• HEADLINES: Chicago recovers at midday; No sign of rain in Brazil; Ethanol production stays flat.

• Chicago grain and soy futures have found renewed buying interest following Tuesday night’s collapse. There is little breaking news available, but the push for near-term cash supply is ongoing. Basis bids have rolled to July but flat prices have risen. It does appear that regional needs for origination vary, but as of Tuesday evening elevators were still willing to offer premiums above posted bids in order to guarantee supply. Current prices exceed fair value but there still remain questions over available US supply.

• We have reported this week that the latest stage of the rally is working to slow current and future export sales. Brazilian soy fob basis remains weak. US Gulf corn is now the world’s most expensive feedgrain supply, with Argentine and Ukraine origin, along with Black Sea feed wheat, much cheaper. This pillar of demand will be eroding as importers finally move away from the US corn market.

• Weekly EIA ethanol data is viewed as mixed. Production through the week ending April 23 totalled 278 million gallons, up just 1 million from the previous week and still 8% below the same week in 2019.

• Gasoline disappearance last week was 8.9 million barrels per day, vs. 9.1 million the previous week, and down 4% from 2019. US energy consumption is having trouble finding and sustaining traction despite the ongoing successful rollout of Covid vaccines. We expect gasoline to be at or near 2019 levels by summer, but it is important that weekly data begin to reflect a boost in demand in the next 30 days.

• Yet, US ethanol stocks continue to decline. Stocks last Friday totalled just 829 million gallons, down 25% year-over-year. It remains that any boost in gasoline using moving forward absolutely requires a similar increase in weekly grind rates. Ethanol prices will rally further on a lack of supply, which bodes positive for corn basis levels.

• EU grain markets look to settle steady to lower. New crop Matif corn futures are down €0.75-1.25 per ton. And Brazil’s interior corn index is trading lower for only the third time in 17 days. This is mostly due to today’s rally in the Real, but the message is that spot prices worldwide are reaching levels that give importers and end users pause. Canadian canola prices, too, are down slightly in spite of bullish seedings data released Tuesday.

• Producers in the US remain very active in seeding. Above-normal rainfall remains most probable across the Midwest into the second half of May but there will be ample windows for seeding. Coming warmth spurs rapid germination.

• The midday GFS weather forecast in S America maintains complete dryness across Central Brazil, with the odds that rainfall in the far south expands into Parana being diminished. Another 10 days of soil moisture draws lie ahead, while already historic drought is in place across all but Mato Grosso and far Northern Brazil. A Brazilian crop of 98 million tons or less is assured if rains fail to return to Parana by the middle of May.

• Be prepared for volatility not seen for some years. The last few trading sessions provide a small glimpse of what can be expected once the Northern Hemisphere growing season begins in earnest. A more two-sided trade is expected following May expiration, with weather forecasts, which are updated every 6 hours, to drive daily direction. Long term, Chicago markets will find support on sharp breaks amid collapsing Brazilian corn yields and the need for ideal Northern Hemisphere weather.

• HEADLINES: Chicago retreats as world fob values fail to follow through; GASC cancels tender on high price; ADM CEO calls for US corn/soy seeding to rise 5 million acres.

• Chicago grain futures fell sharply in post opening trade on profit taking with the volatility of the marketplace ramping up on May liquidation ahead of first notice day. Chicago values have pushed higher after an early low as short covering in May corn, soybeans and soyoil continue. The squeeze on May corn, soybean and soyoil shorts has been unrelenting during the past 10 days with volume today suggesting that the final round of speculative shorts is moving to the side-lines or rolling to the July contract. Commercial holders are holding with their May positions, but the point is that old crop is becoming a commercial game, and that speculative positions are better placed in the new crop.

• Upside price targets in May corn at $7.10-7.30 and May soybeans at $16.00-16.20 have been reached. And May Chicago wheat came close to reaching its upside target at $7.90, the breakout of the 2013-2018 bear market.

• Chicago brokers report that funds have bought 11,900 contracts of wheat, 16,000 contracts of corn, and 7,800 contracts of soybeans. In soy products, funds have bought 8,100 contracts of soyoil while selling a net 2,600 contracts of May soymeal. Funds are likely holding a record long Chicago corn position with wheat also nearing a record. Funds can keep buying, but their ownership may be reaching levels where caution starts to be advised.

