8 July 2021

Posted on July 8, 2021 by simon

• HEADLINES: Chicago trades lower with wetter midday forecast; Key support in Dec corn below $5.20 and November soybeans below $13.

• Chicago futures are lower at midday with soybeans/soyoil the upside leaders with wheat/corn in decline. The CONAB Brazilian corn production estimate of 93 million mt was above private estimates, but in line with expectations. Rain is forecast to drop across Iowa on the weekend, but so far this week’s rainfall for the N Plains and the Upper Midwest has been disappointing. The weekly drought monitor portrayed a deepening drought across the Northern Plains and the Western Midwest. The dire nature of the W Midwest/Northern Plains drought implies that regular rainfall will be required through the remainder of the crop year. And with corn pollinating in the area, the number of rows around the cob may be compromised. We doubt that corn/soy/wheat futures have a lot of additional downside price potential with next price move determined by whether a high-pressure ridge setting up across the lntermountain West adds to existing drought conditions across the N Plains and W Midwest. The record large US corn yield is 176.6 bushels/acre, you do not make record yields without all primary Central US crop areas enjoying a favourable summer growing season.

• Chicago brokers estimate that funds have sold 3,200 contracts of corn and 2,100 contracts of soybeans, while buying 1,400 contract of Chicago wheat.

• Cash premiums for old crop corn/soybeans are firming (again) on tightening supplies and the need for quality. As farmers sweep the bottom of their bins, they are running into more off quality corn and soybeans. The ongoing strong US corn export program demands additional quality corn to fulfil Chinese purchases. There could be a spike or final push in cash corn and soybean basis in coming weeks unless the cash pipeline is able to uncover greater supply.

• CONAB admitted that its Brazilian corn production estimate at 93 million mt is from field data that is 20 or more days old. This means that none of the frost/freeze damage of last week was in the total, and the sharp falloff in recent harvested corn yield in Mato Grosso/Goias from late seedings was also missed. We currently stand by a final Brazilian corn estimate of 84-86 million mt in September as additional harvest data is available.

• US weekly ethanol production was record large for initial week in July and was 2% above 2019. And US ethanol stocks fell to 885 million gallons, which is up 2% on last year. Americans consumed a record amount of gasoline over the July 4 holiday. The US ethanol weekly production total to validate the USADA is 294 million gallons/week. This past week, the US produced 314 million gallons which consumed an extra 7 million bu of corn. The USDA 2020/21 US corn grind estimate remains too low by 45-65 million bu.

• The midday GFS weather forecast i s wetter in Eastern Iowa this weekend but is otherwise consistent with prior output. Steady rain arrives to the Central Midwest beginning Friday and persists into Monday, with accumulation of 1-3″ to be spread across the entirety of Iowa, Illinois and Ohio. The midday GFS forecast also indicates a secondary system across Central and Eastern Midwest next Thurs-Sun, which produces similar totals across Missouri, Illinois and Indiana. The Eastern Midwest will not be wanting for water into late month, though low-level flooding remains an issue in pocket of IL/IN. Net soil moisture loss resumes across the Plains and Minnesota. Record corn/soy yield remain unlikely.

• The market’s exclusive focus on rainfall continues into August. The pace that newly harvested crops are used determines fair value in autumn/winter. Our thesis remains that production fails to match consumption in 2021 amid historic Brazilian corn yield loss and the return of Chinese soy demand in bulk beginning late summer.

7 July 2021

Posted on July 7, 2021 by simon

• HEADLINES: Chicago corn bounces from key $5.20 Dec support; Midday forecast drier for E Midwest with high pressure ridge in extended range; CONAB Thursday.

• Chicago grain futures are lower while the soybean market hangs in the green on end user pricing and active soy/corn spreading. December corn has fallen back to last week’s low which completely erased last week’s NASS Stocks/Seeding rally. Soy futures are holding firm on US soymeal export demand while wheat futures sag following corn. The USDA July Crop Report will be released on Monday, but traders are focused on Central US weather and the rain that is projected to fall from Iowa eastward. Traders have been very focused on Central US weather.

• We note that crude oil and a host of other commodities turned lower this morning, which is sparking a “risk-off” trading mentality. Funds appear to be exiting risk in a host of commodity markets which is a bearish Chicago undertow. August crude oil futures has fallen back to $71.07 this morning, which was down over $2/barrel. Lumber prices have reversed early day gains while the US$ rallies and tests the April high. It is the strengthening US$ that has acted to pressure a host of commodities. The upside price target for the greenback is a test of $93.50, the March high. Strong resistance is offered between $94-95.00 for the US$ Index, the late 2020 high.

