent crop yield deterioration.
  • Temperatures stay hot across the NW US with that heat pushing east starting this weekend. The Plains and W Midwest endure widespread 90′s to low 100′s mid next week. The heat will add to the growing crop stress.
  • The Brazilian winter corn crop is in rapid decline with a new threat of a frost/freeze while heat/ dryness returns to the N Plains/NW Midwest. Our Chicago view stays bullish on expanding US demand potential and supply losses.

25 June 2021

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  • HEADLINES: Supreme Court allows EPA to grant biofuel waivers; Drought improvement unlikely in Plains, Upper Midwest.
  • Ag markets are widely mixed at midday, with spring wheat and canola (rapeseed) rising on renewed yield threats in Canada, while Chicago markets shed additional premium following the news the US Supreme Court will allow the EPA to grant blending waivers to small refineries. The collision of this morning’s SCOTUS decision with active Midwest precipitation has triggered additional liquidation. Very few aim to hold large positions ahead of NASS’s stocks and seedings release.
  • It is now left to the EPA to determine whether and when waivers will actually be granted. Today’s decision provides little/no clarity over ethanol and biodiesel/renewable diesel production and consumption longer term. And new renewable diesel capacity expansion is still on track, with a possible $550 million refinery in Louisiana being announced just this morning. The market remains incredibly sensitive to even minor changes in future supply and demand, but a material impact on soy crush rates and ethanol grind is not anticipated. The Biden administration overall commitment to green fuels is most important.
  • FAS’s daily reporting system featured 112,000 mt of US soymeal sold to Mexico, of which 28,000 is for old crop delivery. Mexico is a traditional buyer of US origin meal, but this does reflect US soymeal’s competitive position in the world marketplace.
  • US meal for Jul-Aug delivery is quoted $5-10 per ton below Brazilian origin. Argentine meal basis is just $2 per ton below the US Gulf and has rallied some $15 per ton in the last week alone. This follows US meal being offered at a sizeable premium to Brazilian origin throughout the 2021/22 marketing years. Weekly sales of 250-400,000 mt will be commonplace moving forward. The return of strong US soymeal export demand lends support to the rate of crush through the balance of summer.
  • Other input is lacking. Market fear over a potential 4-5 million hike in corn seedings next Wednesday along with always unknowable quarterly corn and soy residual use has clearly triggered an exiting of the spec community. The entirety of US soy and corn balance sheets will be fine-tuned/reset early next week, but only amid massive surprises in residual disappearance will the data be taken as bearish. Long term research suggests that the odds of stocks-building in 2021/22 are low.
  • Paris milling wheat futures are down €3.50 per ton as harvest there looms. EU corn futures are down €3.50-4.00 per ton amid favourably wet short and long-term forecast offered to key areas of Western Europe’s corn belt. Spot WTI crude is up $0.75 at $74.
  • The midday GFS weather forecast is again much drier across the Plains and Western Midwest compared to the early morning run. An active pattern of showers continues across the eastern Plains and Midwest into next Tues/Wed. Thereafter, the return of expansive high pressure to the Western US confines meaningful precipitation and favourably cool temperatures to the Delta/Southeast and far Eastern Midwest. Climate guidance across the Eastern Midwest has trended wetter in July amid the recent and upcoming boost in soil moisture, but drought improvement remains unlikely in KS, NE, MN and the Dakotas. Key to July weather will be soil moisture anomalies in the next 10 days.
  • And too much rain will plague crops in Illinois and Indiana. SRW harvest will be delayed further.
  • This is and will remain a big market. Yet, not until old crop balance sheets are finalised and Northern Hemisphere yields are better understood will it be known that highs have been scored. It doesn’t take much yield loss to trigger record low new crop corn and soy stocks/use amid record demand. We strongly caution against chasing breaks.
To download our weekly update as a PDF file please click on the link below:

