- HEADLINES: Chicago corn soars to test contract high on rumours of China demand for US HRW and corn; USD 2020/21 corn sales exceed crop year forecast; USDA Friday.
- It has been a bullish morning with corn/wheat pushing to strong daily gains, while the soybean market is being pulled along. Strong cash basis bids and renewed basis pushes from W Midwest ethanol producers rallied old crop corn futures to sharp daily gains. May corn is back testing last week’s post report spike high at $5.85. The May/July corn spread pushed out to a 17-cent May premium as the market is trying to entice pre-planting cash sales from the US farmer. December corn futures are testing their contract high at $4.9375.
- There are rumours that China’s is asking for offers on US HRW wheat for July/August. WE are uncertain if any US wheat has been sold but based on the cheapness of US HRW wheat to Chinese corn, it makes economic sense. Note that it was a 130,000 mt of US SRW wheat sale a few days ago to an unknown buyer (China?). When the Chinese Government starts to secure US wheat, we doubt that the buying will stop at just 2 cargoes.
- There are also rumours that China is seeking 1-2 million mt of US old crop corn for late summer shipment. We cannot confirm these rumours with cash connected traders. The CIF nor FOB markets in the Gulf or PNW are confirming the buying. We have heard cash talk that China was seeking US new crop corn for 2-3 million mt which is economically more attractive for October/ November than late summer. Chinese corn buying talk is likely “rumours” chasing the market.
- Chicago brokers estimate that funds have bought 15,800 contracts of corn, 5,100 contacts of wheat, and 1,900 contracts of soybeans. In soy products, funds are buyers of 900 contracts of soyoil while selling 1,200 contracts of soymeal. Funds have NOT been very active in the complex in recent days, fearful that the USDA will not change or raise 2020/21 US soybean end stocks.
- The index fund roll starts on today’s close and there may be some profit taking ahead of Friday’s USDA report. However, rising cash basis bids will underpin any correction in wheat/corn/soybeans post the report.
- CONAB estimated their 2021 soybean crop at a record 135.5 million mt, up 400,000 mt from March with their corn crop pegged at 109.0 million mt, equal to the USDA March forecast. CONAB raised their crop seeding estimate and trimmed yield estimates slightly to arrive at the record 109 million mt corn crop forecast. We see the CONAB crop estimates as 5-7 million mt too high amid ongoing drought related crop stress. Weather forecasts are arid for the second Brazilian corn crop. US weekly export sales for the week ending April 1 were 3 million bu of old crop and 19.5 million bu of new crop wheat, 29.8 million bu of corn, and net cancelations of 3.4 million bu of US 2020/21 soybeans.
- For their respective crop years to date, the US has sold 925.4 million bu of wheat (up 4.4 million or 1%), 2,617 million bu of corn (up 1,288 million or 97%), and 2,232 million bu of soybeans (up 864 million or 63%). The US has already sold more corn than the USDA is forecasting for the entire 2020/21 crop year with 5 months left. We statistically argue that 2020/21 US corn exports will be 3,000 xmv or more. US corn remains competitive into SE Asia.
- The midday S American GFS weather forecast is drier across the eastern two thirds of Brazil’s safrinha corn area. A high-pressure ridge will limit the flow of tropical moisture southward. The southern half of Mato Grosso has a limited chance of rain for the next week with bone dry weather conditions for MGDS and Parana. High temperatures range from the 80′s to the lower 90′s. Crop stress will be increasing amid arid weather conditions.
- Chicago corn values are sharply higher in anticipation of a bullish USDA report tomorrow, along with China purchase rumours for US corn/HRW wheat. The US has already sold more corn as of April 1 than the USDA is forecasting with 5 months remaining in the crop year. Midwest soyoil basis is pushing to 5-5.50 cents over which will become a feature heading into first notice day in a few weeks. There can always be profit taking declines, but as Brazilian winter corn and Northern US Plains dryness shows, you do not want to be short when Mother Nature is not fully cooperating. This why we will hold a bullish bias heading into summer.