• HEADLINES: Fund selling pounds corn to lowest price since April 21; China rumours of corn rolling unfounded; Midday GFS shifts plains rain southward.

• CBT futures are sharply lower at midday amid favourable Central US weather with managed money selling out a portion of their long position. Corn, soybean, and wheat futures are pushing to the downside with July corn pacing the decline. July corn futures fell below last weeks and the late April low to trigger a host of sell stop orders. July corn futures tested key support that rests from $6.10-6.20, the 50-day moving average. The July/December corn spread pushed down a $1.04 July premium before it started to recover. Soybeans and wheat have followed corn on liquidation and “me too” selling.

• There are rumours that China is rolling old crop corn sales forward to new crop. We CANNOT find any confirmation that the state buyers, COFCO or Sinograin, are rolling any of their old crop purchases to new crop. US exporters report that those programs are ongoing and will not be cancelled. However, private US corn sales to Chinese livestock feeders on the books could roll, but tonnage amounts are said to be less than 600,000 mt. But even here the importer is looking at fat margins and will be unwilling to cancel large tonnages. When Chicago corn prices ease, traders suggest that China must be doing something, but often it is just managed money order flow.

• Chicago brokers estimate that funds have sold 40-45,000 contracts of corn. 7-9,000 contracts of wheat, and 12-14,000 contracts of soybeans. In soy products, funds have sold 9-11,000 contracts of soymeal and 2-3,000 contracts of soyoil. The fund selling in corn has been massive.

• US elevator systems report that farmers have slammed shut their bin doors on the decline with cash pushes not matching the futures decline. This is causing farmers to halt cash sales. US farmers do not have much old crop cash stock in their control, but all bushels will be needed with US exporters and ethanol producers fighting for any remaining corn supply.

• The Index Fund Roll starts on June 7, but some of the faster funds may be rolling out of their July positions before the end of the month. A portion of the pressure in July corn could be due to the faster moving fund rolling.

• Based on the USDA March 31 Seeding Intentions report, 8.9 million acres of corn and 12.7 million acres of soybeans were planted in the Dakotas. This would account for 10% of US 2021 corn and 14.5% of soybeans. The deepening Dakota drought will have an important impact on US summer row crop production. Recent rainfall has been too light/widely scattered to cause any material drought improvement.

• Derail estimated that 47% of their corn crop is average conditions, up 1%. The crop that was rated poor as 31% was stable. 86% of the crop post pollinating with 6% of the Parana winter corn crop noted as in maturation.

• The midday GFS weather forecast targets the harvest areas of Texas/Oklahoma and Southern Kansas with 1.5-4.00″ of rain. The wheat harvest was expected to start this weekend in Central Texas and then push northward to Kansas in mid-June. All this coming rain will not help seed quality with fungal diseases to flourish if the wet weather persists.

• Below normal rainfall will continue across the N Plains and the Northern third of the Midwest with near to above normal rainfall for the remainder of the Central US. High temperatures range from the mid 70′s to the upper 80′s.

• Key chart support was broken, and corn futures fell sharply on fund liquidation. We cannot find much that is fundamentally different today. China is not rolling or cancelling large amounts of their existing US corn purchases with the break providing a new purchase opportunity in new crop. It does not take much volume to push Chicago values up and down with the push today strongly to the downside. Corn, soybeans, and wheat are below our downside price targets and undervalued. But Central US weather is favourable and that is what traders are focused on for now. The risk vs the reward has shifted back to the bulls, but there is no chart-based sign that a bottom has yet been formed. We see December corn under $5.20 as too cheap.

• HEADLINES: Chicago tries to recover on firming June/July corn basis; GASC secures 240,000 mt of August Romanian wheat; Midday forecast south with rain.

• Chicago futures are lower at midday in thinning volume. Corn, soybean, and wheat futures have pressed the downside on non-threatening Central US weather forecasts. The 2021 US corn, soybean and winter wheat crops are off to a solid start with spring seeding progressing on a timely basis amid a lack of extreme heat. And some moderate rain has fallen across the Dakotas, but regular moisture is necessary throughout the summer to end the drought.

• End users purchased the morning break (and the test of last week’s low) knowing that the summer weather markets start in earnest in June. Yet, some traders are side-lined trying to better understand summer Central US, Chinese and Black Sea weather before making their bullish or bearish bets. Therefore, Chicago volume has slid in recent trading sessions as traders seek to identify new trends.

