- HEADLINES: Corn soars to new contract high with May nearing $6.00/bu; Parana Brazilian corn ratings decline on acute dryness; C IL corn/soybean cash basis strong.
- Midday Chicago grain and soy futures are sharply higher with corn/wheat pacing the advance on tightening US domestic supplies amid adverse weather. Brazil’s winter corn crop is being hit with a flash drought while cold/dry weather limits seeding across the N Plains/Canadian Prairies. Funds and speculators have been active buyers on the rally. Wheat futures have advanced on talk of reduced offers by Russian exporters.
- May corn futures reached a new rally high at $5.9725 while December corn pushed to a new rally high at $5.125. May soyoil futures have pushed against last week’s high at $54.58. A close in May soyoil above $54.63 will produce a retest of contract highs amid the exceptionally strong cash markets. We hear that domestic end users/exporters pushed bids for old crop corn and soybeans. There are rumours that July Central IL corn traded at 45-50 cents over with soybeans trading at 70-75 cents over July. End users are competing for tightening supplies which is spurring nearby and summer basis gains. Research argues that a demand rationing rally is required in old crop corn/soybean to assure adequate stocks and that needed imports arrive. US soybean imports from Canada/S America are well below the USDA forecast.
- There were 158 contracts of deliverable Chicago soyoil receipts that were cancelled as Central IL cash basis holds at a firm 5.5-6.0 cents over May futures. As the US soy supply dwindles and processors are forced to slow crush rates, soyoil should score new highs on strong demand and tightening supplies.
- Chicago brokers estimate that funds have bought 6,200 contracts of wheat, 5,400 contracts of corn, and 4,700 contracts of soybeans. In the soy products, fund managers have bought 2,200 contracts of soymeal and 3,700 contracts of soyoil.
- APK reports that large exporters of Russian wheat including Dreyfus, KZP, Bunge and Sierentz Merchants have left the cash market citing the uncertainty of the Russian export taxes and their risk. Moreover, Cargill and Gemcorp have also suspended cash purchases. Most are waiting for the €50 euro duty to end on June 2 to sell stored purchases. We look for a noticeable decline in Russian wheat/grain exports during April/May and that the USDA’s annual Russian wheat export total of 39.5 million mt is at least 2-3 million too high.
- US corn ethanol production fell 10 million gallons from last week to 277 million gallons, which was up 65% from last year, but down 7% from 2019. US ethanol stocks were down 76% on last year. We look for US ethanol to reach 2019 levels in May.
- US gasoline consumption is only down 5% from 2019 and as more of the US economy reopens, it will reach or exceed pre-pandemic levels by summer. Crude oil futures are $3/barrel higher on the outlook for increasing US/world demand.
- The midday S American weather forecast follows the overnight GFS output with 0.3-1.25″ of rain for the winter corn areas of Brazil mid next week. Limited rainfall is expected through the weekend before a frontal pass sparks shower activity midweek. The 11–15-day period shifts back drier with warming temperatures as the tropical humidity flow retreats north. Highs will range from the 80′s to the mid 90′s. The extended range 16–30-day forecast is drier with the dry season starting on time in early May. This leaves Brazilian corn parched heading into the reproductive period.
- Other than occasional profit taking, there is limited selling above Chicago. Thursday’s weekly export sales report and NOPA Crush data should maintain the rally in soybeans/soyoil. Parana’s Deral cut their winter corn condition rating from 76% good/excellent from 92% the week prior. This sharp rating decline reflects the flash drought stress that is being placed on the second corn crop. Corn remains the bullish stalwart with wheat following on dry Plain’s weather.