- HEADLINES: May option expiration adds to late day volatility; Brazilian winter corn forecast into May 5; Chicago expands daily trading limits starting May 3
- It is the end of the week and Chicago values are taking a breather following the robust and massive rallies of recent days. Corn, soybeans, and wheat futures are mixed at midday as fund buying has slowed. European and Asian funds are off for the weekend and with US farmers expected to quicken the planting pace in the next few weeks, caution in chasing the Chicago rally is being expressed. No one seems willing to hit the green purchase button repeatedly.
- Corn, soybean, and wheat futures have become overbought with consolidation needed. Moreover, those that are calculating S American soyoil imports (into the US) note that there is a margin. This may offer a pause if rumours develop of US soyoil purchases/imports. We hear of no such talk today. Please note that there is a 19% import duty on S American soyoil into the US and record high world freight rates makes imports more difficult. Yet, the US will have a need for soyoil imports by autumn amid rising renewable biodiesel demand.
- Chicago brokers report that funds have been on both sides of the market. Funds have sold 2,900 contracts of corn and 3,800 contracts of soybeans, while buying 2,700 contracts of wheat. In the soy products, funds have sold 2,400 contracts of meal & 1,200 contracts of soyoil. All eyes on the afternoon CoT report to gauge how long fund managers are across Chicago.
- Brazilian cash corn prices traded near a record $7.50/bu with new corn import demand being discussed from Argentina. Brazil dropped its import duties from western world suppliers late Tuesday, but it is nearby Argentina where corn that is the cheapest, offering the best margin. Research maintains that Brazil will have an Argentine corn import program that reaches 800,000- 1.20 million mt into August. The purchases today are rumoured to be 30,000-60,000 mt.
- The USDA/FAS announced that 336,000 mt of corn was sold to an unknown buyer with Guatemala taking 136,000 mt in the 2021 /22 crop year. And China bought 132,000 mt of 2020/21 US soybeans. Debate exists whether the unknown buyer is China or another importer like Columbia or Taiwan. Exporters report that China is asking offers on US new crop corn and soybeans.
- Chicago is raising daily commodity price limits to $0.40/bu in corn, $1.00/bu in soybeans, $0.45/bu in wheat. The new limits will cause margin rates to rise while also causing option volatility to expand. The new limits take effect on May 3. If a US weather market ever gets started this summer, the new daily limits will be needed before and after important weekend weather events.
- The midday GFS weather forecast is similarly dry across Parana, MGDS, Goias and Southern Mato Grosso for the next 10 days. The GFS forecast does start to argue for more of a winter type of weather pattern developing in early May with the jet stream sagging southward across RGDS and Northern Argentina. Rainfall will be receding to the north across Mato Grosso. 90′s temperatures return in the 11-15 day period that would add to corn crop stress. Our concern for the 2021 Brazilian winter corn crop stays elevated with a downward yield bias. By mid-May, the rains in RGDS could shift far enough north to provide shower chances for Parana. This should be closely followed next week.
- May options expire at the close which has added a layer of market volatility. The sellers of calls have had to either exit or buy futures. The degree of May futures liquidation that occurs with the May option expiration will be important on Monday. The Brazilian winter corn weather forecast is dry, while how much rain fall across the US Northern Plains and the Canadian Prairies will key wheat price direction. And Russian wheat crop estimates are in decline. US weather and the old crop cash markets determine Chicago values next week with considerable market volatility. Our stance remains to buy any sharp correction of 15-20 cents in corn and 25-40 cents in soybeans.
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