24 June 2021

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  • HEADLINES: Chicago recovers from morning lows; GFS weather forecast abruptly drier in Plains, Western Midwest.
  • Chicago selling has slowed dramatically at midday. The fear of a sizeable hike in corn area (4-6 million acres) along with precipitation expanding into the Eastern Plains this weekend up until now has sustained a ‘get me out’ mentality in Chicago. Yet, at current prices, the market is now trading record corn and soy yields along with a sizeable acreage hike in corn. Whether NASS on June 30 confirms corn seedings in excess of 94 million acres is unknown, but unless such expansion is confirmed, and Mar-May corn and soy residual use collapses, the market will quickly add premium in early July. Spring wheat futures are now trading higher, as that market’s chore of assuring area expansion in 2022 will be arduous. And the Jul-Dec spread reached its exhaustion top on Wednesday, with Dec to take over bullish leadership moving forward.
  • Weekly US export sales were uninspiring but did include modest new purchases of old crop soy by China. Corn sales through the week ending June 17 totalled 8.5 million bushels, vs. 1 million the previous week. FAS pegged physical corn shipments last week at 67 million bushels, vs. FGIS’s tally of 58 million. FGIS continues to underestimate the reality of corn exports.
  • Soybean sales totalled 5.2 million bushels, vs. 2.4 million the previous week and included a cargo of new demand from China. Wheat sales totalled 14 million bushels, vs. 11 million the previous week, which matches the pace needed to hit the USDA’s target. US meal sales through the week ending June 17 were an impressive 388,000 metric tons. The highest since mid-January. S American meal basis has rallied $20-22 per ton in just the last 30 days.
  • US meal is now very competitive in the world marketplace. Enlarged meal exports through the remainder will be highly supportive of crush margins and crush rates, as crushers in recent months have been reluctant to crush for oil production.
  • We also believe that China will be in the market for US soy supplies in late August as Brazilian fob premiums rise and freight costs work less against importing from the US. The message is that already pace analysis suggests US corn and soy exports are understated. Balance sheets can barely tolerate new Chinese demand prior to Aug. We note that weekly soy sales of just 3 million are needed to meet USDA’s forecast.
  • Chicago brokers report that funds have sold a net 5,000 contracts of beans, 3,500 contracts of meal, 3,000 contracts of wheat, while funds have bought a net 1,500 contracts of oil and as of midday have turned into net buyers of 4,500 contracts of corn. A drier midday forecast is noted. Drought relief across the Plains, western IA and Minnesota is unlikely into July 10.
  • The midday GFS weather forecast is noticeably drier across western IA and the entirety of the US Plains over the next 10 days. Active showers will be spread across the Central and Eastern Midwest over the next 72 hours. Cumulative totals of 1-2″ will be widespread, with totals upwards of 4-12″ to impact Missouri, Illinois and Indiana. Rainfall there will likely trigger short-term flooding issues.
  • Beyond the weekend, rain chances into July 10 will be strictly confined to the eastern Midwest and Delta. Upper-level ridging moves into the Plains next week and is forecast to cover the whole of the US beginning July 8. Confidence so far out is low, but how the models handle high pressure ridging moving forward will be critical. The return of heat/dryness in July is most probable in areas already facing deeply negative soil moisture anomalies. We also note that max temperatures in Canada next week reach into the mid-90s.
  • NASS’s June stocks and seeding data will determine whether corn/soy markets are fairly valued or whether premium must be added dramatically. This has pushed the spec community to the side-lines. It is a long growing season and it remains that not a single bushel of yield can be lost if US and world stocks are to build in 2021/22. Sales are not advised at current prices.