• CONAB will be out with their updated Brazilian corn and soybean estimates on Thursday. Of focus will be the winter Brazilian corn crop estimate following the hard freeze of last week. Most of the cold weather damage will NOT be calibrated in tomorrow’s corn yield estimate, but key states like Parana, Mato Grosso Do Sul and even Mato Grosso have been cutting their respective state production estimates that add up to a final Brazilian corn crop as low as 84-86 million mt. Brazil’s corn estimate is in decline based on harvested yield data. The Parana cuts are so large that Southern Brazil will face an acute corn shortage with prices rising sharply. In fact, speculation is growing if the Brazilian Northern Arc may have to export corn to Southern Brazil to ease their acute feed shortage. For now, the function of the Brazilian corn market is to rally interior cash corn prices to levels that are well above export and shift Brazilian corn demand to the US/Ukraine. A Brazilian corn crop of 85 million mt would sharply curtail their annual corn export program by 8-13 million mt. The problem is that the world does not have the corn to make up that difference. The USDA US 2021/22 corn export estimate needs to rise from 2,450 million bu to at least 2,850 million bu. This would drop US 2021/22 corn end stocks closer to 1,100 million bu without a change in old crop US corn end stocks and adding in the additional 1 million harvested acres found in last week’s NASS report. This would use a US corn trend yield of 179.5 bushels/acre.

• The GFS weather forecast is like the overnight run, except that meaningful heavy moisture across Iowa will be south along the Iowa/Missouri border. This heavy rain will then push into Illinois/Indiana early next week where some localised flooding could occur. Soils here are saturated and need more time to dry down following the 5-12″ of rainfalls of 10 days again. However, the forecast is broadly drier for the S and E Midwest with rain totals being some 1-2″ less than the overnight run. N Illinois and Southern Michigan are the new “bullseye” for soaking rain. Mild summer temperatures persist for the next 7-8 days before warming returns as a high-pressure ridge elongates across the Central US. This is the first strong high-pressure ridge across the Central US in the crop season to date. It will be closely monitored by traders heading into the weekend.

• Leftover speculative selling pounded Chicago corn early in the day, but the market is recovering and holding its 100-day moving average. The weather models keep reducing rain for the N Plains/Minnesota which adds concern for 2021 US corn/soy yields. Near perfect weather is needed for trend E Midwest corn/soy yields based on the acute dryness of the N US Plains/W Midwest. We are bullish looking for new contract highs in corn and soybeans.

6 July 2021

Posted on July 6, 2021 by simon

• HEADLINES: Chicago posts limit losses on massive fund liquidation in corn/soyoil; Midday GFS weather forecast knifes rainfall for Iowa/Minnesota/Dakotas next 10 days.

• Chicago futures are sharply lower to limit down at midday with corn futures trading at the limit 40 cents down in new crop futures. Wheat and soybeans have followed corn with sharp daily losses with KC wheat futures falling back to under $5.80 basis September. Emotions are high with liquidation with December corn futures said to be trading 7-9 cents below the limit. The daily limit in soybeans is $1.00/bu and November has witnessed losses of $0.97/bu. KC wheat futures are at their lowest levels since March, even amid the massive loss of US/Canadian spring wheat crops.

• Chicago rallied to sharp limit up gains last Wednesday following the USDA June Stocks/Seeding Report. Today’s break has nearly taken back most of those gains amid the emotional weather selling of the morning. We well understand the need and timing of rain for the W Midwest and the Northern US Plains, but the top end of the US corn/soy yield has been lost due to extreme heat/weeks of dryness in the Dakotas, Minnesota, and much of Northern Iowa. Rain will produce stabilisation, but again remember that the record large US corn yield is 176.6 bushels/acre, and even with rain, it is difficult to forecast a US yield larger than 177.0 bushels/acre. Chicago is too cheap relative to fundamentals and coming demand.

• Chicago brokers estimate that funds have sold 24,000 contracts of corn, 19,000 contracts of soybeans, and 12,500 contracts of wheat. In soy products, funds have sold 8,500 contracts of soyoil and 7,700 contracts of soymeal.

• US weekly grain export inspections for the week ending July 1 were; 48.7 million bu of corn, 7.6 million bu of soybeans, and 9.5 million bu of wheat. For their respective crop years, the US has exported 2,289 million bu of corn (up 936 million or 69%), 2,110 million bu of soybeans (up 737 million or 54%), and 65 million bu of US wheat early in the crop year. We would remind that Census corn exports are 173 million bu ahead of FGIS at the end of May, so adding this on top of FGIS produces a crop year total of 2,462 million bu. With just under 9 weeks remaining in the 2020/21 crop year, the US must average 43.1 million bu/week to reach the WASDE target. We forecast a total close to 51 million bu/week or a total of 2,925 million bu.

