• HEADLINES: Early Chicago sell the fact break uncovers new fund buying; Corn/soybeans rally to new highs at midday; Weather to key Sunday evening trade.

• Chicago grain/soy futures are higher at midday as “sell the fact” corn trading had only a momentarily bearish impact. FAS/USDA confirmed that 1.3 million mt of US corn was sold to China. We believe that an additional 3-4 million mt were also sold to China on Monday/Tuesday with the total purchase of around 5-6 million (Gulf for Oct-Nov and PNW Dec-January). And that China is still asking for new crop corn and soybean offers this morning.

• China is behind in their US ag purchases and their booking of new crop reflects that their feedgrain shortage will extend into the new crop, when their farmers start their own domestic harvest. China normally slows or halts corn imports when their farmers start cutting new crop corn and focus on soybean imports. Like the US, China cannot withstand anything but perfect weather this summer without looming feed shortages.

• We look for a higher Chicago close with the upside leader being the soy complex/soyoil as world vegoil prices surge. Whether it is palm, canola, rape, sun or soyoil, world spot vegoil supplies are extremely tight while demand rationing shows no evidence of starting. The morning break in corn occurred on shrinking volume, a close above $6.30 December corn sets an initial target of $6.60-6.80 while November soybeans look to target $14.50-14.70/bu on tight 2021/22 stocks.

• Chicago brokers estimate that funds have bought a net 4,200 contracts of corn and 5,300 contracts of soybeans, while selling a net 1,300 contracts of wheat. In soy products, funds have bought 1,100 contracts of soymeal and 3,900 contracts of soyoil. The fund buying returned on the morning dip.

• The USDA/FAS announced that 1.36 million mt of US corn were sold to China with another 188,468 mt to an unknown destination.

• Statistics Canada estimated their all-wheat stocks at 16.2 million mt, canola at 6.6 million mt, and oat stocks at 1.8 million mt. The wheat, oat, and canola stocks were slightly under trade estimates and in the case of canola, some 34% below last year. The April Canadian stocks were mildly bullish with Canadian farmers not selling grain due to Prairie drought concern. The dry weather is hampering seeding and emergence, and causing farmers to slow cash sales. Any loss of the new crop Canadian wheat/canola crop will have a massive impact on world prices.

• Another week ends with Brazilian winter corn struggling without rain. The 2021 crop year is likely to go down in the record books as being the driest in 50 years of weather records. The lack of rain during pollination along with rising temperatures has caused some corn fields to be zeroed out. Producers are abandoning fields which complicates the overall sums in determining production.

• The biggest hope of end users is a bearish USDA May report. However, we doubt that the May Report could be bearish enough to end the bull market. In fact, record low US new crop corn/soybean stock/use ratios could accelerate the rally. Moreover, there is a chance that the USDA could revise Chinese grain/corn stocks lower, which would help justify a larger import estimates in 2021 /22. May is normally the report where the USDA engages in long term statistical housecleaning.

• The midday GFS weather forecast is like the overnight run, but compared to the Canadian and EU models, the GFS is too far north with rain into lowa/N Illinois. The bias of the Ensemble models is to keep the N Plains and N Midwest dry over the next 10 days. There is rain hinted at in the 11–15-day period, but the models have had a very poor track record beyond the next 10 days.

• The loss of 12-20 million mt of Brazilian corn supply makes the world corn exporter balances sheet exceptionally bullish. Add on top of that the ongoing dryness across Canada/US and you end up with a dynamic bull market with fund managers adding to purchases. May was supposed to be the month of improving soil moisture, it is turning drier much like April. Stay with a bullish bias as any weather problem in the US, Black Sea or Canada will shoot values to new highs. Seasonal highs are not expected until sometime in July or August.

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