- HEADLINES: New Chicago corn contract high ($5.4375 Mar ‘21) on new US sale to China; US soy demand rationing elusive (but needed).
- Chicago futures are mixed at midday with the summer row crops firmer, while wheat sags on intercrop spreading. Traders are using wheat as their short leg against long corn/soybeans amid building market volatility. The wheat/corn spread has narrowed to a premium of $1.24/bu with corn being the bullish stalwart. Canola futures have soared to fresh 13-year highs with a print of $717.40/mt on exceptionally tight stocks. The Chicago trend stays higher on the need for demand rationing. However, selling the fact of Chinese purchases has pressured Chicago. We look for a mixed Chicago close with debate ongoing whether China will post another round of sales tomorrow morning.
- FAS/USDA announced the sale of another 680,000 mt of US corn to China, along with 126,500 mt of US soybeans to an unknown destination (rumoured to be China) along with 132,000 mt of 2021/22 soybeans to China. The US has now sold 2.04 million mt (80 million bu) of corn to China in the past 2 days which will raise US corn 2020/21 export commitments to a record large 1,975 million bu. And US soybean sales will be record large at 2,150 million bu with US exporters already shipping out 76% of this total. The US is exporting soybeans nearly as fast they sell. And Chinese importers are shocked that US exporters keep offering them soybean offers amid the dramatically tightening domestic supply.
- Chicago brokers estimate that funds have bought 7,700 contracts of corn, 6,500 contracts of soybeans, and 4,400 contracts of soyoil. Funds have sold 2,300 contracts of wheat and 2,900 contracts of soymeal.
- The Biden Administration will offer debt relief to 12,000 financially struggling US farmers. The USDA will suspend past due debt collections and foreclosures. The USDA will move to find ways to help farmers amid Covid-19 struggles including new direct aid. The relief is not expected to change either grain or livestock holding. Generally, US farmers have sold an estimated 90% plus of their 2020 soybean and 80-85% of their corn crops.
- EIA reported that weekly US ethanol production fell 1.3% to 274 million gallons (vs prior week) which consumed an estimated 95 million bu of corn. This demand would consume some 4.95 billion bu of US corn if annualised over the crop year. US ethanol stocks held steady at 991 million gallons. US ethanol demand is holding steady, but as a larger share of Americans are vaccinated by the spring, there should be an increase in gasoline demand that pushes US 2020/21 corn use for ethanol up to 5,100 million bu. The weekly report is being deemed as positive.
- The midday GFS weather forecast is consistent with the overnight run with soaking regular rain to drop across the southern third of Brazil. This rain will cause crop quality issues and low-level flooding with 10-day rains of 4-9.00″. EC Brazil will hold in an arid flow while near to below normal rains drop across Northern Brazil. The Argentine forecast offers near to above normal rainfall which will aid crops.
- The temperature outlook for Argentina and Southern Brazil is for below normal readings with highs ranging from the 70′s to the upper 80′s. The cool/wet weather slows maturation and heightens the spread of fungal diseases.
- Selling the Chinese demand confirmation has sparked a midday profit taking. Yet, the 2.0 million mt of US corn demand confirms that TRQ’s for imports are no longer required. The Chinese Government is buying US corn for in country resale and the Government does not need to issue TRQs to themselves. Additional US corn purchases are likely as Chinas lowers its weekly wheat auctions and domestic feed prices rise. China will continue to book old crop US soybeans amid the latent Brazilian (Parana) harvest amid excessive wet weather. Breaks will be brief/shallow with large US weekly sales expected Thursday morning in corn/soybeans.