• US farm sales have shut off on the Chicago decline. N Plains farmers want to see the rain in their gauges before making any new sales. And domestic end users in Brazil are frantically using the Chicago break to make forward cash corn purchases. There is a growing concern in Brazil that winter corn crop will not make the quality with supplies to dramatically tighten on last week’s freeze. Brazilian cash corn prices have rallied sharply in recent days and are not following Chicago sharply lower this morning. It is demand for US corn/soybeans that will be the bull driver once the supply selling is completed. Resting orders in the market are becoming increasingly difficult to uncover.

• The midday GFS weather forecast is much warmer/drier for the Western Midwest and the Northern Plains compared to what has been offered in recent runs. The GFS midday forecast slashed Iowa rainfall by 1.5-2.0″ with 10-day totals now around 0.6-1.25″. That amount of rain is not going to alter or help declining soil moisture. And the 6–10-day period is warmer with high temperatures returning to the upper 80′s to the mid 90′s. The GFS would maintain a dire drought across the N Plains and the NW Midwest into July 20. Any heavier rain is offered for Missouri, the southern half of Iowa and the Ohio Valley. Hurricane Elsa veers inland across Sarasota tomorrow after raking the Florida’s Western Peninsula with tropical storm force winds. The EU model has been trending drier, but the midday GFS forecast is a concern for a deepening drought across the N Plains and W Midwest. This is not the rain that would end a drought.

• “Student body right/Student body left” produces acute Chicago volatility with combined corn, soybean, and wheat open interest now back at levels not seen since September. The Brazilian corn crop losses are adding up in a world that is increasingly tight of grain. We see no reason to back away from our bullish outlook with new contract highs forecast. End users should use this break to extend forward coverage well into 2022.

2 July 2021

Posted on July 4, 2021 by simon

• November Canadian canola futures soared to contract highs on the increasing drought stress that is being placed on the crop. This week’s extreme heat, wind and dryness will knife Canadian crop ratings next week. And the forecast is arid/warm for another 2 weeks.

• Time is running out for drought stunted Canadian crops which are starting their reproduction phase. Ongoing dryness will have a sizeable negative impact on N American oilseed/grain supplies.

• Canola oil can be used in US biodiesel production while Chinese import demand is record large. The loss of Canadian canola comes at a time when world vegoil stock/use ratios are at record lows, maintaining bullish price trends.

• Soybeans traded quietly ahead of the holiday weekend and marked strong weekly gains at Friday’s close.

• May soymeal exports were reported at 1.05 million short tons, 97% of last year but right in line with the 5-year average. Weekly FAS reporting showed a sharp decline in soybean meal exports through June, as S America ramped up production and exports. Based on the FAS data, we estimate that June meal exports fell below 1 million short tons for the first time since June 2019. Nevertheless, cumulative meal exports at 10.8 million tons will be the largest since 2014/15.

• S American basis has rallied sharply in the last month, raising the odds that the US picks up additional late summer soymeal export business.

• This week’s USDA reports showed old crop stocks were tighter than expected, and farmers did not expand their acreage. This places greater importance on the need for a national yield above 50 bushels/acre and supports November soybeans above $13.75. A late summer weather problem could drive November back to $16 (or higher) amid an acute need to ration demand.

• Dec Chicago corn ended 11 cents lower as Trump’s summer E15 mandate ended for the summer of 2022 and as very light showers are probable across the drier areas of eastern Nebraska and Iowa next Tuesday-Thursday. Rainfall there of 0.25-0.75″ will not materially alter soil moisture and more important over the weekend is whether a pattern of heat/dryness persists across the Plains and W Midwest into the second half of July. Model guidance on Sunday afternoon/Monday morning will begin to peek into post-July 15 precipitation and temperatures.

• We have reduced 2020/21 US corn exports to 2,925 million bushels. However, this is still 75 million above USDA’s forecast, and ethanol’s demand draw in May was revealed at 448 million bushels, a post-Covid high. June ethanol use is pegged at 445 million. Similar disappearance is expected in Jul-Aug, which suggest USDA’s industrial use forecast is 25-40 million bu too low. And US feed/residual use will also be raised 50 million bu. Today’s E15 decision does not impact US corn demand longer term.

• The market trades weather exclusively into late month. Our bet is that a pattern of stagnant heat/dryness persists across the Plains amid deeply negative soil moisture anomalies. Breaks early next week are buying opportunities.

