- HEADLINES: Chicago sinks on risk off into end of quarter/month and NASS Report: China buys new crop Ukraine corn; US annual corn/soy sales reach 98%/99% of USDA full year forecast.
- Chicago values are sharply lower at midday as fund managers/speculators shed length ahead of the highly unpredictable March Stocks/Seeding Report. Option volatility continues to rise in corn/soybeans suggesting that there will be a sizeable price move following the March 31 report. Wheat option volatility has not expanding much, suggesting that traders are not looking for post report fireworks here. Today’s decline is all about risk reduction (market was long) amid the unpredictability of the March 31 report. Fundamentals are little changed with cash basis bids rising on the break. US and S American farmers are not using the break to make new sales.
- Technically, May corn fell to key downside support at $5.30-5.40, May Chicago wheat at $6.00-6.10, and May soybeans at $13.90-14.10 key long term support. May soyoil futures have fallen to limit losses at $54.98 with end users trying to add to their forward coverage on the break. Soyoil values are hinged to whether NASS can find extra US soybeans in the residual category (soybeans in transit Dec vs March 1) that would allow the US crush rate to be maintained. A US March 1 soybean stocks total of 1,500 million bu or less (0 bushels of residual) would cause a dramatic future rationing rally of soyoil US demand.
- Chicago brokers estimate that fund managers have sold 11,400 contacts of soybeans, 5,900 contracts of wheat and 18,400 contracts of corn. Funds have bought 3,100 contracts of meal and sold 9,700 contracts of soyoil. The selling across the grains has been strong since the morning reopening.
- Ukraine has been active in selling China corn on Thursday with rumoured totals placed at 1.2-1.5 million mt for a September/October/early November timeframe. This is the first corn that we can see that China has booked in a new crop position. European cash sources report that China is still asking for offers and may secure more than 2 million mt. This year, we estimate that China will import 8.5-9.0 million mt of Ukrainian corn and at least 25 million mt from the US during the 2020/21 crop year for a total of 33-34 million mt. Those who estimated China taking 40 million mt of world corn in 2020/21 are coming closer to reality.
- US weekly export sales for the week ending March 18 were; 15.2 million bu of wheat (12.6 million old and 2.6 million bu new crop), 176.4 million bu of corn, and 3.7 million bu of old crop soybeans. Through the daily reporting system, the USDA announced the purchase of 111,000 mt of US corn bt Japan. The corn sales were at the top end of expectations.
- For their respective crop years to date, the US has sold 2,558 million bu of corn (98% of the USDA estimate), 2,231 million bu of soybeans (99% of the USDA estimate) and 913 million bu of wheat (93% of the WASDE forecast). Research argues for the USDAS to elevate its corn export estimate by 400 million bu to 3,000.
- The USDA should raise their soybean export estimate by at least 100 million bu to 2,350 million bu with US 2020/21 wheat exports to be increased by 15 million bu to 1,000 million bu. US 2020/21 soyoil exports appear overstated due to strong domestic use.
- The midday GFS weather forecast is drier for Argentina and Southern Brazil and equally as dry for C and N Brazil. Limited rain is forecast for Brazilian winter corn areas for the next 10-12 days with generally above normal temperatures with highs running in the mid 90′s to the lower 90′s. Argentine highs range from the 70′s to the mid 80′s. The Argentine corn harvest is gaining speed amid arid weather.
- Fundamentals are bullish, but fund managers are cutting their risk into the March 31 NASS reports and the end of the quarter. April options expire Friday with funds are forecast to be net short wheat heading into a new growing season. This looks like an ideal opportunity for end users to scale into future coverage on this pre-report dip. The market knows that US 2021 corn/soybean seedings will very likely be large, that is known news. The bull market will not end next Wednesday.