• US and world exporter stock/use ratios are historically tight which means that any threatening weather will produce an oversized price impact. A Central US high pressure ridge that offers a week plus of warm/dry weather will produce a strong upside marketplace response. We doubt that seasonal price highs have been set, there are high odds of a few summer weather scare rallies.

• Midwest cash corn basis bids are holding at heady premiums as merchandisers push to stimulate additional cash corn movement. Central Illinois corn is bid at 45 cents over with 5-10 cent pushes reported for sizeable cash sales. This compares to 35 cents over on April 23. Highly profitable ethanol margins and the record large US corn export program to China will maintain a hunt for cash corn through the July. We look for July corn futures to gain on December without a Central US weather threat.

• Russia will start its wheat export tax program on June 2. The Moscow Exchange is reporting a Russian FOB export wheat price of $242/mt vs GASC offers today at $264/mt. The GASC offers makes the Russian Grain Exchange price look $19-21/mt too cheap. The lower Moscow FOB price favours Russian exporters amid a lower tax rate, but it causes confusion in terms of the relevancy of the Moscow Exchange and Russian FOB export offers. Black Sea exporters report that the lower Moscow price reflects the sales/offer prices of an offshore exporter intermediary. The Government and Exchange will be holding a weekend meeting to better discuss the program, its implementation and fob wheat cash spreads.

• GASC secured 240.000 mt of Romanian wheat at prices of $254-259/mt to establish the world wheat market for late summer.

• The US exported 68.0 million bu of corn, 7.1 million bu of soybeans, and 21.1 million bu of wheat in the week ending May 20th. For their respective crop years to date, the US has shipped out 1,924 million bu of corn (up 843 million or 78%), 2,065 million bu of soybeans (up 777 million or 60%), and 917 million bu of wheat (up 20.3 million or 2%). China remains a sizeable importer of US corn each week.

• Chicago brokers estimate that funds have sold 4,300 contracts of wheat, 2,900 contacts of soybeans, and 5,400 contracts of corn. In the products, funds have sold 3,200 contracts of soymeal and bought 2,800 contracts of soyoil.

• The midday GFS weather forecast targets Kansas and the Plains with heavy rainfall of 1-4.00″ while missing the drought-stricken Dakotas. A high-pressure ridge holds across the South-Central US with a deep trough of low pressure just west of Hudson’s Bay. There are clear indications that the speed of the jet stream will be slowing down and shifting north which raises the risk of pattern stagnation during June and July. Close attention should be paid to the extended 10-14 day forecast in terms of a Western and Central US high pressure ridge. High temperatures hold in the 70′s/80′s.

• The Chicago theme is the same, values struggle to rally or break leading to an extremely choppy and wide-ranging marketplace. Heady cash basis bids underpin July corn futures on breaks amid a massive China export program. We do not look for China to cancel or roll many June/July/August sales to new crop. Our view remains bullish on Chicago breaks in the expectation of warmer/drier weather to come from mid-June into July.

• HEADLINES: Low volume allows Chicago order flow to push prices; EU cash corn price soars on limited supply; Seven ships grounded in Parana River.

• Low volume and mixed are Chicago grain futures at midday. Soybeans/soyoil have been able to recover while corn/wheat hold with modest midday losses. The volume of trade is well down from recent days as few desire to add to their market risk heading into the weekend. Europe is closed for a holiday Monday with the US off next week Monday for Memorial Day. The market has a feel of apathy after early selling could not break key chart support at $13.50 basis November soybean futures. July soybean and corn futures are bouncing on the spreads, but cash markets are little changed. We anticipate a mixed Chicago close.

• Chicago brokers estimate that managed money managers are flat in corn and wheat including the overnight session, while buying a net 2,100 contracts of soybeans. In the products, funds have sold 900 soymeal while buying 2,100 contracts of soyoil. Long oil/short meal spreads are back in vogue.

• FAS did not release a China corn purchase for the first time this week. The lack of a daily sale does not indicate that China has finished its new crop corn buy program. We hear that China has additional corn demand to cover.

• EU cash corn prices are soaring on the lack of old crop supply. It appears that EU corn supplies have all but run out. Feeders/starch manufacturers are searching for any old crop cash corn available. We understand that cash corn prices are soaring with bids rising to $8-8.50/bu equivalent to end the week. The EU corn end user is extremely short bought with 3.5 months remaining before the new harvest.

