3 May 2022

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  • HEADLINES: Chicago rally fails on fund risk reduction ahead of US central bank rate hike; Week 2 of the Central US weather forecast wet.
  • It is a mixed trading session with Chicago corn trading lower, while wheat and soybeans hold in the green. Wednesday’s forecast Fed increase in interest rates along with uncertain 10–15-day weather forecast for the Central US has Chicago futures trading either side of unchanged. It does not require much volume to push values either up or down. We see the Chicago corn break as consolidative at an historically high price as the market awaits the US Central Bank decision on rates and what is the long-range weather forecast. US spring planting progress is going to be delayed and time is running short, but no one wants to push the panic button until closer to May 10. Late planted corn/soybean crops do not produce record yields. The May WASDE is likely to use a US corn yield that is 4 bushels/acre above last year’s record at 181 bushels/acre. We see a 2022 US corn yield above last year’s record 177 bushels/acre as being out of reach. A mixed Chicago close is expected as weather and the US Central Bank’s policies are awaited.
  • Chicago brokers report that funds have sold 2,000 contracts of wheat, 3,200 contracts of corn, while buying 1,500 contracts of soybeans. In soy products, funds are flat in soymeal while being buyers of 3,200 contracts of soyoil. Market volatility is going to be ramping up even more on few resting orders above or below the market.
  • We would not chase Chicago rallies or breaks. A good way to lose money is trading daily momentum into the May USDA Report. End user support lies below the market while profit taking from the longs is capping rallies. The market needs to see a more defined weather problem or find a key supplier like India banning wheat exports (which we expect due to poor yields) to push Chicago values to new rally highs. The risks in Chicago are to the upside, it is just that price is already high, and volume is in decline on the increased volatility. Avoid chasing rallies or breaks.
  • Midwest corn ethanol and soybean crush margins are exceptionally strong with demand for the finished products holding at elevated levels. Soymeal, soyoil and ethanol demand are strong. The structure of the Chicago bull market has not changed with record profit margins for domestic end users, even with cash corn values of $8.00 in corn and $17.00 in soybeans. It is just that the daily Chicago price ranges are expanding as weather enters the price equation. December corn will continue to have solid support below $7.25.
  • Much has been said about the 2022 Indian wheat crop that is now projected near or below 100 million mt due to record heat that occurred from March into early May. Harvest is just getting started, but high temperatures in the lower 100’s has caused yields to fall 7-15%. And Pakistan falls into this same adverse weather category and may have to import record wheat tonnages in 2022/23. Pakistan imported 2.0 million mt of wheat in 2021 and may have to import 4-5 million mt of wheat in 2022/23, a record amount. 2022/23 world wheat supplies are tightening.
  • An active weather pattern holds across the Central US for the next 10-12 days with storm systems passing through the area every 2-3 days. The frequency of the rain further slows planting progress, even in the E Midwest. The storm systems oscillate between the Northern and Southern Jet Streams with 10-day rainfall accumulations of 0.5-3.50”. The rain will maintain a slow planting pace and concern for late seeding and yield drag will be rising. The only good news is that following a cool 4-5 days, temperatures will reach seasonal 60’s/70’s which will aid evaporation rates. However, cooler temperatures return in the 11–15-day period. A fast-moving jet stream without any blockage will cause considerable Central US storminess. Midwest and Northern Plains planting delays will be extended.
  • The US Central Bank has not raised interest rates by more than 0.5% in a single meeting since 1994. The market has been taking risk off ahead of the announcement that comes out Wednesday afternoon. Following the decision, fund managers should get back to adding risk in their portfolios. We see no evidence of a lasting spate of dry weather into May 15 that would allow rapid seeding progress. Our bet is that Chicago values will add weather premium into the weekend.