• Non-US cash basis levels are crashing on the Chicago rally. Brazil’s paper soybean trade has Paranagua soybeans offered a record $0.50 under Chicago. Actual fob Brazilian offers for May from the Northern region is even with Chicago while the US Gulf is offered 85 cents over. And Argentine May corn is offered at midday at 5 cents under Chicago compared to the US Gulf at 70-75 cents over. The spread of $0.85-0.90 US Gulf premium to Up-River for Argentina for June is historically wide. And Russian wheat works into Mexico including freight costs which has Mexican buyers looking elsewhere from traditional US suppliers. The point is that US prices on exportable cash grain are expensive by any measure with imports of Argentine corn/French wheat into the US SE Coast being discussed. The Chicago rally has made the US a domestic price island onto itself.

• GASC cancelled its wheat tender citing high prices for mid-August. No new tender date has been set.

• Stats Canada estimated total wheat acres at 23.6 million acres (right at trade estimates), canola at 21.5 million acres (below average trade estimate, but up 700,000 acres from last year) with oats at 3.6 million acres (up vs. trade estimates, but down 200,000 from last year). The big surprise was barley acres which at 8.6 million acres was up 1.0 million acres from last year.

• Midwest farmers report that they have been hard at seeding for the past three days. Strong progress is being reported with summerlike temperatures helping the effort today. Based on the weather forecast, Midwest farmers should be able to finish off corn/soy seeding by the middle of May. With a few good rains, the 2021 US corn/soybean crops will be off to a solid start. Corn/soy crops could be highly rated (in early June) with a few good May rain events.

• The midday GFS weather forecast is similarly dry to the overnight run for Parana, MGDS, Goias and Mato Grosso. The GFS forecast has rains for RGDS around May 4. A winter weather type of pattern is developing with rain for Parana in the extended range. Yet, concern stays high for Parana corn with Deral’s good/excellent corn crop ratings falling to 40% from 62% this morning.

• Strap yourself in with the market digesting a sub 97 million mt Brazilian crop. Yet, the world cash market is not keeping pace with the Chicago rally. The ADM CEO mentioned in an earnings call that they expected that combined US 2021 corn/soybean acres would expand 5 million acres from NASS Intentions. That would be important if correct. The Chicago rally appears tied to May short covering and firm old crop basis. However, that pressure should be substantially reduced on first notice day- Friday. Fresh US export sales will be difficult amid high US fob premiums.

• HEADLINES: Chicago May corn/soyoil push to limit gains; Brazilian midday weather, dry for another 12 days; The UDS exported 76.8 million bu of corn last week.

• Chicago grain futures are sharply higher at midday with corn, soybean, soyoil, and wheat futures posting new contract highs. Corn is up the 25-cent limit in both the May and July futures contracts. The premium of July to December corn is 89 cents with the spread to May being $1.125. The coming first notice day combined with premium cash markets is causing the frenzied buying. Cash corn bids are well above $7.00 and not finding much cash selling. The farmer is busy in the field and disinterested in new sales. We note that when corn/soybeans did come off limit that volume increased on profit taking, but it did not take much of a rally to force values higher at midday. A bullish market tone persists with forced short covering by margin clerks adding to the upside.

• The next upside price targets rest at $7.10-7.30 May corn, $16.00-16.20 May soybeans and $7.90-8.20, the breakout of the 2012 bear market in wheat. The upside has come faster and carried farther than many traders had expected as funds continue to pile into additional market length. There is no evidence today of a market top either in the futures or cash markets.

• Chicago brokers report that funds have bought 8,900 contracts of wheat, 11,200 contracts of corn, and 9,800 contracts of soybeans. In soy products, funds have bought 7,100 contracts of soyoil and 6,400 contracts of soymeal. Managed money has been on the long side of the marketplace since the opening.

• We note that May contracts have no limit on the trading session before first notice day, Thursday, with daily trading limits then expanding on Sunday evening ,May 3 as described by Chicago last week.

