- HEADLINES: Supply worry sends Chicago corn, soyoil and soybeans to fresh highs; Deral drops Parana corn ratings; Central IL soyoil basis soars on demand.
- Chicago futures are sharply higher at midday. Corn, soybean and soyoil futures have scored fresh contract highs with May soybeans/soyoil being the upside leaders. The volume of Chicago trade was extremely active in early morning dealings, but futures/volume have eased at midday. We expect that funds will return near the close with additional buying to dress up valuations. New contract highs often beget new contract highs in the language of traders. And with Midwest cash corn/soybeans/soyoil trading well above May futures valuations, we doubt that any correction will be sustained or large heading into first notice day on April 30. This is a buy the breaks type of marketplace on tightening US cash supplies.
- The next upside price targets rest at $15-15.20 May soybeans, $6.18-6.25 May corn, and the March highs of $6.62 in May KC wheat. Funds are net short of Chicago wheat, and we expect that like the summer row crops, funds will be looking to establish a net long position into late spring. The function of wheat is to assure that additional supply is not fed following the recent arctic blast. Amid concerning Brazilian and Northern Hemisphere weather, end users and speculators are looking to buy 2–3-day market corrections.
- Chicago brokers estimate that funds have bought 14,000 contracts of corn, 9,500 contracts of soybeans, and 9,700 contracts of wheat. In soy products, funds have bought 6,500 contracts of soyoil and 3,900 contracts of soymeal.
- Parana’s Deral continued to reduce its weekly ratings of its corn crop due to warm/dry weather. This week, Deral estimated that 62% of Parana Brazil’s corn crop is rated good/excellent compared to 76% last week, and well below ratings of 90% plus in early April. Some regions of Parana have not had any rainfall for the past 30 days with stress becoming acute. Farmers are becoming pessimistic on the crop in Parana, Mato Grosso Du Sol, the southern half of Mato Gross and Goias. It is estimated the 2021 Brazilian total corn harvest is 100 million mt with downside potential to 91-93 million mt with arid weather through May.
- The arctic chill will be pushing eastward in coming days with sub-32-degree lows pushing down into the S Midwest/Northern Delta. It is always difficult to measure what cold weather losses are as you do not know where the crop is starting from nor what the weather conditions will be to follow. Yet, on a broad sense, some 30-65 million bu of HRW wheat may have perished via the cold and SRW wheat is vulnerable with 4% of the Missouri and 5% of the Illinois crop in the heading phase. This makes Midwest temperatures important overnight with US SRW wheat stocks already tightening. The outlook for US wheat futures is brightening on spring and winter supply losses due to adverse weather.
- Central US soyoil basis exploded with rail basis offered at 12.00 cents over. The explosion in cash basis is said to be end users taking forward cover on the fear of declining US soybean supplies and a slowdown of the crush. Cash basis bids of 60-90 cents over is not securing large amounts of old crop cash soybeans. And there are commercial rumours that Canada is importing 2 cargoes of Ukraine rapeseed amid their acute tightness of supply.
- The midday GFS weather forecast is similarly dry across Parana, MGDS, Goias and Southern Mato Grosso for the next 10 days. The deepening flash drought for Central Brazil will produce increasing stress on the winter corn crop. The extended range maintains a dry forecast into May 4.
- Supply losses of Brazilian corn and US wheat (cold temperatures) is gaining the attention of traders in a world that was already tight of exportable grain stocks. And autumn US ethanol board margins are calculated to be a profitable +0.80/bu based on surging ethanol values (and RINs). Strong demand is colliding with shrinking supplies which is creating bullish cash/futures trade. There is no evidence of demand rationing and Chicago breaks will be shallow/short lived into first notice day against May futures. The EU winter rapeseed crop endured a massive weather hit last week with below freezing temperatures during a sensitive time of growth.