29 April 2022

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  • HEADLINES: Corn market scores new contract highs; Wheat retreats on Plains rain; China booking US soybeans.
  • Chicago futures are sharply mixed at midday. Wheat futures are lower on the prospect of Plains rainfall next week, while corn futures have scored new rally highs in both old and new crop futures on the same rain delaying planting. And soybeans have rallied on fresh Chinese interest for US July forward soybeans from Sinograin. 3-5 cargoes of new crop US soybeans were sold thismorning. The volume of trade is well down from recent days as traders adjust risk heading into the weekend. Weather has become the dominant fundamental this week and that will now continue into mid-August. The US nor world can ill afford to lose a bushel of production and record tight US stock/use ratios for the summer row crops. We doubt that the selling of wheat/soyoil can be sustained amid tightening world supplies. US SRW wheat is close to becoming the world’s cheapest new crop wheat. The same can be said for soymeal prices relative to corn on a feed value measurement.
  • Chicago brokers estimate that funds have sold 4,800 contracts of wheat and 3,900 contracts of soyoil. Funds have bought 5,900 contracts of corn, 3,200 contracts of soybeans and 2,700 contracts of soymeal. Profit taking in the oil/meal spread and wheat/corn spreads is being felt today.
  • The USDA did not announce any daily export sales today. China purchased as many as 10 cargoes of Brazilian soybeans for June shipment yesterday, with the US Gulf back to being competitive from July forward. There are indications that China continues to seek US new crop corn on Chicago weakness.
  • We estimate that US farmers through Sunday will have planted some 18-19% of their 2022 corn and 12-14% of their soybean intentions. Last year 42% of the US corn crop was seeded through Sunday with the 10-year average being 33%. US corn seeding will continue to badly lag with 4 or more potent storm systems to pass through the Central US in the next 12-14 days. We hear that based on the cold weather forecast for next week, that growers concentrated more on planting soybeans rather that corn. The bigger seeding gains on Monday will be in soybeans.
  • At least half of the world will be celebrating an extended weekend based on the May Day holiday. Also, China and a large share of SE Asia will be out through Wednesday for their Golden Week Celebration. This will limit Chicago volume early next week and produced some selling in Paris wheat on the close.
  • The US Central Bank will be meeting next week and raising their lending rate by 0.5-0.75% on May 4. The increase has been well telegraphed, with US equity futures trading violently on the repricing of risk relative to bond yields. Rising inflation throughout the rest of the world has the flows of funds heading into raw material markets. New corn fund buying was witnessed this morning.
  • E Midwest cash soybean cash bids are bid $0.05-0.15 higher via crushers seeking June forward supplies. With cash crush margins at +$2.80, the big risk to a US crusher is not having enough supply to keep the plant operating at 95% of capacity. US farmers are nearly sold out of old crop soybeans, and crushers and exporters will keep driving up their cash bid to uncover supply.
  • The midday GFS weather forecast offers an active jet stream and 3 storm systems for the Central US in the next 10 days, with a fourth indicated in the 11–15-day period. Cool/wet weather persists with 10-day rainfall totals from the Northern Plains into Missouri and east to Ohio ranging from 1.50-4.50”. Rainfall totals for the W Plains were reduced as the systems were further east and south. Key for next week’s Chicago price is the location and amounts of rain. Midwest planting delays to not afford record yields with a yield drag in corn after May 10 and in soybeans after May 20.
  • Crush demand for June/July/August soybeans is on the rise as exporters and domestic users fight for supply.  The coming cool/wet Central US weather slows seeding, while offering needed rain for Plains HRW. Yet, record heat yesterday really took it out of the HRW wheat crop. Adverse US/Brazilian weather and the ongoing Russian war is bullish of grain. Corn should be the upside leader on Midwest planting delays.
To download our weekly update as a PDF file please click on the link below:

28 April 2022

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  • HEADLINES: Chicago corn scores fresh contract high on wet weather forecast/China demand confirmation; Soybeans leak lower on May liquidation.
  • Chicago futures are mixed at midday. The lack of fresh buying from China has allowed soybean futures to sag, while corn/wheat hold in the green on concerning US and Canadian weather. The volume of trade is well down on prior days, but limited sell orders rest above the marketplace. Brazilian soybean basis bids have declined which has pushed China to secure June soybeans from the Paranagua export corridor. We doubt that the weakness in May soybeans ahead of first notice day will be lasting or deep. A mixed close is forecast with the grains to add weather premium into a wet weekend across the N Plains and the Upper Midwest.
  • Chicago brokers estimate that funds have bought 1,800 contracts of wheat and 1,900 contracts of corn, while selling 2,600 contracts of soybeans. Money managers see any modest break in soyoil futures as buying opportunity with US soyoil stocks in decline on renewable diesel demand.  First notice day against May futures is Friday, no soybeans, corn, soymeal or soyoil are expected to be tendered. If there are deliveries, they will be against Chicago or KC May wheat.
  • The FAS/USDA Weekly Export Sales report held few surprises.  For the week ending April 21, the US sold 1.2 million bu of old and 4.6 million bu of new crop wheat, 34.1 million bu of old and 33.2 million bu of new crop corn, and 17.7 million bu of old and 21.3 million bu of new crop soybeans. As expected, China was the largest buyer of both old and new crop US corn and soybeans.
  • For their respective crop years to date, the US has sold 709 million bu of wheat (down 231 million or 24.5%), 2,264 million bu of corn (down 402 million or 18%) and 2,115 million bu of soybeans (down 129 million or 5.7%). The US soybean sales pace will quickly catch up with last year with a late year push for US supply.
  • We would note that new crop US soybean sales are record large at 395 million bu with corn at 166 million bu. There is a massive 763 million bu of old crop corn and 399 million bu of old crop US soybeans that are sold, but not yet shipped out. A real fight for old crop supply will emerge between US exporters and domestic crushers/ethanol producers in the weeks ahead.
  • The USDA/FAS reported that China booked 1,088,000 mt of corn with the purchase split between old and new crops (476,000 mt of old and 612,000 mt new crop). We suspect that the sale was for privates that had received TRQ’s and purchased Ukraine corn, with that corn unlikely to be shipped. The demand was switched to the US for execution. China has now purchased 14.2 million mt of US old crop corn and 1.56 million mt of new crop. We would argue that China has 1-1.2 million mt of US corn purchased in an old crop position that is reported as an unknown destination. This would boost old crop Chinese purchases of US corn to 16 million mt including the sale announced today.   We iunderstand that China is still asking for new crop corn offers off the PNW in new crop.
  • After being patient, US farmers looking at the wet forecast hit the panic button this morning with planters noted across the Midwest. Farmers feared if they waited too long, that seed would not make into the ground before May 10, the date that yield drag starts to occur. However, the coming cool/wet weather could be equally as damaging to yield with fields reported as too cool and too wet to work. Bean seeding is favoured over corn on their cold tolerance
  • The midday GFS weather forecast offers an active jet stream and 3 storm systems for the Central US in the next 10 days, with a fourth indicated in the 11–15-day period. Cool/wet weather persists with 10-day rainfall totals from the Northern Plains into Missouri and east to Ohio ranging from 1.50-4.50”. the rain is further north than the overnight EU/GFS forecasts and would be more concerning for MN, IL, and IN. It is looking unlikely that US corn/soy seeding will occur on a timely basis.
  • Too cold/too wet for 2022 corn/soybean seeding to be timely and deepening drought for the Brazilian winter corn crop look to keep Chicago grain values supported. Wheat traders struggle as to whether they should pay more attention to the lack of N Plains HRS seeding, or the rain for the HRW wheat crop. Our outlook remains bullish with corn/soyoil the two upside price leaders. The market will look at weather forecasts and add premium for the coming crop risks. Soybean futures are lower on May liquidation and weaker Brazilian premiums.

27 April 2022

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  • HEADLINES: Corn futures push to new highs on China demand; Central US weather forecast too wet/too cold for active planting; Prevent plant for ND.
  • Chicago futures are mixed at midday with corn/soybeans firmer, while wheat sags on the prospect for rain across the drought-stricken areas of the Plains after May 3. Corn/soyoil futures have scored new contract highs amid cash rumours of China securing US July/August corn. May corn futures reached $8.20/bu, the highest price in nearly a decade, while May soyoil futures reached an all-time high of $88.51/lb. First notice day against May futures is Friday and no soyoil, soymeal, corn, soybeans are expected to be tendered. Wheat could be tendered against Chicago/KC futures with a new crop harvest just weeks away. Chicago price trends are bullish with US farmers likely to hit the panic button next week on spring seeding due to the calendar shifting from April to May.
  • We expect a strong Chicago close amid threatening weather for North American spring seeding and the health of the Brazilian winter corn crop. Cash markets are pacing the Chicago advance with seasonal highs not expected until June. We note that any lasting decline hinges upon the production of record large US corn/soybean/spring wheat yields. Anything less just won’t do with 2022/23 end stocks already forecast at or below pipeline levels.
  • Chicago brokers report that funds are buyers of corn, soyoil and soybeans. Funds have sold 3,200 contracts of wheat and a net 400 contracts of soymeal. Funds have bought 5,500 corn, 5,900 soybeans and 4,300 contracts of soyoil.
  • Cash rumours abound that China has booked 1-1.25 million mt of US corn for late summer shipment. COFCO has been active booking barges and seeking US cash corn for July/August export. USDA confirmation of the exact tonnages of purchases is awaited, but US exporters are confident that China has booked US corn today
  • US weekly ethanol production amounted to 283 million gallons which consumed an estimated 99.7 million bu of corn. The weekly grind was up 2% from last week, but the US needs to equal 300 million gallons of ethanol production per week to reach the USDA’s annual target of 5,375 million bu. Rail tanker car shortages are the constraint with variable margins profitable.
  • Argentina’s fob corn basis has scored a seasonal low with 50% of the corn harvest now completed. Last week Argentine corn was offered 10-15 cents below Chicago. Today its offered 10-15 cents over. The quick 20-30 cents in basis confirms strong importer demand and tight-fisted Argentine farm holding of the newly harvested crop. A bottom in Argentine cash corn aids US corn exports with additional basis gains expected as licenses are used up and the Government is slow to issue new licenses on inflation.
  • Midwest farmers appear to be patient in corn/soybean seeding awaiting improved weather (warmth/sunshine/drying). However, as the calendar shifts to May 1 on Saturday, the pressure to plant regardless of conditions will develop and panic planting could take place in less-than-optimal soil conditions. Also, the Plains Wheat Quality Tour kicks off early next week with on the ground HRW yield estimates measuring the severity of the 2022 Plains drought.
  • The midday GFS weather forecast offers an active jet stream and 3 storm systems for the Central US in the next 10 days, with a fourth indicated in the 11-15 day period. Cool/wet weather persists with 10-day rainfall totals from the Northern Plains into Arkansas and east to Ohio ranging from 1.50-4.50”. The rain produces sufficiently wet fields to further slow N Plains/Midwest spring seeding. Some rains will leak into the W Plains, but totals of 0.2-1.00” will not break the dire drought. The forecast is concerning for timely corn/soy seeding before May 10.
  • Too cold/too wet for 2022 corn/soybean seeding to be timely. Prevent Plant dates for North Dakota starts on May 20. Based on existing conditions and the forecast, Northern Plains farmers are out of the fields for at least 2.5 weeks. The next upside target for May corn is $8.43, the all-time high. Soybean futures should also score new all-time highs as old crop supplies tighten and crush margins rest at over $3.00/bu in the cash market.