23 June 2021

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  • HEADLINES: Corn sags on weather and spread pressure; US ethanol production down 2% from 2019 with margins best since 2018; More US beans to China?
  • Chicago futures are mixed at midday with corn and soybean futures lower while wheat hangs in the green on curtailed N American supplies. Spread trade has been active with the July/December corn spread pushing out to a new rally high at $1.31 July premium while soyoil/soymeal have rocketed to their best levels in 2021. Corn has also come under pressure as traders liquidate long corn/short wheat futures which were a darling position during the spring. The combination of spread liquidation and chart-based selling pulled December corn futures below last week’s low for a moment.
  • Cash soyoil, corn and soybean basis are well above Chicago July futures which is likely to maintain nearby spread firmness. US farmers are not interested in sweeping out their bins until corn is post pollination. Spot Chicago soymeal futures fell to their lowest level since early October at $354.20/basis July. The downside in July soymeal is limited below $350/ton and in $5.25 basis December corn.
  • The USDA reported that China booked another 330,000 mt of US soybeans on Tuesday’s dip and is still bidding for additional supply at midday. Another 2-4 cargoes of US soybeans were likely sold.
  • Chicago brokers estimate that managed money has sold 7,900 contracts of corn and 3,400 contracts of soybeans, while buying 4,500 contracts of wheat. In the soy products, funds have bought 3,200 contracts of soyoil and sold 4,100 contracts of soymeal.
  • US gasoline consumption jumped to 9.44 million barrels/day last week which is unchanged from 2019, but up 10% from last year. The US produced 308 million gallons of ethanol, up 17% from last year, but down 2% from 2019. The US only needs to produce 297 million gallons of ethanol per week to reach the USDA annual forecast for 2020/21 at 5,075 million gallons. We would argue that the USDA is too low by 75-100 million in 2020/21 and 100-125 too low for 2021 /22. Assuming that the USDA is too low in its US 2020/21 corn export estimate by 125 million bu and too low in ethanol at 75 million bu and correct in feed/residual, US 20/21 corn stocks would be 907 million bu. The old crop stocks fall would cut 2021/22 US corn end stocks to 1,157 million bu assuming no change in 2021/22 demand. The point is that it does not take much of a demand increase (corn exports or ethanol grind) or fall in yield to produce an ultra-bullish new crop US corn balance sheet. End users need to be buying corn on this break.
  • The midday GFS weather forecast is drier the overnight run and keeps any heavy rainfall across Missouri/S Illinois. The S Illinois rain may pose a quality issue for SRW wheat, but corn/soy crops will benefit from the moisture. The W Midwest/N Plains will see widely scattered showers with totals ranging from 0.4-1.25″, some help, but not the soil moisture cushion that crops would like heading into corn reproduction and the warmest days of summer. The Canadian Prairies will gather increasing concern as limited rain is forecast for the next 2 weeks. And extreme heat will return to Kansas and the Western US with highs ranging from the mid 90′s to the lower 100′s. There continues to be a clear sign of the Western US high pressure ridge progressing eastward in July.
  • The rains start across the W Midwest on Thursday with the 1–4-day period being the wettest of the next 10 days. Thereafter, price direction hinges upon the June 30 NASS Stocks/Seeding Report and first notice day against July futures. It only requires a modest yield fall to produce a sizeable Chicago rally. Wheat has become a bull market amid US and Canadian spring wheat yield reductions, and the need to expand seeding in 2022. Wheat now must limit its feed use, not encourage it in the Plains.

22 June 2021

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  • HEADLINES: Rain forecast sinks new crop corn/soybeans at midday; China books 5-7 cargoes of new crop soybeans off PNW for October.
  • Chicago mixed at midday; The battle of condition ratings vs wet weather for Illinois, Indiana, and Missouri. It has been a broadly mixed and thinly traded morning of trade. July contracts continue to outperform on the upside amid the lack of supply that is producing premium cash markets. The July/Dec corn spread has gained a hefty 17.50 cents to $1.20 premium while July soyoil is back to gaining on December with the nearby rail soyoil basis priced at 7.5 cents over. July futures are expected to keep performing with shorts caught on the wrong side of the futures market. The July/December corn spread is back at contract highs with a close above $1.22 projecting a $1.40-1.50 July premium.
  • Farmers in N Plains, Minnesota and Nebraska worry about heat returning without rain, while farmers in the E Midwest report that their crops are looking better. Traders continue to debate US production with weather producing differing outcomes depending on your Central US location. E Midwest crops are improving following the coolish/wet weather, while crop struggles deepen amid short soil moisture across the N Plains and the NW Midwest. The one thing that N Plains and NW crops cannot endure is heat. Any temperatures above 90 degrees in the next few weeks is going to cause a sharp fall each state’s crop conditions.
  • Since the morning reopen, Chicago brokers estimate that managed money has sold 3,200 contracts of wheat, 2,900 contracts of soymeal and 9,000 contracts of corn. On the buy side, funds have purchased 4,300 contracts of soybeans and 3,700 contracts of soyoil. Active soyoil/ meal spreading is returning.
  • There are strong cash reports that China used the morning decline to secure another 5-7 cargoes of US soybeans off the PNW for October. The demand lifts recent purchases close to 14-17 cargoes since Friday. Sinograin is said to the be the buyer for the reserve. China’s cash soybean crush margins are still in the red which is keeping crush demand limited. We hear that China’s Government will be using breaks in Chicago soybeans and corn to add to their new crop purchases. China is rumoured to have resting buy orders under $5.20 basis December corn futures for late 2021 export.
  • Central IL cash corn is trading at 27-32 cents over according to elevator sources. This makes taking July receipts profitable with a US export program to China underway in the Gulf.
  • Central Illinois spot cash soybean bids are 70 cents over November or $13.81/bu. This price is below spot July futures. The July/November soybean spread is trading at $.98/bu premium, well off the highs that were set back in May at over $2.00 over. With a US soybean export program that will be ramping up during July, stopping deliverable receipts makes some economic sense for an exporter, but not for a domestic crusher.
  • The midday GFS weather forecast is outright wet across Illinois, Indiana and Arkansas with 10-day rains of 3-7.00″. The forecast is wet enough that worry of localised flooding is real/concerning. Some areas of IL/IN could receive more than 7-10″ of rain which following the weekend rainfall, will spark low level flooding. On the other side of the Midwest is Iowa, Minnesota, Nebraska and the Dakotas where the forecast has gone starkly drier. A cut-off low pressure vortex that is a slow mover will produce Midwest “haves and have nots”. Chicago will see E Midwest rain as bearish, but we hold a growing concern that Illinois/Indiana and Arkansas will see excessive rain. Pattern stagnation is a growing problem of climate change, and this looks to be playing out with some rigor into July.
  • Wet weather is seen as bearish to Chicago, but it is all about rainfall locations and amounts. The N Plains and the NW Midwest will be short-changed on the rains with coming heat for the western half of the US adding to yield worry. China is back securing US new crop soybeans while US spring wheat yield potential is in sharp decline. Dec corn is nearing downside targets at $5.25-5.35. This is no place to make new sales.

