- HEADLINES: Chicago mid-morning rally fails as May futures turn mixed into delivery on Friday; US export sales as expected; May day holiday looms for the EU/Asia.
- Chicago grain and soy futures are mixed to weaker at midday as the leadership of the May futures contracts fades. The volume has subsided from recent activity with most traders awaiting to see whether any cash deliveries will be posted against May futures. Tightening US corn and soybean supplies prevail and will maintain strong cash basis bids, but with the next delivery period 8 weeks away, the market’s focus will shift back to the US’s premium to S American and European grain offers. We looks for a sloppy mixed close with many traders off on Monday for the May Day holiday. The extended weekend for Asia and European traders will cause trading activity to decline. We would mention that Friday is the end of the month with bullish funds looking to lock down hefty profits.
- Chicago brokers estimate that managed money has sold 2,600 contracts of wheat and 4,100 contracts of soybeans, while buying 2,100 contracts of corn. In soybean products, funds have bought 2,200 of soyoil while selling 4,500 contracts of soymeal. The volume has been off from recent days with funds likely holding a record long corn and soyoil position to be reported on Friday.
- Questions abound as to how low can the Brazilian 2021 corn crop get with continued arid weather. We note that if you use prior record low winter corn yields on this year’s expanded acres, a winter crop of 70-72 million mt appears about right. The first Brazilian corn crop was 23.6 million mt with the third Brazilian harvest estimated at 3-4.00 million. So, if you add 23.6 plus 3.5 million and a 70 million mt winter crop, the sum offers a crop of 97.0 million mt. This year may see yield losses in Parana greater than 35% which could drop the Brazilian total harvest to 95 million. Our point is that USDA will start the process of crop reduction in May with a likely cut of 5-8 million mt to be followed with additional reductions in June and July. We doubts that the total 2020/21 Brazilian corn harvest will fall below 94-96 million mt.
- The US corn market this week has been openly discussing a sub 100 million mt 2020/21 total Brazilian corn crop. There is some additional leeway for a further crop reduction, but a sub 95 million total Brazilian corn harvest is going to prove to be difficult based on existing Mato Grosso conditions and the third corn harvest which will be record large due to domestic cash bids of $7.50 and higher.
- US export sales for the week ending April 22 were 8.2 million bu of wheat, 20.5 million bu of corn, and 10.7 million bu of soybeans. For their respective crop years to date, the US has sold 940 million bu of wheat (down 13 million or 1.4%), 2,666 million bu of corn (up 1,222 million or 85%), and 2,246 million bu of soybeans (up 817 million or 56%). The US corn and soybean sales pace is slowing due to strong US Gulf FOB prices with Mexico being the primary buyer/importer.
- The midday GFS weather forecast in S America maintains complete dryness across Central Brazil’s safrinha belt, with an improved chance for rain across Parana and Santa Caterina. The Northern third of Mato Grosso will also see 0.5-1.50″ of rain which will aid a limited amount of corn acres. Temperatures hold in the 70′s to 80′s with warming next week when lower to mid-90′s return. The forecast is too warm/dry and a further decline in the Brazilian corn crop (total) to 97-98 million mt is expected. The importance of Brazilian weather will be diminished beyond mid-May as the damage will be done and reversal of crop losses is near impossible.
- The best two words that we have heard explaining the coming Chicago marketplace for coming weeks is “extreme choppiness”. The bulls nor the bears will be happy as rallies and breaks will not carry through. Funds have loaded the boat long in the last half of April. US farmers have scored active planting progress this week. We see support for December corn under $5.25 and November soybeans below $13.00. We await sharp breaks to return long in the hope for a June weather scare. Until then, be prepared for extreme chop.