26 April 2022

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  • HEADLINES: Stats Canada surprise on canola seedings; Northern Plains weather too wet/too cold; Chicago daily limits expand on May 1.
  • Chicago futures are mixed at midday with old/new crop spreads weakening ahead of May’s first notice day. There was selling noted right after the opening tied to the weakening of the US/world financial markets as the DOW fell 500 points. The weakness of the macro-markets caused the algo funds to be grain sellers, which was quickly retraced as crude oil rallied and the Central US weather forecast stayed cool/wet. Old/new crop spreads are weak on active rolling forward by several large funds ahead of first notice day. As Chicago moves into a weather market, fund managers desire to position in new rather than old crop. Nearby cash basis is steady/firm with soybean bids steady to 3 cents higher as Chicago board crush margins push out to new highs. Midwest corn bids are steady to 2 cents higher as ethanol plants look to extend their forward coverage as the weekly grind starts to seasonally increase.
  • We look for a mostly higher Chicago close with new crop corn, soybeans and KC wheat adding premium for the threat of continued challenging planting weather. Also, it is too dry across the HRW wheat areas of the Plains and too cold/wet across the Northern Plains. It will take another 3-5 days before Midwest farmers and 10-14 days before Northern Plains farmers get back to fieldwork and start or restart spring seeding.
  • The USDA reported that 133,000 mt of US soybeans were sold to China with 132,000 mt to an unknown destination in the 2022/23 crop year.
  • Chicago brokers estimate that fund managers have bought a net 2,000 contracts of wheat and 4,200 contracts of soyoil, while selling 2,500 contracts of corn, 3,200 contracts of soybeans, and 5,500 contracts of soymeal. Soymeal fell below some key chart points which accelerated oil share spreading. The only resistance in July soyoil sits at contract highs at $83.12 from Friday.
  • Chicago announced that effective May 1, daily grain price limits will change. The new limits are; $0.50/bu for corn, $1.15/bu in soybeans, and $0.70/bu in wheat (both Chicago and KC). Oat limits expanded to $0.45/bu with the soyoil limit being $0.05/pound while the soymeal limit expands to $30/ton. To the best of our knowledge, this is the first time that Chicago corn daily price limits rest at $0.50/bu and soyoil at $0.05/pound. Margins and option volatility rates will adjust to these new limits starting on Friday.
  • Statistics Canada estimated 2022 seeding intentions for canola at 20.9 million acres, down a sizable 1.6 million acres from last year. This was a big bullish surprise with the trade looking for seedings that were near steady. Canadian oat seeding intentions were 3.8 million acres, up a larger than expected 600,000 acres while Canadian all wheat was up 1.6 million acres with durum acres up 700,000 and spring wheat being up 900,000 acres. Like US farmers, Canadian farmers choose to seed low input cost crops.
  • The sharp fall in 2022 canola acres means that US/world vegoil supplies will stay constrained for another year. Strong soyoil/canola oil prices will prevent soybean/canola from weakening amid heady crush margins. It is shocking that with $17 spot Chicago soybean prices, that crush margin is at record or near record high. No US soybean crusher will be cutting crush, they will just keep bidding cash soybeans higher to secure future supplies.
  • The midday GFS weather forecast is like the overnight run. Heavy rains will continue to batter the Northern Plains and the W Midwest and Delta with 10-day totals of 1.50-3.00”. The rain and ongoing chill will cause issues for seeding and rapid fieldwork. The time is now that Mother Nature needs to start cooperating if there is to be any chance in getting corn/soybean and spring wheat crops seeded on a timely basis. Our seeding concern is rising.
  • The Brazilian winter corn crop is going backwards fast due to a lack of rain and soil moisture during the reproductive phase. And the Plains are either too dry or excessively wet which is knifing US hard wheat production. We maintain a bullish stance based on new crop threats and strong end user demand on margin. New highs in new crop corn/soybean futures are forecast.