• US wheat futures ended mixed, with Chicago/KC contracts down 13-21 cents and spring wheat futures firm. Downside in spring wheat futures is severely limited as N American yield potential erodes further. We expect the US winter harvest to reach 50% this weekend. Stocks peak in the weeks ahead and supply pressures ease beyond mid-July. We also note that interior HRW basis remains firm despite the advancing harvest. Wheat-specific news on Friday was absent. The market follows corn and soy more directly as row crop reproductive periods lie just ahead. Sep KC’s premium to Sep Chicago corn is a weak $0.27 per bushel, and recall KC does not trade below corn for any length of time. Managed funds were flat in Chicago on Tuesday, and the risk is that substantial new buying emerges if soaking rain and cooler temperatures fail to materialise across the Plains and NW Midwest.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 2 July 2021

1 July 2021

Posted on July 1, 2021 by simon

• HEADLINES: Chicago corrects early day gains on windfall profit taking; Midday GFS/Canadian weather forecasts dry for Plains/NW Midwest; US export sales poor.

• Chicago futures are correcting early morning gains on windfall profit taking. The morning selling is occurring as the bulls accept windfall gains following Wednesday’s NASS USDA Report. The coming 3-day weekend and uncertainty of US weather which includes a tropical storm has pushed the bulls into taking some risk off the table. We expect a higher Chicago close on Thursday and see the morning break as a buying opportunity. An open chart gap rests at $5.885 in December corn which offers initial support with key support at $5.81. November beans will be underpinned below $14.00, while September Chicago wheat holds $6.75.

• Corn, soybean, and wheat futures are trading mixed at midday. Minneapolis wheat is the bear leader. The Minneapolis/KC spread has reached out to historical resistance at a $2.20-2.30 premium which has sparked a correction. Spring wheat has reached spread levels that entice end users to switch to other protein wheat classes, such as hard wheat from the Central Plains. We doubt that flat prices of spring wheat have scored a top as domestic and export demand is highly inelastic. Any fall back to $8.25 basis September Minneapolis wheat would be seen as a new buying opportunity. We doubt that any Chicago futures can endure a lasting price break until late summer.

• Chicago brokers estimate that funds have bought 3,200 contracts of soybeans and 3,100 contracts of soymeal, while selling 3,000 contracts of soyoil, 4,000 contracts of corn and 3,000 contracts of wheat. Managed money was active buyers overnight and then turned sellers on waning upside momentum. End users have used the break to extend their forward coverage.

• The export sales report indicated that that for the week ending June 24 the US sold 8.3 million bu of wheat, .6 million bu of old and 2.7 million bu of new crop corn, and 3.4 million bu of old crop and 61.4 million bu of new crop soybeans. The sales totals for US corn, wheat and old crop soybeans were bearish. The new crop soybean sales were noticed in the daily reporting system and bullish.

• For their respective crop years to date, the US has sold 235 million bu of wheat (down 28 million or 8% from last year), 2,738 million bu of corn (up 1,072 million or 64%), and 2,272 million bu of US soybeans (up 625 million or 38%). We expect that US corn, soybean and wheat sales increased last week on the market decline as exporters added forward coverage ahead the NASS June 30 report.

• Russian interior grain markets are poorly defined with farmers unwilling to sell their new winter wheat harvest. Russian farmers appear willing to store their initial wheat cuttings awaiting a higher cash price, rather than having to participate in the floating weekly export tax. Russian President Putin claimed yesterday that the floating export tax was working and prevented Russian flour prices from rising to even higher levels.

• The midday GFS weather forecast offers limited rainfall for the Northern US Plains, the Canadian Prairies, and the NW Midwest into Sunday July 11 . A weak frontal pass on July 7-8 looks to produce a few light showers, but outside of S IA, rainfall totals will be limited to less than 0.4″. The remainder of the area is arid with rising temperatures. Hurricane Elsa veers inland across Sarasota on July 7 after raking the Western Peninsula with hurricane force winds. Elsa then curves NE to the North Carolina and returns to tropical strength as it returns into the Atlantic. The GFS forecast has Elsa as a strong hurricane that must be closely monitored. The storm will cause an eastward shift in the Western US high pressure ridge to the lntermountain West and the Western US Plains which will produce numerous days of 90′s across the Plains/W Midwest. This remains a concerning weather pattern for the N Plains, W Midwest and Western US and yield reductions are likely.

• Bullish US and world grain stocks will underpin Chicago heading into the USDA report on July 12. A deep cut in the Brazilian corn crop will raise US 2021/22 corn exports. And the USDA will very likely cut harvested acre estimates from NASS to account for the ongoing N Plains and NW Midwest drought in corn, soybeans, and spring wheat. We doubt that the USDA will lower yields until crop conditions decline deeper. The risks vs rewards are stacked strongly in the favour of the bulls with $7.50-8.00 corn possible with any US corn yield loss below 175 bushels/acre.

