- HEADLINES: Chicago May corn soars on cash tightness and fund buying; NOPA February crush report bearish; Midday GFS weather model adds to southern Brazilian rains.
- Chicago futures are mixed at midday with corn rising strongly on renewed fund buying, heady US weekly export inspections and the difficulty that ethanol producers/exporters are having securing cash corn for replacement. The cash corn market has real strength showing this morning which is relating into old/new crop spreads. Domestic supplies of US corn and soybeans are becoming exceptionally tight while commercial estimates of 2021 US corn/soybean seeding rises. Talk has the US looking to plant 94-95 million acres of corn and 90-91 million acres of soybeans for the March 31 report. We would argue that combined US corn/soybean acres of more than 82 million will be difficult to realise amid expanding sorghum and cotton seeding, but the point is that the world needs additional acres across the fibre and grain spectrum. Today’s rally is linked to the cash market as March futures expired Friday at sizeable premiums.
- Moreover, few analysts/traders have any confidence in the second quarter corn feed/residual use or second quarter residual use in soybeans. History shows that the volatility in NASS March 1 corn/soybean stocks is large and growing. The market has no room for record large corn feed or a residual soybean use.
- US cash corn/soybean markets are tightening with US farm selling being limited on declines. End users needing cash corn/soybeans and have started to raise their basis levels to acquire supply ahead of the March 31 NASS reports.
- Chicago brokers report that funds have sold 11,200 contracts of corn, 3,000 contracts of soybeans and 3,200 contracts of wheat. In the products, funds have bought 2,900 contracts of soymeal and 2,200 contracts of soyoil. Other than some isolated order of long profit taking, there are just not many resting orders above the market.
- US export inspections for the week ending March 11 were; 86.7 million bu of corn, 19.0 million bu of soybeans, and 25.1 million bu of wheat. The corn export total is a multiyear high. For their respective crop years to date, the US has exported 1,179 million bu of corn (up 547 million or 87%), a record 1,951 million bu of soybeans (up 831 million or 74%), and 708 million bu of wheat (up 17 million or 2%). The US corn export program is expected to stay strong with some spring weekly export totals surpassing 100 million bu. China exported 14 million bu of US corn last week with its weekly total expected to expand to 17-22 million bu in the weeks ahead.
- NOPA reported a soybean crush rate of 155.2 million bu, well down from trade expectations of 167-169 million bu, the lowest monthly US crush rate in 17 months. Severe bitter cold in early February likely slowed crush rates as plants moved to maintenance only production. Soyoil supplies dipped to 1,757 million pounds due to the lower monthly crush with daily usage rates holding only steady.
- The NOPA crush data was slightly bearish with the oil/meal peaking overnight and close to longer term downtrend line at 42.5%. Tight US soybean supplies going forward are likely to further lift soymeal prices.
- The midday GFS weather forecast is wetter for S Brazil and drier for Argentina. Argentine rain totals are estimated in a range of 0.25-1.50″ in the next 36 hours with a second similar system late in the weekend and early next week. Cordoba and La Pampa will be favoured with any heavier rain. The GFS forecast stays wet for Brazil with 10 day totals of 3-6.50″. Both the EU and GFS models offer a drier trend in the 11–15-day period. The heavy rains for Northern Brazil should be coming to an end by early April.
- Fund managers are adding to their net long Chicago holdings. Corn has the bullish potential on yield risk for Brazilian winter corn, strong US weekly export loadings and American drivers returning to pre pandemic gas consumption rates. Reported freeze damage to the SW Russian winter wheat crop underpins US wheat with talk emerging for a 2021 Russian wheat crop under 75 million mt. Chicago soy futures hold in a range amid a correction in the oil/meal spread and the worry over Brazilian soybean imports into the US.