25 April 2022

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  • HEADLINES: Chicago corn recovers on cash tightness/planting worry; Midday Central US weather; More rain; China demand for US soy.
  • It is a macro-Monday with sharp losses in world equity prices and worry over China locking down Beijing (and other cities) which would slow commodity demand thereby pressuring Chicago values. Although there is no statistical evidence that world grain demand is slowing, it is the fear of a future recession along with first notice day against May futures that pushed Chicago values lower in morning trade. We doubt that the Chicago break will be lasting or deep.
  • China’s 0% Covid tolerance policy is not working. But the Government does not have an effective vaccination or hospitalisation policy. Yet, Chinese policy makers are not willing to admit Covid feat. And economists argue that China is deliberately locking down large urban areas to lower soaring raw material prices and inflation. Chicago weakness is due to the fear of slowing world economic growth. However, Covid has raised food consumption in impacted countries in 2020/21. Will China’s lockdown raise or lower caloric consumption is the question that is being pondered by traders/fund managers. Our bet is that it will cause hoarding on the fear of the unknown.
  • The supply side of the world grain/oilseed markets is turning more bullish. There are new weather/crop threats for Canada, Brazil, and the US Plains. Canadian Prairie farmers were blasted with snow/rain and cold on the weekend with widespread flooding reported across SE Saskatchewan and Manitoba. The same winter type of weather impacted the Dakotas with farmers reporting that they will be out of the fields for 10-14 days (if it stops raining). Already N Plains producers are talking about accepting the Prevent Plant option amid high input costs and the hefty revenue provided. Rain chances for the drought areas of the W and S Plains are poor and we estimate that US farmers have only seeded 7-9% of their 2022 corn crop, half the normal rate. Temperatures are currently in the 20’s across the Dakota with 30’s extending southward into Iowa/Nebraska. This is not the spring start that farmers were hoping for.
  • The USDA reported that 330,000 mt of US soybeans were sold to China with 66,000 MTs in the 2021/22 crop year while 264,000 mt were for new crop.
  • US weekly Export Inspections for the week ending April 21were 65.0 million bu of corn, 22.1 million bu of soybeans, and 10.6 million bu of wheat. FGIS exports for their crop years to date rest at; 1,373 million bu of corn (down 257 million or 16% less than last year), 1,712 million bu of soybeans (down 257 million or 13%), with wheat inspections at 675 million bu (down 157 million or 19%). We note that US corn Census exports are running above last year through February due to the record Canadian imports of US corn which is not caught in the Monday data.
  • We see estimates that Russia will export 36-39 million mt of wheat in 2022/23, which assumes that Russia will use its full export capacity (question mark?).  We believe such heady export estimates as propaganda by the Russian Government with totals unlikely to surpass their current rate of 1.3-1.6 million mt/month due to the war. The EU is where world wheat demand will be focused on in the new crop position as the Black Sea is hobbled by the lack of insurance and high costs. We peg Russian 2022/23 wheat exports at 18-20 million mt and Ukraine at 4-5 million mt (at best right now), which leaves a hole in world trade of 27-30 million mt that cannot be filled by others, including India, which is facing a smaller harvest on bad weather.
  • The midday GFS weather forecast is like the overnight run. Heavy rains will continue to batter the Northern Plains and the W Midwest and Delta with 10-day totals of 1.50-3.00”. The rain and ongoing chill will cause issues for seeding and rapid fieldwork. The time is now that Mother Nature needs to start cooperating more favourably if there is any chance in getting corn/soybean and spring wheat crops seeded on a timely basis.
  • Macro financial worry tied to China’s Covid lockdowns and May liquidation ahead of first notice day have pressured Chicago values in recent sessions. However, declining US HRW wheat conditions and a slower than desired spring seeding look to push Chicago values to new highs. Stats Canada will be out with its April Seeding Intentions Report on Tuesday. We remain bullish Chicago on price breaks.

