- HEADLINES: Chicago retreats as world fob values fail to follow through; GASC cancels tender on high price; ADM CEO calls for US corn/soy seeding to rise 5 million acres.
- Chicago grain futures fell sharply in post opening trade on profit taking with the volatility of the marketplace ramping up on May liquidation ahead of first notice day. Chicago values have pushed higher after an early low as short covering in May corn, soybeans and soyoil continue. The squeeze on May corn, soybean and soyoil shorts has been unrelenting during the past 10 days with volume today suggesting that the final round of speculative shorts is moving to the side-lines or rolling to the July contract. Commercial holders are holding with their May positions, but the point is that old crop is becoming a commercial game, and that speculative positions are better placed in the new crop.
- Upside price targets in May corn at $7.10-7.30 and May soybeans at $16.00-16.20 have been reached. And May Chicago wheat came close to reaching its upside target at $7.90, the breakout of the 2013-2018 bear market.
- Chicago brokers report that funds have bought 11,900 contracts of wheat, 16,000 contracts of corn, and 7,800 contracts of soybeans. In soy products, funds have bought 8,100 contracts of soyoil while selling a net 2,600 contracts of May soymeal. Funds are likely holding a record long Chicago corn position with wheat also nearing a record. Funds can keep buying, but their ownership may be reaching levels where caution starts to be advised.
- Non-US cash basis levels are crashing on the Chicago rally. Brazil’s paper soybean trade has Paranagua soybeans offered a record $0.50 under Chicago. Actual fob Brazilian offers for May from the Northern region is even with Chicago while the US Gulf is offered 85 cents over. And Argentine May corn is offered at midday at 5 cents under Chicago compared to the US Gulf at 70-75 cents over. The spread of $0.85-0.90 US Gulf premium to Up-River for Argentina for June is historically wide. And Russian wheat works into Mexico including freight costs which has Mexican buyers looking elsewhere from traditional US suppliers. The point is that US prices on exportable cash grain are expensive by any measure with imports of Argentine corn/French wheat into the US SE Coast being discussed. The Chicago rally has made the US a domestic price island onto itself.
- GASC cancelled its wheat tender citing high prices for mid-August. No new tender date has been set.
- Stats Canada estimated total wheat acres at 23.6 million acres (right at trade estimates), canola at 21.5 million acres (below average trade estimate, but up 700,000 acres from last year) with oats at 3.6 million acres (up vs. trade estimates, but down 200,000 from last year). The big surprise was barley acres which at 8.6 million acres was up 1.0 million acres from last year.
- Midwest farmers report that they have been hard at seeding for the past three days. Strong progress is being reported with summerlike temperatures helping the effort today. Based on the weather forecast, Midwest farmers should be able to finish off corn/soy seeding by the middle of May. With a few good rains, the 2021 US corn/soybean crops will be off to a solid start. Corn/soy crops could be highly rated (in early June) with a few good May rain events.
- The midday GFS weather forecast is similarly dry to the overnight run for Parana, MGDS, Goias and Mato Grosso. The GFS forecast has rains for RGDS around May 4. A winter weather type of pattern is developing with rain for Parana in the extended range. Yet, concern stays high for Parana corn with Deral’s good/excellent corn crop ratings falling to 40% from 62% this morning.
- Strap yourself in with the market digesting a sub 97 million mt Brazilian crop. Yet, the world cash market is not keeping pace with the Chicago rally. The ADM CEO mentioned in an earnings call that they expected that combined US 2021 corn/soybean acres would expand 5 million acres from NASS Intentions. That would be important if correct. The Chicago rally appears tied to May short covering and firm old crop basis. However, that pressure should be substantially reduced on first notice day- Friday. Fresh US export sales will be difficult amid high US fob premiums.