30 June 2021

Posted on June 30, 2021 by simon

• HEADLINES: NASS Reports bullish for Chicago corn/soybeans; Combined 2021 US corn/soybean acres just 180.3 million; June stocks close to trade estimates.

• The June NASS Stocks & Seeding Reports were bullish for US corn/soybeans with Chicago posting sharp to limit up gains. The only bearish surprise was wheat including a slight increase in new crop seeding. The June Stocks/Seeding report raises weather/yield risks for the remainder of the summer and opens the market to further gains.

• NASS forecast US June 1 corn stocks at 4,112 million bu, 18 million bu decline from trade expectations, and the lowest US June stocks total in 8 years. We calculate the Mar-June feed/residual use at 882 million bu, down 109 million bu from last year. The Sept-June 1 2020/21 feed/residual use is pegged at 5,509 million bu, up 118 million bu from last year (+2%). USDA is forecasting a 197 million bu decline in US feed/residual for the 2020/21 crop year or -3.3%. The USDA should raise their 2020/21 US corn feed/residual use rate by 50 million bu in the July report.

• US June 1 soybean stocks were 767 million bu, down 6 million bu from trade estimates and down 614 million bu from 2020, the smallest since 2015.

• The March-June US soybean residual is calculated at a +89 million bu, up 11 million bu from last year. The enlarged residual helps to provide comfort in last year’s NASS soybean crop estimate. The soybean market was fearful of larger decline in the residual, compared to pre report estimates.

• US final 2020/21 wheat end stocks were forecast at 844 million bu was down 17 million bu from trade expectations, and down 184 million bu from last year’s stocks total.

• 2021 US principal crop acres rose to 317.2 million acres, the largest total since 2018 when 319.3 million acres were seeded. The big gains in seeded acres vs 2020 occurred in the Dakotas (North Dakota crop acres up 15.6% to 24.15 million with South Dakota up 8.0% to 16.8 Mil acres). Other Midwest States showed modest seeding gains of 0-2% with Iowa seeded crop acres unchanged from last year. Kentucky cropped acres rose 6% to 5.1 million acres while Nebraska acres fell 2.3% to 19.3 million acres. Kansas held the most cropped acres at 23.5 million acres.

• Combined US corn/soybean acre were below the record at just 180.3 million acres. US corn seeded acre rose by 1.6 million acres from the March intentions to 92.7 million acres,while soybean seeding held steady. The big corn seeding gains (from March) occurred in N Dakota, S Dakota and Minnesota which showed a bump of 9.1%, 7.1% and 6.3%, respectively. This is the same area struggling with dire drought which hold bearish yield implications. These 3 states account for 18.1 million corn acres or 19.5% of the US total.

• NASS estimated US 2021 harvested corn acres at 84.5 million acres, up 1 million from the March Intentions forecast. NASS stated there was 2.18 million acres of US corn left to be planted when the survey was conducted which suggests if there are any reductions, they will be to the downside when FSA data is included.

• US 2021 soybean seeded acres held steady with March at 87.6 million acres, which was steady with the March intentions survey. Harvested acres were placed at 86.7 million acres. This was the third largest US soybean seeding pace on record, behind 2017 and 2018. Like corn, the big gains occurred in the Dakotas with North Dakota seeding 7.2 million acres, up 25% and South Dakota up 11% at 5.5 million acres. Texas, Mississippi, Georgia, South Carolina, and Wisconsin acres were also up on a percentage basis substantially. NASS indicated there were 9.84 million acres left to seed when the survey was completed.

• US spring wheat acres were 11.58 million acres, up modestly from expectations. US total wheat acres were 46.7 million, a 600,000-acre gain from March. The wheat seeding gain is being overlooked amid worsening weather across the N Plains. US wheat futures are holding strong gains.

• The USDA report is bullish and raises the stakes for rain for the drought-stricken areas of the N Plains/NW Midwest. The GFS midday weather forecast reduced totals for most of this area vs. the overnight solution. We maintain an outlook for new contract highs in new crop corn, wheat and soybeans.

29 June 2021

Posted on June 29, 2021 by simon

• HEADLINES: Chicago markets mixed ahead of NASS data; Spring wheat weak on profit taking; Canola market sharply higher.

• Chicago futures are higher at midday with spring wheat futures reversing early gains on profit taking ahead of the NASS Stocks/Seeding Report. Corn and soyoil futures have traded mostly higher on tightening old crop cash markets and ongoing dry weather for the N Plains and the NW Midwest. The midday tone of summer row crops is cautiously bullish with S American firms estimating that a hard freeze overnight likely caused the loss of 2-3 million mt of winter Brazilian corn production in Parana and MGDS. 75% of the Parana corn crop was vulnerable to a freeze due to latent corn seeding dates in early March.