21 June 2021

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  • HEADLINES: Chicago bounces with July leading; Midday GFS weather forecast stays with active weather pattern for Central US into July; Brazilian corn crop still in decline.
  • Turnaround Monday – July futures lead on cash premiums; Traders debate Central US July weather; Following rain related opening selling, Chicago futures were able to recover with July leading the gains as first notice day looms with cash markets still priced at a premium. July soybeans and soyoil paced the recovery with traders remembering the strong rally that occurred in late April as the shorts covered, fearful that they would be forced to perform/deliver. The rains may help make additional new crop supply, but the old crop is tight, and users do not have as much coverage as many in the industry have pencilled in. End users are hoping that farmers sweep bins clean in July, but most Midwest farmers have already sold out any/all cash length.
  • 100 deliverable receipts were cancelled in soyoil leaving just 767 remaining. Illinois rail soyoil is trading at 7-7.5 cents over July Chicago futures which is likely to cause zero deliveries. Major grain and energy companies are pushing through with their renewable biodiesel plant construction plans. No one is concerned by any wavier from the EPA/Biden Administration..
  • Since the morning reopen, Chicago brokers estimate that managed money has bought 3,000 contracts of wheat, 6,000 contracts of corn and 5,500 contracts of soybeans. In the soy products, funds have bought 2,000 contracts of soymeal and 1,200 contracts of soyoil. The algo buyers have been on the long side of the market following the push lower to new lows on the reopening.
  • FGIS export inspections for the week ending June 17 were 58.3 million bu of corn, 20.1 million bu of wheat, and 6.4 million bu of soybeans. The exports were in line with trade expectations and weekly vessel loadings. For their respective crop years to date, the US has shipped out 2,185 million bu of corn, 2,093 million bu of soybeans, and 45.7 million bu of wheat. Remember that monthly Census exports are running 753 million bu more on corn and 124 million bu more on soybeans. Research argues for a 3,000-3,050 million bu corn and 2,325 million bu US 2020/21 soybean export estimate. Both are well above the latest June USDA forecast.
  • USDA/FAS reported that 336,000 mt of US soybeans were sold to China with another 120,000 mt sold to an unknown destination. The combined sale is 456,000 mt and we have heard that another 200-400,000 mt could be announced on Tuesday or show up in Thursday’s weekly export sales report. The buyer is (unsurprisingly) rumoured to be Sinograin for their reserve. China crush margins in the new crop position are improving, but still negative, which has China crush importers concentrating on Brazilian/Argentine supplies for August/September.
  • Brazilian corn crop estimates continue to slide on poor yield performance. Although just 5% of the Brazilian corn harvest has been completed, yield data points to a Brazilian corn crop of 86-88.6 million mt. Some sources are refining their estimate awaiting additional information from Deral, Parana’s crop ministry. Such a meagre Brazilian winter corn crop is going to limit their July/August exports and shift demand back to the US.
  • The midday GFS weather forecast is drier than the overnight run across the SW Midwest and the E Plains, but slightly wetter for North Dakota. Extreme heat is forecast for early next week with rains to return starting Thursday/Friday. NW Iowa, Nebraska, Minnesota, and the Dakotas remain extremely dry and in dire need of rain. This NW Midwest and N Plains drought looks to worsen in the coming weeks. Crops cannot endure extreme heat amid the lack of soil moisture. It is heat that will become of sizeable importance
  • Mother Nature cannot make additional old crop supply. It is July futures that will lead Chicago upwards into mid-summer. Yet, it is July weather that determines Midwest/N Plains corn yield and August weather for soybean yield. We maintain a bullish bias in that any yield loss is too large amid US 2021 corn end stocks under 1,000 million bu and soybean stocks under 120 million bu. Don’t sell sharp breaks.