• For the week ending April 22, the US exported 76.8 million bu of corn, 8.6 million bu of soybeans, and 20.7 million bu of wheat. The corn and wheat exports were above trade expectations. For their respective crop years to date, the US has exported 1,623 million bu of corn (up 742 million from last year or 84%), 2,031 million bu of soybeans (up 803 million or 65%), and 830 million bu of wheat (up 3 million or 1%). The US corn and soybean export pace continues to outpace the USDA annual forecast.

• Egypt’s GASC is expected to pay a fob price of around $270/mt if submitted bids are accepted on Tuesday. This compares to $235/mt just a few weeks ago which shows how robust the rally has been. Whether the wheat is Eastern European, or Russian will be closely followed based on Russia’s floating export tax. The higher the world wheat market rises, the larger the tax. We see little chance that world wheat prices will drop to $200/mt or below during harvest that would allow Russia to export wheat with no tax.

• The midday GFS weather forecast is similarly dry to the overnight run for Parana, MGDS, Goias and Mato Grosso for the next 10 days. The GFS forecast has backed away from rains for RGDS around May 4. The forecast calls for a deepening flash drought which will cut winter corn yields. Rain will be receding to the north across Mato Grosso this week. 90′s for highs during the 11–15-day period add to corn crop stress. Our concern for the 2021 Brazilian winter corn crop stays elevated with a continued downward yield bias. A sub 100 million mt Brazilian corn crop is in the making.

• There is no evidence of US demand rationing with China said to be asking for offers in US corn/new crop wheat. We wonder why China does not book Ukraine corn with their fob offers well below the US Gulf from October onward. The loss of Brazilian corn supply is growing and worrisome with world exporter stock/use ratios at a record low. Ongoing dry weather the Northern US Plains and the NW Midwest would send new crop futures into a bullish adjustment. The Chicago outlook stays bullish, and it will be interesting to gauge if a Tuesday correction develops.

• 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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Weekend summary 23 April 2021

• 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.

• HEADLINES: China rumoured to be seeking US new crop corn; C Brazilian weather forecast stays dry; Weekly US ethanol production disappoints with 10% under 2019.

• Chicago futures are sharply higher at midday with corn, soyoil, and soybeans pushing to new rally highs. The morning rally has been largely based on tightening US cash markets and historically high cash basis bids that are producing limited cash corn, soybean, or old crop wheat sales from the farmer or reseller. Shorts fear that they will be tagged to find and deliver receipts against May futures and are exiting positions.

• We look for a strong Chicago close, but May corn is nearing our first upside price target at $6.25-6.40, while May Chicago wheat is testing contract highs against $6.85, while May soybeans are targeting $15-15.20. May options expire on Friday and there are over 1,000 contracts of short May $15.00 calls that are vulnerable. Research suspects that the market will make the holders of these short call options “uncomfortable” before a trading top is set. At these prices there is always the chance for a correction.

• Chicago brokers estimate that funds have bought 14,000 contracts of corn, 5,000 contracts of wheat, and 7,200 contracts of soybeans. In soy products, funds have bought 1,000 contracts of soymeal and 7,600 contracts of soyoil.

• There are rumours that China is seeking US new crop corn for October/November with purchase estimates of 1-2.5 million mt. We have no way of knowing when the purchases will be announced, but like 10 days ago, cash connected traders are discussing further new China interest for US corn.

• EIA estimated US weekly ethanol production at 277 million gallons, 10% below 2019 but 6% above last year. The weekly ethanol grind was of around 99 million bu was less than expected with US ethanol stocks falling 3 million gallons to 859 million gallons. US ethanol stocks are down 26% from last year heading into a new driving season. US ethanol prices have been rising sharply and margins are again in the green by an estimated $0.24/gallon. This should enable the weekly grind rate to expand in the coming weeks.

• Mato Grosso revised their soybean crop estimate up by 1% to 35.7 million mt on slightly better yields at the end of the harvest. IMEA suggested that despite the early season drought, rain occurred with enough frequency to produce a record large harvest. Brazilian soy exports are record large to date, with April soybean exports expected to exceed 15 million mt.