• 50 contracts of Chicago soyoil receipts that were cancelled this morning which added to the need of the bears to cover net short July soyoil positions. Cash soyoil is priced 5-5.5 cents over July futures on the Illinois rail which will keep shorts nervous heading into first notice day.

• July corn futures returned to a $1.35 premium to December which argues that the NASS Stocks estimate will be bullish on Wednesday. Such a heady old crop spread premium argues for US 2020/21 corn end stocks of just 850 million bu or less which makes the need for extra US 2021 corn acres more important.

• Brazilian corn futures are up the limit and will likely trade at a second limit later today following a cooling off break. This would produce record high Brazilian corn futures with the cash market difficult to define. The hard Parana/RGDS/MGDS freeze caught the March seeded corn crop at a delicate time of development, either late pollination or the milk stage. The freeze will produce low test weight corn that is likely to carry a considerable amount of mould. The impact on tonnages is preliminarily estimated at 3-4 million mt with us now pegging total 2021 Brazilian corn production at 87-88 million mt. This would be 10 million under the June USDA estimate. The 2021 Brazilian winter corn crop appears to be cursed, late seeding, drought, and now widespread frost/freeze damage across the south. Making export grade quality could prove difficult.

• Stats Canada pegged 2021 crop seeding at 23.3 million acres of all wheat, 5.5 million acres of durum and 22.5 million acres of canola (rapeseed). All were right on pre-report estimates with the data considered neutral. If there was a surprise, it was that 2021 oat seedings were 3.42 million acres compared to forecasts of 3.6 million and barley acres at 8.3 million acres compared to forecasts of 8.3 million acres. The big concern is not seeded acres in Canada, but the deepening drought and coming heat that looks to produce acute stress on the canola crop. Canola/rapeseed does not do very well under extreme heat with highs in the 90s to lower 100s to produce acute stress across Saskatchewan and Alberta. It is the potential loss of canola yield that has rallied Chicago soyoil to sharp daily gains.

• Chicago brokers estimate that funds have been buyers of corn, soybeans and soyoil. Managed money has purchased 2,000 contracts of corn, 900 contracts of soybeans, and 5,500 contracts of soyoil. Funds have sold a net 2,300 contracts of soymeal and are net flat in wheat (early buyers/midday sellers). Profit taking and technical selling has been witnessed in Minneapolis wheat.

• The midday GFS weather forecast is wetter across Minnesota/Wisconsin with dry weather holding across the remainder of the N Plains and the NW Midwest. The Canadian Prairies and the PNW stay arid without meaningful rain for the next 10 days. Temperatures stay hot across the NW US with that heat pushing east this weekend. The Plains and W Midwest endure widespread 90′s to low 100′s mid next week with such heat adding to the accumulating crop stress. The forecasts have been very consistent in recent days in bringing back the old May and early June weather patterns.

• Brazil’s second corn crop is still in sharp decline with a frost/freeze adding to crop losses and quality concern. Spring wheat futures have fallen on pure technical trading and profit taking ahead of tomorrow’s NASS report. We look for the USDA reports to be positive on US corn stocks and we doubt that combined 2021 US corn/soybean acres will add up to more than 183 million acres. We estimate 2021 US corn seeding at 93 million acres.

28 June 2021

Posted on June 28, 2021 by simon

• HEADLINES: Corn/Soy rally sharply on S American cold; China buying of PNW soybeans for October; Covering before the NASS stocks/seeding report.

• Chicago futures are sharply higher at midday with corn and new crop soybeans the upside leaders. Spring wheat futures have sagged from fresh contract highs on profit taking ahead of the Stats Canada Seeding forecast that will be out Tuesday morning. Traders are also debating flooded/drowned out crops in Northern Missouri/Central Illinois along with frost/freeze coming from Brazilian corn is providing the upside price lift. And traders are coming to understand that Friday’s SCOTUS decision to allow EPA waivers in a non-consistent fashion will not have much of a demand impact under the pro biofuel Biden Administration. No renewable biodiesel construction is being slowed or halted which is the driver of new crop crush demand.

• Dec corn has rallied sharply to test initial chart-based resistance at $5.40-5.50 while Nov soybeans are back above $13.10. Soyoil futures have recaptured all of Friday’s losses. However, the big change is that world soymeal demand which is shifting back to the US amid the sharp rise in Brazilian/Argentine export premiums. And US soybeans off the PNW are again competitive with Brazilian offers on a landed basis into China. With Chicago soymeal open interest at its lowest level since 2009, end users are making new forward purchases.

