- HEADLINES: Limit up corn, wheat, and soyoil push Chicago values to their highest price since 2013; China bidding for Ukraine corn; Brazilian winter corn dryness to worsen.
- Chicago corn, soyoil and wheat futures are limit up at midday with soybean/soymeal futures sharply higher and in tow. The volume of trade has been active as the market pushes to aggressively ration demand amid rising cash basis bids that are producing only limited cash movement. Central Illinois corn is said to be bid at 35-40 cents over while soybean cash bids have been pushed to 70-90 cents over. And it is just April!. Getting to the new crop position is months away.
- We have been discussing the “tight” cash markets for weeks, it is just that short covering panic has set in prior to first notice day vs May futures. May options expire tomorrow with short call holders panicking and buying futures. Chicago is expected to raise margins which will only add to the short covering fervour. By early next week, May futures contracts will become a commercial cash market trade. The problem the market is having is finding a price that causes farmers to sell stored grain as they attempt to accelerate their spring planting pace amid warming Midwest temperatures. Currently at limit up, the movement of cash corn is said to be modest. And as corn futures have blown through $6.25-6.40 weekly gap resistance, the next upside target is the $6.85-7.20 target and test the July 2013 corn trading range.
- US weekly export sales for the week ending April 15 were 8.8 million bu of old crop and 13.7 million bu of new crop wheat (total of 22.50 million bu), 15.3 million bu of old crop corn and 1.2 million bu of new crop (total of 16.5 million bu), and 2.4 million bu of old crop soybeans and 11.6 million bu of new crop (total of 14 million bu). The sales were on the lower end of trade expectations and considered neutral to slightly bearish.
- For their respective crop years to date, the US has sold 932 million bu of wheat (down 3 million from last year), 2,645 million bu of corn (up 1,255 million or 90%) and 2,235 million bu of soybeans (up 840 million or 61%). US corn old crop sales are just 30 million bu and soybean sales are just 45 million bu from the USDA annual target with 4.5 months remaining in the crop year.
- There are rumours that China is not only bidding for French wheat/US new crop corn, but also Ukrainian new crop corn. We cannot confirm, but the new crop bid/offer range is a wide +$0.87 over with an offer at $0.98/bu. The Chinese are the big-short in the market with their purchases of new crop corn and soybeans well behind the pace of anticipated demand that will start in September/October. China has been a modest new crop wheat buyer.
- Chicago brokers estimate that funds have bought 11,500 contracts of corn, 8,500 contracts of wheat, and 9,800 contracts of soybeans. In the soy products, funds have bought 3,900 contracts of soymeal and 3,200 contracts of soyoil. May soyoil futures has been able to come off limit bid at midday.
- 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 winter corn. The extended range maintains this dry forecast into May 7. The forecast shows no evidence of returning a flow of upper air tropical moisture that can produce meaningful rain beyond N Mato Grosso. Our concern for the 2021 Brazilian winter corn crop stays elevated with a downward yield bias. The biggest weather and crop risk remains cantered on Parana/MGDS and Goias. Temperatures in the 11-15 day period look to warm back to the mid 80′s to the mid 90′s.
- This is a cash driven bull market with an acute need to ration demand or reach price levels that allow for imports to solve the old crop stocks tightness. US wheat and new crop corn/soy futures are following along. Even a modest Central US weather problem could rally December corn to $6.00 and November soybeans to $14.00. Wheat contract highs are making sure that additional feed wheat consumption is not occurring. The deepening Brazilian corn crop loss and premium of spot US cash markets is creating considerable anxiety/upside market risk. Strap yourself in for volatility to push across Chicago heading into summer.