18 June 2021

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  • Chicago soars as China starts a new crop purchase program from the PNW; Midday GFS weather model shifts rain to the E Midwest; West short changed.
  • A bullish day, demand surfaces from China and Chicago grows horns; Chicago futures are sharply higher at midday with new crop corn/soybeans the upside leaders.
  • Chicago volume has been more active than Thursday with yesterday’s sellers returning as today’s buyers. Note that Chicago markets lack bids and offers under and above the market that exacerbates daily price ranges. Brokers are struggling amid margin calls amid the huge daily/weekly price ranges.
  • The drier forecast for W Iowa, W Minnesota and the Plains placed a bid under Chicago values this morning. Also, China has shown up asking for new crop US soybean offers. We understand that China has booked 6-8 cargoes of US soybeans with the Government of China (Sino Grain) rumoured to be the buyer. This would be the first China purchase of US soybeans in some weeks, and likely starts a lengthy campaign of demand. We believe that China will book/import 40-44 million mt of US soybeans in 2021/22, which will push US soybean exports above 2,200 million bu for the second year in a row. China is intent on meeting its commitment on its Phase 1 Trade Pledge to get to Phase 2 negotiations and a new trade deal that could reduce tariffs. The US/EU’s deal to end tariffs via airline production offered China hope for 0% tariffs.
  • An extremely volatile Chicago trade is expected Sunday evening. Key will be amounts/locations of Midwest rainfall this weekend. Moreover, the extended range forecast looking into July will play large as corn pollination starts across the Southern Midwest/Central Plains right after the July 4 holiday. The US corn/soy markets cannot afford to lose a single bushel of production due to record large demand. This week’s Chicago break has allowed end users to extend their forward coverage well into early 2022. Strap in for high octane markets in July when each and every raindrop will be counted and measured against yield.
  • Somewhat surprising is that on this week’s sharp futures break, Chicago open interest had not liquidated more. As spot soyoil futures fell nearly 10 cents/pound, open interest was down just 12,000 contracts. July soybean futures dropped $1.50/bu with open interest down just over 11,800 contracts. July corn is down over $0.50/bu with Chicago open interest down 50,000 contracts. We aretold by large institutional traders that index fund money is still pouring into the raw material space that likely replace the selling from faster moving managed money. Most fund managers report that they will hold onto “net long” ag positions into the heart of the growing season in July.
  • The weather risk of a Russian Sukhovei is growing and being closely monitored by Black Sea traders. A Sukhovei is a weather phenomenon in which crops can be decimated in a matter of days due to hot/dry weather and wind. Such weather has knifed Russian wheat crops by 10-20% in a matter of days. KC wheat has recaptured all of Thursday’s loss as it most closely reflects Russian wheat.
  • The midday GFS weather forecast is drier than the overnight run for the W Midwest with the model’s homing in on the potential for better rains for the E Midwest vs. the West. The Central US Plains stays dry with continued warm to hot temperatures. Crop areas west of the Mississippi look to receive limited 0.25-1.50” of rainfall through June 30. That is not enough to slow or end the drought.
  • It is the Western Midwest that needs the rain as the dire drought of the west will continue its slow progression eastward in the coming weeks. July weather then becomes critical as the corn crop starts its pollination phase with soil moisture limited. The extended range forecast calls for a ridge West/trough East which follows prevailing soil moisture trends. Heat will back from west to east and our view is that the GFS midday weather model is not warm enough for the Plains and the W Midwest. Our concern for West Central US weather remains extremely high.
  • “Wax off/Wax on” has been the trend of Chicago grain markets in recent days which is producing large liquidity holes. The midday models shift the rain trend to the E Midwest to the worry of W Midwest/Plain’s farmers. Ongoing dryness in the Plains/W Midwest will cause yields here to fall off the table. We stand by our longer term view, do not rule out new contract highs.
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17 June 2021