• Brazilian corn is facing frost/freeze losses that will add on top of drought yield reductions. Brazilian corn prices are rising sharply this morning on the cold weather threat with freeze warnings out for Mato Grosso, Mato Grosso Do Sul, and Parana overnight. We note that in Parana, 14% of the corn crop is pollinating, 61% filling with 24% mature. The frost catches that March seeded corn crop at a vulnerable stage. We estimate the 2021 Brazilian corn crop at 87-88 million mt based on early harvest yield prior to the freeze. We also note that 9% of the Parana winter wheat crop is in germination and 91% in the vegetative growth stage, also vulnerable.

• US export inspections for the week ending June 24 were; 40.0 million bu of corn, 3.8 million bu of soybeans, and 10.5 million bu of wheat. The corn exports were below vessel counts and trade expectations which we see at 53-57 million bu. We note that last week’s US corn loadings were raised to 69.9 million bu, an increase of 11.6 million bu. Someone is underreporting exports via market considerations. And remember that Census US corn exports are 153 million bu larger than FGIS inspections through April.

• We understand that China is back bidding for US new crop soybeans with 3-6 cargoes said to be sold off the PNW this morning. The Chinese have started a routine autumn US soy buying program. We look for USDA to confirm new sales in coming daily reports. Brazil has rapidly sold old crop soybeans/soymeal with Chinese demand now shifting to the US PNW.

• Chicago floor brokers estimate that managed money has purchased 4-5,000 contracts of wheat, 10-12,000 contracts of corn, 7-7,500 contracts of soybeans, 3-4,000 contracts of soymeal and 6,500 contracts of soyoil this morning.

• The midday GFS weather forecast is wetter across Illinois/Indiana /Missouri and drier across the Southern Plains. The last thing that Central Illinois requires is additional heavy rain amid widespread reports of flooding. Crops witnessing flooding would be best served by cool temperatures, sunshine, and winds to promote rapid drying. The midday forecast maintains arid weather conditions across the N Plains and NW Midwest. Iowa will need 1-1.50″ of rainfall each week to prevent crop yield deterioration.

• Temperatures stay hot across the NW US with that heat pushing east starting this weekend. The Plains and W Midwest endure widespread 90′s to low 100′s mid next week. The heat will add to the growing crop stress.

• The Brazilian winter corn crop is in rapid decline with a new threat of a frost/freeze while heat/ dryness returns to the N Plains/NW Midwest. Our Chicago view stays bullish on expanding US demand potential and supply losses.

25 June 2021

Posted on June 25, 2021 by simon

• HEADLINES: Supreme Court allows EPA to grant biofuel waivers; Drought improvement unlikely in Plains, Upper Midwest.

• Ag markets are widely mixed at midday, with spring wheat and canola (rapeseed) rising on renewed yield threats in Canada, while Chicago markets shed additional premium following the news the US Supreme Court will allow the EPA to grant blending waivers to small refineries. The collision of this morning’s SCOTUS decision with active Midwest precipitation has triggered additional liquidation. Very few aim to hold large positions ahead of NASS’s stocks and seedings release.

• It is now left to the EPA to determine whether and when waivers will actually be granted. Today’s decision provides little/no clarity over ethanol and biodiesel/renewable diesel production and consumption longer term. And new renewable diesel capacity expansion is still on track, with a possible $550 million refinery in Louisiana being announced just this morning. The market remains incredibly sensitive to even minor changes in future supply and demand, but a material impact on soy crush rates and ethanol grind is not anticipated. The Biden administration overall commitment to green fuels is most important.

• FAS’s daily reporting system featured 112,000 mt of US soymeal sold to Mexico, of which 28,000 is for old crop delivery. Mexico is a traditional buyer of US origin meal, but this does reflect US soymeal’s competitive position in the world marketplace.

• US meal for Jul-Aug delivery is quoted $5-10 per ton below Brazilian origin. Argentine meal basis is just $2 per ton below the US Gulf and has rallied some $15 per ton in the last week alone. This follows US meal being offered at a sizeable premium to Brazilian origin throughout the 2021/22 marketing years. Weekly sales of 250-400,000 mt will be commonplace moving forward. The return of strong US soymeal export demand lends support to the rate of crush through the balance of summer.

• Other input is lacking. Market fear over a potential 4-5 million hike in corn seedings next Wednesday along with always unknowable quarterly corn and soy residual use has clearly triggered an exiting of the spec community. The entirety of US soy and corn balance sheets will be fine-tuned/reset early next week, but only amid massive surprises in residual disappearance will the data be taken as bearish. Long term research suggests that the odds of stocks-building in 2021/22 are low.

• Paris milling wheat futures are down €3.50 per ton as harvest there looms. EU corn futures are down €3.50-4.00 per ton amid favourably wet short and long-term forecast offered to key areas of Western Europe’s corn belt. Spot WTI crude is up $0.75 at $74.