• 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 6. The forecast shows no evidence of returning a flow of upper air tropical moisture that can produce meaningful rain. Our concern for the 2021 Brazilian winter corn crop stays at an elevated level with a downward yield bias. The biggest weather and crop risk remains cantered on Parana/MGDS and Goias.

• The cash market and potential Brazilian winter corn crop losses are driving Chicago futures to sharp midday gains. The marching Chicago rally is nearing its initial upside price targets and some caution is advised. This is no place to make new purchases as corn tries to fill a long held weekly chart gap. However, amid US cash markets that are strongly bid, any correction will be modest/well supported. Thus, we stay longer term bullish. December corn will find resistance above $5.50-5.70 until more is known about the 2021 US growing season. Look for more two-sided type of trade on Thursday.

• 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.

• HEADLINES: New crop corn/soybean futures push to new contract highs; Brazilian winter corn crop cuts expected under acute drought; cold temperatures for Plains HRW.

• Midday Chicago futures are mostly higher with a correction underway in oil/meal spreads. New crop corn and old crop May soybeans have been the upside leaders for their own fundamental reasoning. The 2021 Brazilian corn crop is being threatened by acute dryness and a widening yield loss while the ability of US soybean crushers to replace stock is becoming extremely difficult, no matter the amount of the basis push. The contract high for May soybeans is in sight at $14.56 while December corn pushes to new highs. Wheat has been a tag along with traders closely following the midday forecast to gauge how cold temperatures become in the next 2 mornings, and damage to HRW wheat. A firm Chicago close is expected with traders wanting to secure a 5-15 cent break.

• The midday volume of trade has slackened following an active opening. December corn futures were able to push above $5.20 which was acting as early resistance. We see nothing magical about $5.20 December corn with research suggesting that new crop corn as undervalued relative to its fundamentals. New crop corn should pace this week’s Chicago rally, even if US farmers are able to seed more aggressively next week due to warming temperatures.

• Brazilian corn production losses are highly important to US corn exports from August through January. What Brazil suffers from the drought losses will be pushed directly to the US in a new crop export position. The US is the residual supplier of corn to the world.

• The issue is with US 2021/22 corn end stocks near or below 1,000 million bu, there just is no cushion of supply for the US to export an additional 8-15 million mt of corn {relative to losses from Brazil). Somehow the market must embark on a deeper demand rationing rally in new crop corn futures. Therefore, if the Brazilian corn crop is down 9 million mt to 100 million as our weather/yield research would suggest, then December corn futures are undervalued by $0.30-$0.50.

• Since the opening of the Chicago day session, brokers estimate that funds have sold 1,500 contracts of wheat and 2,500 contracts of corn while buying 5,600 contracts of soybeans. Managed money has bought 2,700 contracts of soymeal and sold 2,900 contracts of soyoil. The volume of trade has been modest with the activity expected to pick up just before the close.

• US export inspections for the week ending April 15 were 60.0 million bu of corn, 6.8 million bu of soybeans and 22.6 million bu of wheat. For the respective crop years to date, the US has shipped out 1,545 million bu of corn (up 705 million or 84%), 2020 million bu of soybeans (up 814 million or 67%), and 809 million bu of wheat (even with last year). Last week’s US corn inspections were raised 6 million bu with the weekly average needed to achieve the USDA annual export total being 47 million bu.

• The midday GFS weather forecast is similarly dry across Parana, MGDS, Goias and Southern Mato Grosso for the next 10 days. The forecast has stopped pushing out the prospect of rain forward and is equally dry in the 10-15 day period. The deepening flash drought for Central Brazil will have an adverse impact on winter corn yields. With Brazilian winter corn starting to reproduce in late April and early May, the yield losses could be substantial. And unfortunately, the extended range forecast maintains an arid weather trend in May. The dry season may begin then. High temperatures range from the 80′s to the lower 90′s which are a few degrees above normal. The 2021 crop year is starting to mimic 2005 and 2016 when Brazil winter corn yields plunged 20-30%. Our weather concern is high.