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  • HEADLINES: Massive fund selling pummels Chicago prices with GFS weather forecast staying wet for Midwest; Just out, Canadian model reduces rain for W Midwest/N Plains.
  • Chicago futures are sharply lower at midday as funds take risk off the table. Soybeans, soyoil, corn and even wheat futures are sharply lower on the prospect of Central US rains and a firming US$. Gold has dropped more than $90/oz to best reflect the “get me out” mentality. December corn futures have fallen to the lower end of support at $5.40 while November soybeans have dropped below chart support at $13.00. The waterfall decline in soybeans is based on massive speculative liquidation in soyoil futures, which was the cornerstone of the demand soy bull based on renewable biodiesel investment/demand. Chicago volume has picked up on the decline as key technical levels were triggered. July corn futures fell sharply once the 50-day moving average was breached at $6.52. November soybeans fell sharply once support at $13.00 was exceeded. Scale down buying is noted with commercial sources reporting that China is back looking for new crop soybean offers. A sharply lower close is expected with Friday’s trade to be about an important weather weekend. At these prices, the rain must fall, or crop yield has the potential to fall off a cliff in July.
  • Chicago brokers estimate that funds have sold a large 24,000 contracts of corn. And managed money has also sold 11,000 contracts of soybeans and 4,500 contracts of wheat. In the soy products, funds have sold 3,200 contracts of soymeal and upwards of 7,000 contracts of soyoil. Funds are active sellers.
  • Questions abound on the Biden’s Administration’s policy on biodiesel and ethanol, but importantly, there does not appear to be any change on the commitment to reduce carbon through renewable fuels such as biodiesel. There were over 20 groups that pressed Congress late Wednesday to begin working on US Clean Air Policy that will help in reducing carbon emissions. The groups made an appeal to the House Energy/Commerce Committees and the Senate Environmental and Public Works Committees. Biofuels are cornerstone/steppingstone to decarbonisation/electrification. We see no coming change for renewable biodiesel tax credits and plant completion and start-up dates.
  • US weekly export sales were disappointing. For the week ending June 10 the US sold 10.5 million bu of wheat, 0.7 million bu of old crop corn and 10.9 million bu of new crop corn, and 2.4 million bu of old crop and 0.2 million bu of new crop soybeans. The sales pace was just poor. The US has sold 2,729 million bu of corn (1,096 million more than last year) and 2,264 million bu of soybeans (649 million more than 2019/20. US 2021/22 wheat sales stand at 213 million bu, down 20 million from last year’s pace. China cancelled new crop US soybeans but bought additional old crop. FAS announced the sale of US soymeal to the Philippines this morning. Brazilian fob soybean basis keeps rising on the Chicago decline.
  • The midday GFS weather forecast is like the overnight run with short waves embedded within a southward sagging jet stream producing rain for Iowa/Illinois and much of the E Midwest on the weekend and through much of next week. Rain totals for Iowa/Illinois/ Wisconsin and Michigan are estimated in range of 1.00-2.50″ with locally heavier amounts. The best rain is slated to drop across the Eastern Iowa, Southern Wisconsin, and Northern Illinois with 10-day rain totals over 2.50″. The remainder of the Midwest receives 0.4-1.50″ with only the Plains short changed. Heavy rains would exacerbate the flooding across the Gulf States with a tropical storm to make landfall across New Orleans on Saturday. A strong ridge rebuilds across the Southern US with additional rain for Iowa/Illinois.
  • It is a get me out day with November soybeans back to where the rally started at $12.50 following the March Seeding Report. Research argues that corn/soybean values are too cheap, but with rain slated to drop on the weekend and next week, traders will wait until Sunday for any new buying. The volatility of Chicago prices is amazing. Western Midwest crops are under acute stress, it had better rain in abundance next week.