- HEADLINES: Chicago May corn/soyoil push to limit gains; Brazilian midday weather, dry for another 12 days; The UDS exported 76.8 million bu of corn last week.
- Chicago grain futures are sharply higher at midday with corn, soybean, soyoil, and wheat futures posting new contract highs. Corn is up the 25-cent limit in both the May and July futures contracts. The premium of July to December corn is 89 cents with the spread to May being $1.125. The coming first notice day combined with premium cash markets is causing the frenzied buying. Cash corn bids are well above $7.00 and not finding much cash selling. The farmer is busy in the field and disinterested in new sales. We note that when corn/soybeans did come off limit that volume increased on profit taking, but it did not take much of a rally to force values higher at midday. A bullish market tone persists with forced short covering by margin clerks adding to the upside.
- The next upside price targets rest at $7.10-7.30 May corn, $16.00-16.20 May soybeans and $7.90-8.20, the breakout of the 2012 bear market in wheat. The upside has come faster and carried farther than many traders had expected as funds continue to pile into additional market length. There is no evidence today of a market top either in the futures or cash markets.
- Chicago brokers report that funds have bought 8,900 contracts of wheat, 11,200 contracts of corn, and 9,800 contracts of soybeans. In soy products, funds have bought 7,100 contracts of soyoil and 6,400 contracts of soymeal. Managed money has been on the long side of the marketplace since the opening.
- We note that May contracts have no limit on the trading session before first notice day, Thursday, with daily trading limits then expanding on Sunday evening ,May 3 as described by Chicago last week.
- For the week ending April 22, the US exported 76.8 million bu of corn, 8.6 million bu of soybeans, and 20.7 million bu of wheat. The corn and wheat exports were above trade expectations. For their respective crop years to date, the US has exported 1,623 million bu of corn (up 742 million from last year or 84%), 2,031 million bu of soybeans (up 803 million or 65%), and 830 million bu of wheat (up 3 million or 1%). The US corn and soybean export pace continues to outpace the USDA annual forecast.
- Egypt’s GASC is expected to pay a fob price of around $270/mt if submitted bids are accepted on Tuesday. This compares to $235/mt just a few weeks ago which shows how robust the rally has been. Whether the wheat is Eastern European, or Russian will be closely followed based on Russia’s floating export tax. The higher the world wheat market rises, the larger the tax. We see little chance that world wheat prices will drop to $200/mt or below during harvest that would allow Russia to export wheat with no tax.
- The midday GFS weather forecast is similarly dry to the overnight run for Parana, MGDS, Goias and Mato Grosso for the next 10 days. The GFS forecast has backed away from rains for RGDS around May 4. The forecast calls for a deepening flash drought which will cut winter corn yields. Rain will be receding to the north across Mato Grosso this week. 90′s for highs during the 11–15-day period add to corn crop stress. Our concern for the 2021 Brazilian winter corn crop stays elevated with a continued downward yield bias. A sub 100 million mt Brazilian corn crop is in the making.
- There is no evidence of US demand rationing with China said to be asking for offers in US corn/new crop wheat. We wonder why China does not book Ukraine corn with their fob offers well below the US Gulf from October onward. The loss of Brazilian corn supply is growing and worrisome with world exporter stock/use ratios at a record low. Ongoing dry weather the Northern US Plains and the NW Midwest would send new crop futures into a bullish adjustment. The Chicago outlook stays bullish, and it will be interesting to gauge if a Tuesday correction develops.