• Others mention that the hunt is on for June/July corn and that end users simply cannot find any meaningful volume. Prices are likely to keep rising while the initial EU wheat crop will find massive demand for the EU feed industry. The EU cannot import US or Argentine corn with the Ukraine sold out. The EU corn shortage has no supply solution as of today.

• Argentina is reporting that seven ships carrying grain have been stranded by low Parana River water levels. A loading strike caused boats to be caught with too much supply on board as river levels declined amid a lack of water flow from Brazil. Most of the boats are loaded with soymeal heading to Asian destinations. Port workers are planning another strike next week to protest the lack of Covid vaccines for essential workers. The stranded vessels will try to offload some of the cargo to refloat. The Parana River level is forecast to decline to near record lows over the next two weeks and the cost of load out will be rising via top off costs downriver. The Brazilian drought has reduced the flow into the Parana River and logistical concern is likely to build without the arrival of S Brazilian and Northern Argentina rains.

• The midday GFS weather forecast targets Iowa/Missouri with heavy rainfall into May 30 with totals of 1-3.50″. The Northern Plains and the Central Canadian Prairies will be short-changed with rainfall of 0.25-1.25″A. high-pressure ridge holds across the South-Central US with a deep trough of low pressure just west of Hudson’s Bay. This trough maintains a flow of showers/storms through the Midwest. There is no indication of any extreme heat/dryness through June 5 . Any high-pressure ridging stays well to the south of key corn/soybean and Northern Plains spring wheat areas. Temperatures warm to the mid 70′s/upper 80′s.

• Chicago rallies and breaks just cannot be sustained amid favourable Central US weather (bearish) and tightening US old crop corn and soybean supplies (bullish). The funds are shedding length on rallies while end users buy breaks worried about adverse summer weather. The rains across the N Plains have been disappointing and drought worries are likely to persist into summer. Amid this week’s massive Chinese purchases of US corn, we doubt that Dec corn can fall too far below $4.40 or November soybeans much below $13.50. Buy breaks.

• HEADLINES: Corn rallies on elevated China state buying in the US; NOAA 30 and 90 day forecast hints at coming summer heat; Central US forecast non-threatening.

• The corrective Chicago price phase appears to have ended with China buying additional US corn (again). FAS announced the sale of another 1.224 million mt of US corn to China for the 2021/22 crop year. The US sale takes Chinese purchases of US corn to a known 12 million mt (commercials rounding up their US total purchase estimate to 12.5 million) and 14-14.5 million mt from all world origins. The sales pace for US corn is record large

• China had purchased a known 5.1 million mt of US old crop corn through May13 with another 7.0 million being sold/announced thereafter by FAS. It appears that China will have no trouble reaching 15.0 million mt of world corn purchases by the end of May. This is a record purchase pace for any month, with all the demand occurring in just 10 days. China has booked nearly 500 million bu of US new crop corn or some 2.8 million acres of US corn production assuming trend line yields of 179.5 bushels/acre. We estimate that the US has sold a record 650 million bu of corn (16.0 million mt) of new crop corn through today. This is a record sales pace of US new crop corn and reflects the rush by China and others to discounted US new crop corn pricing/availability. Brazilian crop losses are likely push others to do the same. Corn has again returned as the Chicago bull leader.

• For their respective crop years through May 13, the US has sold 942 million bu of old crop wheat (down 34 million or 2% from last year), 2,677 million bu of US corn (up 1,126 million or 72%), and 2,258 million bu of soybeans (up 741 million or 49%). US old crop corn and soybean sales are record large. China did not cancel or roll forward any old crop corn as was rumoured late last week.

• China shipped out 39.7 million bu (1.010 million mt) of US corn last week and has 397 million bu (10.1 million mt) of old crop sales that are open on the books. US exporters forecast that China will export most of these purchases with the Chinese state being the buyer. China old crop corn exports will be spread out over the remaining 15 weeks of the crop year which equals out to a weekly export pace of 25.7 million bu/week. If China exports this amount of corn, it will raise 2020/21 US corn exports above 3,000 million bu, a record. This in turn drop US corn end stocks to 1,025 million bu without a needed 50-75 million bu bump in the US corn ethanol grind. The US 2020/21 corn end stock total appears to be on its way below 1,000 million bu.

