- HEADLINES: New crop corn, soy extend rally; Midwest forecast colder in mid-May.
- Chicago grain/soy futures are mostly higher at midday with any selling being in old crop corn futures and tied to China cancelling out of 140,000 mt of old crop corn. The USDA also confirmed that Mexico booked 184,100 mt and an unknown buyer of 147,320 mt of US new crop corn. We believe that China has booked 1.5-2.50 million mt of new crop corn for delivery this autumn. Traders are wondering if China is rolling some of their old crop corn purchases to new crop with the July-December spread reaching $1.10/bu yesterday. We doubt that old crop cancellations/rolls will be widespread with China having already booked a considerable amount of ocean freight for May, June, and early July.
- Soybean and wheat futures have been followers of the corn market this morning. Old/New crop soyoil spreads have been under pressure as Cargill added to their deliveries of soyoil by putting out another 201 contracts with Bunge/CHS the stoppers. The Cargill deliveries in soyoil have pressured nearby spreads at the same time, cash basis and bids remain firm. Traders argue that Cargill is rolling renewable biodiesel hedges backwards to the much cheaper December soyoil futures contract. The cash concern for US soyoil supplies develops as the US soybean crush rate slows amid a lack of local soybean supplies.
- Chicago brokers report strong bear spreading in old/new crop corn and old/new crop soybeans/soyoil as Central US weather becomes a focal point of traders. The cheaper new crop futures appear to offer a lower risk position to be long with Chinese buying likely to be focused on new crop corn and soybeans this summer.
- Managed money has been active on the buy side of the marketplace. Brokers estimate that funds have bought 2,100 contacts of wheat and sold 5,900 contracts of corn and 2,900 contracts of soybeans. In soy products, funds have bought 1,200 contracts of meal and sold 3,900 contracts of soyoil.
- The US aviation/biofuel industries met with a US House panel on Tuesday to discuss ways to expand the production of low carbon aviation fuels. Several major US airlines met with US President Biden back in February to discuss the tax incentives for a low carbon jet fuel. An aviation industry movement is underway to uncover alternatives to fossil fuels that are favourable to the environment. US renewable biodiesel demand is quickly ramping up and there will not be enough vegoils/tallows (or other feedstocks) available that could meet expanding jet fuel demand.
- The US weekly ethanol grind was up slightly with production of 280 million gallons. EIA indicated that last week’s production was down 8% from 2019, but up 2 million bu from last week. US ethanol stocks rebounded to 859 million gallons, up 30 million from the week prior, but down 20% from 2020. There is no indication of corn price demand rationing in US ethanol production with ethanol prices rising.
- Like the EU/Canadian models, the midday GFS weather forecast has shifted any meaningful rainfall southward into the southern half of the Midwest. The N Plains, Canadian Prairies, and the Northern Midwest (I 80 north) hold in a below to much below normal rainfall pattern. Near to below normal temperatures look to prevail with lows ranging from the mid 30′s to the mid 40′s with highs in the 50′s and 60′s. The cool temperatures look to slow emergence and crop growth.
- New crop futures are pacing the rally on the concern of summer dryness and cooler than normal temperatures for the next 2 weeks. The tolerance for US corn or soybean yield losses is zero with end stocks already projected to be as tight or tighter than old crop. To date, there is no evidence that $15.00 soybeans or $7.00 corn is producing demand rationing or imports that would prevent localised shortages by July or August. And we are doubting that the soyoil rally is over with cash markets holding strong. July soyoil futures have strong support between $61-63.00 cents.