1 April 2022

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  • HEADLINES: Dec corn nears $7.00; Old/new crop corn spreads collapse; 5 wheat suppliers around the world need to be monitored.
  • Chicago values are sharply mixed at midday with active bear spreading noted in old/new crop corn. It is not often, but corn spreads have been more violent than flat price, which is saying a lot when the corn daily price range exceeds $0.25/day. The May-December corn spread peaked on March 3 at $1.3575 and has fallen sharply to $0.50. We would argue that the spread may have to come near even money. Remember that the Goldman roll starts late next week which is likely to add additional pressure to corn bull spreads.
  • Soybeans have pushed to the downside on long liquidation while wheat holds on to the speculative buying. There are 4 weather hotspots for 2022 world wheat supplies that must be monitored during April; 1) The US Central Plains, 2) The Canadian Prairies, 3) Northern Chinese Plains, and 4) Russia. It only takes weather adversity for one region to push world wheat futures to new highs.
  • We look for a mixed Chicago close with December corn testing $7.00 as the market tries to economically encourage farmers to seed additional acres. Soybeans and the soymeal market are weaker on spreading and liquidation, but with old crop US 2021/22 soybean end stocks under 200 million bu, the downside price risk for July soybeans appears to be no more than $15.50. Dec KC wheat has support below $10.00 with US wheat export demand brightening at harvest.

Chart</p> <p>Description automatically generated” width=”417″ height=”277″ /></p> <ul> <li>The nearby pressure in corn is related to the cheapness of Argentine corn relative to the US Gulf being nearly $1.00/cheaper. This is shifting world feedgrain trade to Argentina as they sell corn cheaply to gather hard currency. We cut our 2021/22 corn export estimate by 50 million bu and a like adjustment could occur in April if the US corn export sales pace does not improve. There was the sale of 130,000 mt of corn sold an unknown buy this morning. Some argue that it was a private Chinese buyer, but not the Government. Chinese buyers cannot source S American corn due to a lack of a phytosanitary agreement. We believe that China and Brazil are in talks on such an agreement, but the timing of its completion is unknown.</li> </ul> <ul> <li>China auctioned off about half of its 500,000 mt of soybean reserve offered to crushers this week. Once the reserve stocks are sold, there is a 120-day window that the soybeans must be replaced. China is expected to auction off 3.5 million mt of soybean reserves. China’s VP Hu made a call out today for Chinese farmers to double down on 2022 corn production to narrow the gap with demand. Moreover, Hu called for corn used on ethanol to be reduced to preserve supply.</li> </ul> <ul> <li>US analysts are all clustered for 2022/23 US corn end stocks that range from 750-1,100 million bu. But there are widely varied opinions on 2022/23 soybean and wheat end stocks. In wheat, end stock estimates range from 400-750 million bu and 120-420 million bu in new crop soybeans. WASDE will not update their 2022/23 balance sheets until May. The biggest differences in wheat end stocks rests with exports/yield and its crush/exports in 2022/23 soybeans. The US has 17 new soybean crush plants under construction and the S American crop shortfall will have a significant impact on US soybean exports from July into January 2023.</li> </ul> <ul> <li>The midday Central US GFS weather runs are consistent with limited rainfall for the Canadian Prairies and the US Plains over the next 2 weeks. The forecast warms dramatically in the 11–15-day period which could allow corn seeding to begin.</li> </ul> <ul> <li>Bullish price trends prevail, but few are willing to chase December corn above $7.00/bu. We see limited downside risk in soybeans/soyoil/wheat following this decline. Look for increasing US demand to claw back on soy/wheat spreads vs corn. The soy/corn ratio sits just above 2:1. Buy breaks would be our advice.</li> </ul> <p>To download our weekly update as a PDF file please click on the link below:</p> <p><a href=Weekend summary 1 April 2022