• NOAA forecast that any lasting heat/dryness will be located over the Western US with heat leaking into the N Plains and W Midwest with frequency this summer (30–90-day forecasts). The forecast of temperatures is always more reliable than precipitation, but the point is that the odds are elevated of a West Central US high pressure ridge in June and July. Traders will be hanging on every 10–14-day model run starting in early June, following the release of weekly US crop condition ratings. Every bushel of production means that much.

• The midday GFS weather forecast targets Iowa and Illinois with heavy rainfall into May 30. Rain totals are estimated in a range of 1.5-3.00″. The Northern Plains and the Central Canadian Prairies will be short-changed with rainfall of 0.25-1.25″. A high-pressure ridge holds across the South-Central US with a deep trough of low pressure just west of Hudson’s Bay. This trough maintains a wet flow with showers/storms through the Midwest on a near daily basis amid a static cold front. There is no indication of any extreme heat/dryness through June 4. Any high-pressure ridging stays well to the south of key corn/soybean and Northern Plains spring wheat areas.

• Saskatchewan farmers have planted 74% of their spring crops, the best pace in a decade. The coming rains will be ideal. China’s corn buying has the attention of traders, but sustaining a rally requires adverse Central US weather. So far, the forecast is favourable but could become too wet with a static jet stream. Our view on corn, soybeans and KC wheat is bullish, but there is no reason to chase a rally without an adverse Central US weather forecast.

• HEADLINES: Markets extend overnight weakness; GFS weather forecast drier in Midwest; Ethanol production scores new post-covid high.

• A ‘The trend is your friend’ mentality prevails in Chicago, with corn, soy and wheat futures shedding additional premium as needed heavy rain looks to fall across the US Northern Plains and Canadian Prairies Thurs-Sat. The arrival of very late season rain in Southern Brazil is also noted, though amid the complete depletion of soil moisture, rainfall of 1-2″ across Parana and Mato Grosso do Sul in the second half of May will do little salvage yield potential. The abandonment of safrinha corn fields in Brazil will be elevated following zero rain there and abnormal warmth in the last 45-50 days.

• We would also point out that if wetter forecasts across the Dakotas in mid-May weighs on row crop markets to the tune of $0.40-0.50 per bushel, volatility will be even greater than prior expectations once the Northern Hemisphere growing season begins in earnest in mid-June. The entirety of the growing season lies ahead and we strongly caution against chasing daily breaks and rallies.

• Macro pressures persist, with crude down $2.40 and the Dow down 300 points. Paris milling wheat and corn futures are down €4.0-4.5/mt ($0.12-0.13/bu).

• What is known is that current prices are working quickly to encourage demand growth. China bought another 1.36 million tons of new crop US corn, bringing their total purchases on a known basis to 9.5 million tons, or 37% of the USDA’s annual 2021/22 Chinese corn import forecast. FAS also announced that Mexico secured 142,000 tons of new crop US soybeans.

• Additionally, US weekly ethanol grind and gasoline disappearance is beginning to reflect a noticeable boost in miles driven. US ethanol production through the week ending May 14 totalled 303 million gallons, a new post-Covid high and some 25 million above the pace needed to meet the USDA’s 2020/21 corn grind forecast. And US ethanol stocks remain historically tight. US ethanol stocks last Friday totalled  816 million gallons, just 2 million above the previous week and 18% lower than a year ago in mid-May. US gasoline disappearance was also a post-Covid high 9.2 million barrels per day.

• Further expansion in gasoline use lies ahead, with the US economy to be roughly fully opened by mid-summer and the lack of current stocks creates the need for enlarged summer ethanol production. Spot and forward ethanol production margins are profitable, with new crop margins estimated at an incredible $1.00 per bushel. Futures-based new crop soybean crush margins are calculated at $1.40 per bushel.

• Algeria late Tuesday released a tender for July supply. Egypt is expected to follow amid today’s break in global wheat prices.

• The midday GFS weather forecast is noticeably drier across the Plains and Midwest next week as meaningful rain has been shifted southward into the Southern Plains and northern Delta region. Confidence in such a dramatic change is low but the EU model’s afternoon release will be monitored for validation.

• The nearby forecast is consistent with morning output. An active pattern of showers will favour North Dakota, Southern Canada and much of Northwestern Midwest, including the drier areas of Iowa. Max Midwest temperatures reach into the 80s beginning Thursday.