22 April 2022

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  • HEADLINES: Chicago falls on “sell the fact” trading on US corn export sales; Dry season starting early for Brazilian winter corn; Dow falls sharply.
  • Chicago futures are lower shrugging off bullish demand news (new US corn sales to Mexico/China) to trade lower into midday. Soyoil futures has been able to hold opening gains, but corn, wheat, soybeans, and soymeal are trading in the red with double digit losses occurring in corn.
  • Chicago corn/soybeans had become overbought and subject to bouts of profit taking as seed enters the ground. The shift in the market’s focus from old to new crop is ongoing, and the chance for another sizeable harvest at high April price levels causes corrections.
  • However, as the world’s largest palmoil producer/exporter (Indonesia) showed, it is price/supply for consumers that pushes politicians to make harmful trade decisions. Unfortunately, we anticipate that other exporters will fear food inflation and try to boost their own food security through restrictive trade policy. Indonesia worries about spot palmoil shortages for its population, which is strange when its domestic consumption falls short of exports by 9 million mt. The Indonesian palmoil export ban will be short lived lasting between for between 3 weeks to 3 months, but its damage to its trade reliability will be lasting. We look for a mixed to lower Chicago today with selling extending into next week with Midwest seeding pace to gather steam. Chicago should bottom right before or after the May WASDE report as USDA stays conservative.
  • Chicago brokers report that funds have sold 9,500 contracts of corn, 1,200 contracts of wheat, and 6,600 contracts of soybeans. In the soy products, funds have bought 6,200 contracts of soyoil while selling 5,300 contracts of soymeal.
  • FAS/USDA reported that Mexico/China were buyers of US corn. China booked 1.35 million mt of US corn split between 735,000 mt for delivery for the 2021/22 crop year and 612,000 mt for new crop. Mexico booked 281,000 mt with 90,200 mt for old and 190,800 mt for new crop. The combined sale of 1.631 million mt marks one of the biggest daily sales in months. However, additional old crop US corn sales to China could be limited with their future demand positioned in new crop. We calculate that China has now purchased 15.5-16.0 million mt of US old crop corn including what is being held in an unknown destination category.
  • The dry season appears to have started 2-3 weeks early across Northern and Central Brazil which is causing Brazilian farmers worry over winter corn yield potential. 65% of the Brazilian corn crop is in the formative reproductive stage of development (pollination) which is likely to cause yield losses of 5-15%. A 5% yield loss amounts to 3.0 million mt with a 15% loss equating to 8.5 million mt. We are now using a Brazilian winter corn crop range of 79-85.5 million mt. From existing analysis, the best that Brazil can expect is a total corn crop of 108 million mt which is down 8 million from the WASDE April estimate. A crop fall of 8-15 million mt is highly important to the world corn market when Ukraine corn is mostly locked out from the world importers.
  • The US stock market (DOW) has declined over 600 points as the market thinks ahead to May 4 and the next Fed meeting where a 0.5-0.75% rate hike is expected. Rising rates and the Russian war against Ukraine is slowing world economic growth. We doubt that slowing GDP rates will cause world food demand to subside, but there is a risk to high end foodstuffs like the middle meat cuts in beef/pork. The last time that the US Central Bank has raised its lending rate 0.75% was back in 1994.
  • The midday GFS weather forecast is further south and further north with rain/snow (Dakotas/MN/WI) than the overnight run. The forecast is also cooler with North Dakota to endure several episodes of snow. The Plains hold in an arid trend with limited rainfall and a deepening drought. Cold air is indicated during the 11–15-day period which will slow germination rates. The forecast allows seeding across IA, IL, and IN, but the Delta and Northern Plains will be challenged.
  • May Chicago options expire at the close while the rain/snow across the N Plains produce challenging seeding conditions. Soyoil futures have pushed to record highs on the Indonesian ban of palmoil. However, Russia appears intent on capturing E and S Ukraine, which could be problematic for Ukraine exports longer term. Our Chicago stance stays bullish on sharp corrections.
To download our weekly update as a PDF file please click on the link below:

21 April 2022

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  • HEADLINES: Chicago prices sink as longs book profits; US farmers to accelerate seeding in coming days; Argentine corn extremely cheap.
  • Chicago futures are lower at midday as new investment inflow slows and farmers start planting summer row crops across the Western and Eastern Midwest. Getting seed into the ground is not particularly bearish, but the Central US weather pattern does not offer lasting seeding or germination delays. 2022 US corn and soybean seeding progress should run slightly behind normal, but such seeding does not suggest any drag on yield.
  • Chicago is increasing its focus on new crop production/yield, but you cannot lose a crop until it is out of the seed bag. If you are NOT going to see widespread extreme wet weather, the market risk points to a correction from record or near record high prices with the US Central Bank to raise rates in early May, a bottom could be formed after the May WASDE Report. WE would expect that the USDA will be conservative with their assessment of export flows due to the Russian war against Ukraine.
  • We note that a lasting bearish trend is not expected. However, bull markets need to be fed and US export demand for wheat/corn is expected to be modest due to S American fob offers. Argentina is offering May corn at $1.20 under the US Gulf. Even Brazil is offering corn far cheaper than the US well into September. Brazil is offering fob corn at 30 over for July (vs US Gulf at $1.00 over), with August at $.50 over (vs the US Gulf at $1.35 over).
  • Chicago brokers report that funds have sold 4,900 contracts of wheat and 6,500 contracts of corn, while buying 2,900 contracts of soybeans. In the soy products, funds have bought 3,200 contracts of soyoil while selling 2,100 contracts of soymeal.
  • FAS/USDA reported that for the week ending April 14, the US sold 1.0 million bu of old crop and 8.8 million bu of new crop wheat, 34.6 million bu of old crop and 15.3 million bu of new crop corn, and 16.9 million bu of old crop soybeans and 45.6 million bu of new crop. Wheat and corn sales were less than expected, while new crop US soybean sales were larger than expected.
  • For their respective crop years to date, the US has sold 708 million bu of wheat (down 224 million or 24%), 2,230 million bu of corn (down 415 million or 16%), and  2,097 million bu of soybeans (down 137 million or 6%). China was the big buyer of US corn last week taking just over 1 million mt in both crop years combined. 9 million bu of US corn sales were cancelled from an unknown destination. Future US corn sales look to slow on the cheapness of S American corn.
  • Exporters report that China booked 3-5 cargoes of US soybeans off the PNW for October/November. Old crop demand has slowed based on price and sliding domestic crush margins within China. Chinese crushers are tepid in making old crop purchases due to the fear of spreading Covid lockdowns and a slowing economic outlook. The Shanghai port is already clogged which accounts for 20% of China’s import/export capacity. Uncertainty of logistics slows imports.
  • The US 10-year note has pushed near a 3.0% yield which offers the first favourable return for investors vs. the US stock market. The US Central Bank will be raising interest rates on May 4. The hike in rates will sustain the US$ with financial headwinds for commodity values. We look for the FED to raise US fed funds rate by 0.5% in May and the June meeting.
  • The midday GFS weather forecast is further south and further north with heavy rains (AR/Western Dakotas) than the overnight run. The Canadian Prairies will also enjoy some welcome rainfall. The forecast is warmer over the next 2 week with cold Canadian air being lifted northward. Seed will enter the ground, but the dire Plains drought looks to worsen.
  • Bulls need to be fed, and there is just nothing that is fresh on export demand or the weather front.  S America is offering corn cheaply to world feed importers. The 90-day outlook from NOAA offers a deepening drought for the Plains and the W Midwest, but that is too far out in the future to position for until corn/soybean crops are planted and beyond the May WASDE report. We see a choppy and sideways market, don’t chase rallies. There will be a time to reload long positions on Chicago grain.

20 April 2022

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  • HEADLINES: Chicago futures rally as shorts purge positions in May futures ahead of options expiration Friday; Wheat lags on US non-competitive position.
  • Chicago futures are mixed at midday with corn, soybean and wheat futures trading either side of unchanged. July corn has taken out the overnight low and the high on expanding volume at midday. The upside reversal pattern in corn is helping to buffer yesterday’s lower close after scoring new contract highs. May soybeans are back to testing their contract highs with the $17.59 March high looming as an upside target.
  • The fundamental bull market, wheat, has been the day’s dog as the charts turn down and US wheat is non-competitive in world trade. The drought is ongoing, but Paris wheat futures closed lower which is pressuring Chicago. It is the EU wheat market that traders are focusing on. Wheat needs to be rising if the entire Chicago floor is to push to new contract highs.
  • It does not require much volume to push Chicago valuations either higher or lower amid the lack of resting orders. We would note that Chicago trends are up and algo momentum buyers will push the “green” button based on prevailing price trends. Until the market pushes back against the Algo traders, the momentum buyers will keep Chicago values well supported. We look for a mixed Chicago close and that one must be careful about chasing and buying this rally effort.
  • Chicago brokers report that funds have sold 3,100 contracts of wheat, while buying 4,500 contracts of corn and 5,100 contracts of soybeans. In the products, managed money has bought 2,100 contracts of soyoil and 1,900 contracts of soymeal.
  • US exporters report that China has booked 3-5 cargoes of US soybeans off the PWN with 1 cargo sold from August and the remining 2-4 cargoes sold for September/October. The Gulf has been quiet with only nominal interest. Importers and end users are only booking what they immediately need amid the hope for improving Northern Hemisphere weather, getting seed in the ground, and weakening cash bids. US cash basis bids for corn/soybeans are weakening in the E Midwest. Ethanol producers, soybean crushers and livestock producers have positive margins, but $8.00 cash corn and $17.50 cash soybeans are causing altitude sickness for short bought end users. It is the cash short that will place the seasonal top in Chicago futures.
  • US ethanol production slipped to its lowest level since September amid the lack of rail cars and tankers to move supply. The cut in rail availability is having a negative impact on US ethanol weekly production. US ethanol stocks are in retreat on the smaller production.  US weekly ethanol production was off 278 million gallons vs 293 million gallons last week and slightly above last year. The US now needs to produce 300 million gallons per week to reach the USDA annual corn grind forecast of 5,375 million bu. We will be adjusting our 5,400 million bu grind lower due to the deepening rail issues and tightness in rail car availability.
  • The midday GFS weather forecast is further south and further north with heavy rains (10 day amounts) which will allow for spring seeding to expand in the middle (NE, IA, IL and IN). The Canadian Prairies need the rain as does North Dakota, but it would be better that the rain occur after the crop is planted. The forecast is warmer over the next 2 week with cold Canadian air being lifted northward. Seed will enter the ground, but the pace will not catch up to normal and the dire Plains drought looks to worsen.
  • It is all about being short in May corn/soybean futures. Option expiration on Friday and the coming first notice day (April 29) is spurring shorts to exit May futures and replace their sales in a new crop position. This is pushing bull spreads and the front end of corn and soybean futures. Speculative inflows are modest, and we would not chase (buy) corn/soy futures on the midday rally.