• The market senses a deepening Brazilian flash drought that will severely drop corn yields, which opens the upside for Chicago new crop corn futures. December corn has scored a new contract high of $5.215 while November soybean futures have followed to $12.87. It is going to be cold across the Central Plains tonight with lows in the mid to upper 20′s which raises cold damage for HRW wheat. And there is no meaningful rain for the Dakotas/ Prairies. It is all about adverse weather in a year of shortage!. Adding on top of the adverse weather is that basis pushes of 90 cents over May soybeans is not producing much cash movement from Illinois farmers. The lack of supply worries May soybean shorts ahead of first notice day next week Friday.

• HEADLINES: Chicago firm at midday; NOPOA crush slightly below expectations; GFS weather forecast still too wet in Brazil.

• Midday Chicago grain and soy futures are firm at midday on additional fund inflows and no material change to global weather patterns. The speed of the rally has slowed as input today lacks excitement, but US corn and soy balance sheets continue to tighten, while dryness across Western Europe becomes a more pressing issue in May. New crop Paris milling wheat futures are up €1.50-2.25/mt ($0.05-0.07/bu), with EU corn also adding premium on tight stocks. Spot Chicago ethanol has reached $2.00/gallon. Brazil’s interior corn index has again scored a new all-time record high of 96 Reais/mt ($7.23/bu).

• NOPA-member crush in March totalled 178 million bu, vs. expectations of 179-180 million and vs. 181.4 million a year ago in March. Chicago soybeans neither rallied nor broke following the release of NOPA data, but it remains that pace analysis suggests the USDA’s forecast remains too low. Sep-Mar NOPA crush is up 3.1% from last year, vs. USDA’s projected year-over-year increase of just 1.1%. Soy oil stocks in March totalled 1.77 billion lbs, vs. 1.90 billion last year. Soaring soy oil basis levels keeps crush profitable through summer.

• Corn, soy and wheat export sales were lacklustre. Corn sales through the week ending April 8 totalled 13 million bu, vs. 30 million the previous week. Yet, exporters must average sales of just 3 million bu/week to meet the USDA’s forecast. New crop global feed wheat is offered cheaply, but we maintain that the USDA’s corn export forecast will be met no later than the end of April. Soybean export sales totalled 3 million bu, vs. cancellations of 3 million bu the previous week. Old crop wheat sales were a net negative 2 million bu amid modest cancellations from Japan, Mexico, and S Korea. New crop wheat sales were 10 million bu, vs. 19 million the previous week.

• Yet, there is no sign that China’s need for feed has waned. China last week purchased 24 million bu of US sorghum, a marketing-year high. US sorghum export commitments, mostly to China, now sit at 277 million bu, or 94% of the USDA’s annual forecast. We expect China to secure the bulk of this and next year’s US sorghum surplus. New crop sorghum basis across the W Plains ranges from $0.35-0.65/bu over Dec Chicago corn, which is firm. High corn/sorghum cash prices assure enlarged wheat feeding consumption this summer. Unlike recent years, the US cannot afford to increase its share of world wheat trade amid contracting stocks.

• NOAAs updated May-Jul US climate forecast offers the return of heat to all regions and below normal precipitation to the entire Western US. Drought stays intact across the Dakotas and far Western HRW Belt. And major soil moisture draws are offered to the PNW, which is an issue for white wheat amid growing demand.

• Dryness across the Dakotas and PNW takes centre stage into early summer. Both regions combined are sizeable suppliers to the west coast export market. Confirmation of drought/yield loss bodes even more favourably for interior Central US basis levels.

• The midday GFS weather forecast is much wetter across Mato Grosso do Sul and Parana in the extended range period. The GFS forecast advertises cumulative rainfall there of 2-4″ April 25-27, which if realised would stabilise soil moisture ahead of pollination. However, the GFS forecast has been much too wet in Brazil since the end of winter, and EU and Canadian ensemble models must back up this wetter change. In the near-term, Brazilian rainfall stays confined to Mato Grosso and pockets of Goias. Drought worsens elsewhere.

• Bull markets must be fed constantly but regional global weather issues and the need for record N Hemisphere production offer strong support on price breaks. Risk trends to the upside until late summer. Corn remains the leader of the global ag space on tightening exportable supplies.