• The market’s perception of supply potential has increased following the release the USDA’s May WASDE report, improving Northern Plains precipitation and private estimates of much larger final US corn seedings. As such, the battle between non-threatening US weather and rising future demand will sustain a volatile back-and-forth marketplace. This is no place to make new sales with 2021 spring crops not even fully planted. A wetter pattern will be needed east of the Mississippi River in June.

• HEADLINES: Midday values turn mixed in battle of improved central weather vs. strong cash basis bids and a fresh China purchase of US corn; Chicago trade volume slows.

• Another large Chinese purchase of US new crop corn along with historically firm cash basis levels is lifting midday Chicago corn values, but wheat and soy futures are mixed to lower. Corn has been the upside leader because of the Chinese corn buying while soybeans sag on the slower US NOPA processing rate. US soymeal cash basis is leaking downwards, even with the slower NOPA member crush rate. This has traders rolling their July length backwards to November or early 2022 futures. The bull argument exists in the soy complex, but it is becoming a new crop, not a July/August futures story.

• US wheat futures are following Paris wheat futures gains along with a ridge of high pressure that is causing heat/dryness for SW Russia/W Kazakhstan. No crop damage has occurred following a wet weather pattern that has saturated the area. But traders note that high pressure ridges must be followed for the potential for summer heat/dryness. July KC wheat below $6.35 appears to be cheap enough, awaiting late spring and summer weather developments.

• The strength of old crop corn/soybean cash markets offers a peg of CBT support, but a sustained rally demands concerning weather for the Central US, Europe, Canadian Prairies, or the Black Sea. World exporter stock/use ratios are so tight that there is zero tolerance for any adverse weather.

• FAS reported that China booked another 1.36 million mt of US corn for new crop delivery. The purchase takes total known China US corn purchases to a record 6.8 million mt (270 million bu). Commercial sources maintain that China has booked a total of 8-10 million mt of US new crop corn, a record. If China imports 30 million mt of corn in 2021/22, we calculate that China will take 22-24 million from the US and 6-8.0 million from Ukraine. China is unable to import S American corn due to a lack of an import phytosanitary agreement. European sources report that the Ukraine has already sold China 1-1.5 million mt of corn of a 6-8.0 MMT total.

• Parana’s Deral has again lowered corn crop ratings due to drought. Good to excellent corn was cut to 23% (down 2%), while crops rated average were placed at 45% (down 1%), while corn in the poor or very poor category rose to 31%. The progress of the crop was that 51% of the crop is pollinating, 24% in the vegetative growth stage, with 21% filling kernels. 72% of the corn crop is in the reproductive stage of production. Back on April 6, Deral rated 92% of Parana’s corn crop in the good to excellent category.

• The US Wheat Quality Council HRW Tour kicks off today with scouts making their way from Manhattan to Colby Kansas. Crop yield estimates from Northern Kansas reporting districts will be available for release later tonight. The Tour was conducted virtually last May due to Covid-19 on a much smaller scale. It is expected that tour participants will uncover average yield potential depending on late spring and early summer temperatures. The Kansas wheat crop suffered from dryness that limited early growth potential from November into March.

• The Argentine Government has unveiled an emergency effort to bring down the cost of food amid ramped up inflationary pressures. The 30-day ban on Argentine beef exports will most impact China, but rumours are growing that the Government will be looking to raise export taxes on wheat. A tax would have the biggest impact on raising the price of wheat to Brazil, its largest customer. Whether it be Argentina/Russia or others, inflationary pressures are causing policy change.

• The midday GFS weather forecast is wetter across the Plains and the W Delta with rains of 1.5-3.00″. The jet stream stays active with showers/storms likely somewhere across the Central US each day. The heaviest rain falls across the SE US Plains impacting E Texas, E Oklahoma and Kansas with totals of 2-5.00″. The Northern Plains and NW Midwest will see 10-day rainfall totals of 0.5-1.50″. There is no evidence of any extreme heat as high temperatures will range from the 70′s to mid-80′s.

• Improving US weather is clashing with tight old crop supplies to produce a back-and-forth market. Option volatility is too high without adverse US weather. Our best advice is not to chase rallies or breaks until more is known about the US summer weather pattern. Old crop Chicago soybean futures are acting tired on rallies. We await Central US summer weather pattern certainty.

• HEADLINES: July corn/soybean futures rally on strong cash bids; NOPA report disappoints on low April crush; Midday forecast trims Northern Plains rainfall totals.