19 April 2022

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  • HEADLINES: Chicago speculative inflows slow-grain values decline; Soy futures rise in thin volume trade, meal/oil spreading featured.
  • It has been a mixed morning in Chicago with corn, soybean and wheat futures trading either side of unchanged in moderate volume. Wheat has been the downside price leader with Chicago posting double digit losses, while soybeans hold in the green on fresh Chinese demand. Chicago has a corrective feel with profit taking capping rallies and the Midwest planting outlook determining price direction late week.  We forecast a mixed to slightly lower close with the inflow of capital into the markets being much less than Monday. It is the inflow that has become so key to Chicago directional trade since mid-January. With WTI crude oil futures down over $5.00/barrel and the IMF cutting Chinese and world growth rates, the market is trying to decide if price is starting to ration demand. Our current view is that price is not yet high enough with ethanol and crush margins in the green, but the slowing of China’s economic outlook must be closely monitored.
  • Chicago brokers estimate that funds have sold 3,200 contracts of wheat, 2,800 contracts of corn, and 3,100 contracts of soybeans. In soyoil, managed money has sold 3,100 contracts of soyoil, while buying 1,900 contracts of soymeal. The meal/oil spread is back in vogue this morning with crude oil in decline.
  • FAS/USDA reported that an unknown destination booked 123,650 mt of US old crop soybeans. There are also rumours that China continues to seek new crop cargoes off the PWN. Talk of fresh US Chinese corn demand has subsided for now, as US prices rise import margins are barely profitable.
  • Questions abound for economists on China’s economic outlook as the Government sticks to a 0% Covid tolerance. Daily Covid cases rose to 31,403 yesterday, against a 7-day average of 27,353 infections. China is locking down areas were new covid infections are found which depresses raw material demand, including food consumption. Some argue that China is locking down their population to control inflation, not covid, but there is no way to confirm or test this hypothesis. Either way, the IMF cut China’s GDP forecast for 2022 to 4.4%, the lowest in decades. The covid lockdowns also produce fresh supply chain issues which will cause the US Central Bank difficulty in fighting inflation. The 0% Covid fight is causing widespread talk of stagflation in early 2023 with world demand in decline while price rises are ongoing. This would raise the odds that the world or US slips into a recession.
  • We doubt that US farmers will be ploughing up hay/grass land to plant summer  row crops as the availability of hay acres is the lowest since 1907. And the profit margins on hay are historically high. Moreover, most producers of hay need it for their own livestock. The point is that it is Mother Nature that will have the biggest impact on crop seeding determination with the pie of seeded farmland unlikely to rise much above 181 million acres of corn/soybeans combined.
  • The midday GFS weather forecast is heavier with several rain systems that pass from Missouri into the E Midwest. The midday forecast is wetter across IL/IN and OH with 1.50-3.00” to further delay spring seeding. Other areas should be able to start turning wheels later this week and weekend, and progress will be scored, but another Canadian cold shot impacts the E Midwest next week. The 10–14-day forecast is drier with warming temperatures which looks to produce a window for widespread spring seeding. The warm/drier pattern change must be pulled forward in the forecast, but late April and early May offers improving weather conditions for planting.
  • It is all about new investment inflows. When new fund inflows stall or are diminished, Chicago valuations soften. There was a block trade this morning in Dec ‘24 corn for 1,500 contracts that was completed at 2 cents over which bolstered the back end of corn. Nearby corn futures are sagging on weakening cash basis bids amid the prospect that Midwest seeding will get fully underway in late April. The US Central Bank will be meeting in early May to raise interest rates to fight inflation. We stay longer term bullish, but values have reached our intermediate upside targets and need a weather driver to score new highs.