- HEADLINES: Chicago corrects last week’s gain in low volume; Fund managers reduce risk into the end of the month/quarter; US corn exports record large last week.
- Chicago ag futures are mostly lower in midday trade while soyoil futures rally to sharp gains. Risk off appears to be the mentality ahead of NASS March 31 Stocks/Seeding report. Fund managers were the sellers of the morning decline in thin volume. It does not take much order flow to push Chicago around at 9-year price highs with a new Northern Hemisphere growing season just starting.
- US, European or S American farmers are not going to sell a Chicago break and Midwest cash market basis is steady to firmer as a result. It is the cash market that will catch the break with the big risk being a bullish NASS report that does not match the trade’s expectation on record combined US corn and soybean seeded acres (182 million) or a decline in second Quarter corn feed/residual use. US first quarter corn feed/residual use record large, and the second quarter should be similar based on the huge premiums of sorghum, wheat, and barley. The USDA should raise their 2020/21 US corn exports by 200-300 million bu, the ethanol grind by 50-100 million bu and US corn feed/residual by 50-150 million bu.
- The result will be a US corn 2020/21 end stocks forecast of 1,000-1,100 million bu, which could easily fall to 850-900 million bu if China decides to ship out all its purchases. We estimate 2020/21 US corn exports at 3,000 million bu, 7% US corn stock/use ratio $6.00-6.50 spot Chicago corn futures and a growing need for demand rationing into summer. A cash led bull market lies in the offing for corn, with any new crop weather problem expanding the upside potential.
- Chicago brokers estimate that fund managers have sold 7,900 contacts of corn, 4,300 contracts of soybeans, and 3,800 contracts of wheat. Funds have sold 3,900 contracts of soymeal and bought 3,100 contracts of soyoil.
- FGIS indicated that the US exported 77.2 million bu of corn, and 18.0 million bu of soybeans, and 23.8 million bu of wheat in the week ending March 18. For their respective crop years to date, the US has shipped out 1,259 million bu of corn (up 594 million or 89% from last year), 1,971 million bu of soybeans (up 829 million or 72%), and 733 million bu of wheat (down 5 million or 1%). The US soybean weekly export shipping pace needs to decline to 12 million bu for the USDA 2,250 million bu forecast to be correct. We see the USDA 2020/21 US soybean export estimate as at least being 100 million bu too low. Brazil also shipped out a record number of soybeans last week at 134 million bu. World demand for corn, wheat and soybeans is staying strong and record large for the summer row crops.
- Last week’s US corn export estimate was revised upwards to 89.5 million bu, a record high surpassing a total that occurred in November 1989.
- The GFS weather forecast is dry for Central and Northern Brazilian winter corn areas while allowing the soy harvest to push ahead strongly. The sunshine/dry weather is helpful to winter corn, but regular and above normal April rains are essential for trend line yields. It is too late for weather to produce much change in the Brazilian soy crop, but 2 rainfall events will help the RGDS soybean. The RGDS soybean yield could reach near record levels amid frequent rain events since Jan 1. Our biggest weather concern is Brazilian winter corn as a lasting dry trend appears to be establishing over Mato Grosso, Goias, Mato Grosso Du Sol and Minas Gerias. Highs will range from the 80′s to low 90′s across Brazil.
- Rule 1 – Never sell a low volume break in a bull market. The corn drop is corrective in nature as China did not show up securing more US corn today. Yet, corn/soybeans are cash led bull markets amid tightening domestic stocks. Wheat values are declining seasonally, but we worry that the EU/Black Sea cash price falls are premature amid limited stocks and farmers that are unwilling to sell the discounted new crop. This is no place to be making new sales.