- HEADLINES: Hard wheat futures rally on Dakota/S Canadian prairie dryness; Weekly US ethanol grind just 3% below 2019, CONAB out with monthly report Thursday.
- Hard wheat markets have come to life with Minneapolis and KC wheat futures rising to noticeable midday gains. The rally in wheat has taken the selling pressure of old crop corn futures (wheat being fed to Plain’s cattle beyond mid-May on the discount), while fund liquidation in soybeans/soyoil has pressured the complex. The volume of midday trade is diminished with end users looking at breaks in corn/soyoil for new purchases. Chicago has a mixed tone at midday with the grains higher and the soybean complex weaker on fund order flow. The index fund roll starts at the close which continues for the next 5 days. The tone of the grains is bullish on N Plains and Canadian Prairie dryness. Soybeans are struggling on rallies amid improving, but still negative Chinese crush margins.
- Research notes that December corn nearly reached an open chart gap left from the March NASSS seeding estimate between $4.775-4.8075. The corn market should be the upside Chicago price leader following the USDA report. November soybean futures never left an open chart gap, but values have been consolidating at a high price level and forming flag formation. Both Dec corn and November soybeans are undervalued based on our Stock/Use ratio analysis.
- Chicago brokers estimate that funds have bought 4,400 contracts of corn and 3,900 contacts of wheat, while selling 3,600 contracts of soybeans. In soy products, funds have bought 3,400 contracts of soyoil while selling 1,900 contracts of meal futures.
- The US Census Department indicated that the US exported 67.1 million bu of wheat, 248.4 million bu of corn, and 167.5 million bu of soybeans during February. Compared to February FGIS inspections, Census soybean exports were 10 million bu larger, corn exports 6.4 million bu larger while wheat exports were up 4.6 million bu (including flour). The US is well on its way to exporting a record 2,350 million bu of soybeans, a heady 100 million bu above the WASDE 2020/21 forecast.
- CONAB will be out Thursday with its monthly April Brazilian crop estimates. The trade is looking for an increase in the Brazilian soybean crop estimate to closer to 135 million mt and a cut in their corn to around 105 million mt due to recent adverse weather. CONAB has consistently been below the USDA on its corn estimate. The US ag attaché in Brazil cut their total corn crop estimate from 109 million mt to 105 million due to recent dry weather. The May CONAB corn crop estimate will be released on 12 May, the same date as WASDE.
- Central IL cash corn is bid at 25 cents over May corn futures at midday which is well above delivery equivalent. The strong cash corn market should pull May corn futures to a deeper premium vs July. Surprisingly, the strong cash basis is not spurring additional corn movement from producers.
- US weekly ethanol production reached its best level in a year as production nears 2019 pre-pandemic levels. The US produced 287 million gallons of ethanol last week, up 3 million gallons from the prior week, and up 45% on last year. The difference from 2019 weekly production is just 3%. Research maintains that US ethanol production will reach the 2019 production levels by May. The USDA needs to increase its US 20/21 US corn grind for ethanol by 75-150 million bu.
- The midday S American GFS weather forecast is dry across the eastern 2/3rds of Brazil’s safrinha corn area. A high-pressure ridge is forecast to strengthen which will act to limit the flow of tropical moisture southward. Dryness returns to all Brazilian winter corn areas in the 7–14-day period. High temperatures range from the 80′s to the lower 90′s.
- The FAS weekly US Export Sales Report and the CONAB April crop report will be released on Thursday. US cash market strength will underpin May soybeans at $13.90 while May corn likely forged its post report low at $5.50 on Tuesday. It will not take much of a weather problem in the US or Canada to produce a “spicy” wheat market. We stay bullish of corn, while wheat is forging an early seasonal lows. Buying breaks appears to be a sensible policy.