• The midday GFS weather forecast is again much drier across the Plains and Western Midwest compared to the early morning run. An active pattern of showers continues across the eastern Plains and Midwest into next Tues/Wed. Thereafter, the return of expansive high pressure to the Western US confines meaningful precipitation and favourably cool temperatures to the Delta/Southeast and far Eastern Midwest. Climate guidance across the Eastern Midwest has trended wetter in July amid the recent and upcoming boost in soil moisture, but drought improvement remains unlikely in KS, NE, MN and the Dakotas. Key to July weather will be soil moisture anomalies in the next 10 days.

• And too much rain will plague crops in Illinois and Indiana. SRW harvest will be delayed further.

• This is and will remain a big market. Yet, not until old crop balance sheets are finalised and Northern Hemisphere yields are better understood will it be known that highs have been scored. It doesn’t take much yield loss to trigger record low new crop corn and soy stocks/use amid record demand. We strongly caution against chasing breaks.

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Weekend summary 25 June 2021

24 June 2021

Posted on June 24, 2021 by simon

• HEADLINES: Chicago recovers from morning lows; GFS weather forecast abruptly drier in Plains, Western Midwest.

• Chicago selling has slowed dramatically at midday. The fear of a sizeable hike in corn area (4-6 million acres) along with precipitation expanding into the Eastern Plains this weekend up until now has sustained a ‘get me out’ mentality in Chicago. Yet, at current prices, the market is now trading record corn and soy yields along with a sizeable acreage hike in corn. Whether NASS on June 30 confirms corn seedings in excess of 94 million acres is unknown, but unless such expansion is confirmed, and Mar-May corn and soy residual use collapses, the market will quickly add premium in early July. Spring wheat futures are now trading higher, as that market’s chore of assuring area expansion in 2022 will be arduous. And the Jul-Dec spread reached its exhaustion top on Wednesday, with Dec to take over bullish leadership moving forward.

• Weekly US export sales were uninspiring but did include modest new purchases of old crop soy by China. Corn sales through the week ending June 17 totalled 8.5 million bushels, vs. 1 million the previous week. FAS pegged physical corn shipments last week at 67 million bushels, vs. FGIS’s tally of 58 million. FGIS continues to underestimate the reality of corn exports.

• Soybean sales totalled 5.2 million bushels, vs. 2.4 million the previous week and included a cargo of new demand from China. Wheat sales totalled 14 million bushels, vs. 11 million the previous week, which matches the pace needed to hit the USDA’s target. US meal sales through the week ending June 17 were an impressive 388,000 metric tons. The highest since mid-January. S American meal basis has rallied $20-22 per ton in just the last 30 days.

• US meal is now very competitive in the world marketplace. Enlarged meal exports through the remainder will be highly supportive of crush margins and crush rates, as crushers in recent months have been reluctant to crush for oil production.

• We also believe that China will be in the market for US soy supplies in late August as Brazilian fob premiums rise and freight costs work less against importing from the US. The message is that already pace analysis suggests US corn and soy exports are understated. Balance sheets can barely tolerate new Chinese demand prior to Aug. We note that weekly soy sales of just 3 million are needed to meet USDA’s forecast.

• Chicago brokers report that funds have sold a net 5,000 contracts of beans, 3,500 contracts of meal, 3,000 contracts of wheat, while funds have bought a net 1,500 contracts of oil and as of midday have turned into net buyers of 4,500 contracts of corn. A drier midday forecast is noted. Drought relief across the Plains, western IA and Minnesota is unlikely into July 10.

• The midday GFS weather forecast is noticeably drier across western IA and the entirety of the US Plains over the next 10 days. Active showers will be spread across the Central and Eastern Midwest over the next 72 hours. Cumulative totals of 1-2″ will be widespread, with totals upwards of 4-12″ to impact Missouri, Illinois and Indiana. Rainfall there will likely trigger short-term flooding issues.

• Beyond the weekend, rain chances into July 10 will be strictly confined to the eastern Midwest and Delta. Upper-level ridging moves into the Plains next week and is forecast to cover the whole of the US beginning July 8. Confidence so far out is low, but how the models handle high pressure ridging moving forward will be critical. The return of heat/dryness in July is most probable in areas already facing deeply negative soil moisture anomalies. We also note that max temperatures in Canada next week reach into the mid-90s.

• NASS’s June stocks and seeding data will determine whether corn/soy markets are fairly valued or whether premium must be added dramatically. This has pushed the spec community to the side-lines. It is a long growing season and it remains that not a single bushel of yield can be lost if US and world stocks are to build in 2021/22. Sales are not advised at current prices.