• Chicago futures are mixed at midday with an early corn rally failing to pick up any upside momentum as the market needs to technically heal. Last week’s conservative nature of the USDA in estimating 2021/22 US corn/soybean exports along with the lnforma/Markit new crop corn acre estimate finding 6.0 million acres (96.8 million acres) has produced bearishness. The June Seeding report is 6 weeks away and there will be host of views of whether farmers held to their rotations or seeded a considerable number of extra acres. Although it is not popular today, our leaning is that farmers held to their rotations and 2021 US total cropped acreage rose just 2.5-3.0 million acres from the March Intentions.

• US farmers have halted new old crop corn and soybean sales on sinking prices. Farmers argue that there are many chapters yet to be written in terms of Northern Hemisphere weather and its impact on yield. A time for reflection and Chicago choppiness is ahead before the weather fun starts in June/July. We look for a mixed Chicago close with strong cash basis offering support under July soybeans/corn and soyoil. New crop futures price direction will be directed by weather and its yield potential. The US corn market is no longer bulletproof as considerable uncertainty exists on US 2021 row cropped acres/yield.

• US FGIS export inspections for the week ending May 13 were 74.5 million bu of corn, 11.3 million bu of soybeans, and 24.2 million bu of wheat. For their respective crop years to date, the US has shipped out 1,852 million bu of corn (up 814 million or 78%), a record 2,058 million bu of soybeans (up 783 million or 61%), and 24.2 million bu of wheat (up 17 million or 2%). US corn, soybean and wheat exports are running ahead of USDA/WASDE annual forecasts. The US only needs to export 46 million bu of corn per week to reach the USDA annual forecast. Based on the current pace and our expectation that China will ship out its corn purchases for restocking its reserve, the USDA could easily be understating US 2020/21 US corn exports by 200-250 million bu, dropping stocks closer to 1,000 million bu.

• FAS announced this morning that China had purchased 1.7 million mt of US new crop corn taking their known purchases to an estimated 5.5 million. We hear from cash connected exporters that a total of 8.5-10.0 million mt of US new crop corn is sold with China also booking 1.5-2.0 million mt of Ukraine corn. In total, it appears that China has booked 10-12 million mt of world corn and is still asking for offers. The USDA had China importing 26.0 million mt of world corn in 2021/22 which based on China’s purchase pace this early seems to be too low. China appears to have a feedgrain shortage and desires to ramp up imports this summer and early autumn before US soybean exports start in earnest.

• NOPA reported that its members crushed 160.3 million bu of soybeans in April, well below the range of analyst forecasts of 168.7 million bu. Processors having trouble finding cash soybeans slowed their crush and pushed ahead maintenance. NOPA member soyoil stocks at 1,702 million pounds were well below the end of March total at 1,771 million pounds and trade estimates of 1,785 million pounds. The slower crush rate curtailed NOPA soyoil production. The April NOPA report was deemed slightly bearish and soybean futures declined on the news.

• The midday GFS weather forecast is drier across the N Plains and N Midwest with heavier rain south of the Iowa/Missouri border. The heaviest rain falls across E Texas and SE Oklahoma where totals could reach upwards of 6-7.00″. The forecast does offer broad rainfall chances for the Canadian Prairies between May 25-28. Our guess is that the coverage of rain greater than 1.00″ will be curtailed across the Prairies. A zonal pattern is offered in the 11-15 day forecast period.

• Old crop pushes for corn/soybeans are just not finding supply. Yet, the Central US weather forecast for the last half of May has improved with warmth/rain. There is a long way to go in terms of the US growing season. We are certain that this weather pattern will produce a few serious threats. Chicago is about premium cash markets and Central US weather. Look for choppiness to continue as the market struggles to understand 2021 US crop seedings and the coming summer growing season.

• HEADLINES: Chicago morning rally retreats on massive fund liquidation in July corn; US coast guard reopens the Mississippi River; Midday GFS weather forecast drier for N Plains/NW Midwest.

• The US Coast Guard has reopened the Mississippi River with traffic trying to return to normal. The 1.5-day closure will have a limited impact on the US grain export industry. The I-40 bridge is seen as stable without a load factor and normal river navigation is resuming.

• Chicago futures are sharply mixed at midday with old crop corn pushing lower on continued liquidation. The July/Dec corn spread has weakened by over 15 cents with July trading at a $1.00 premium to December. The selling in July corn is fund related. We see no evidence that China is pushing old crop sales forward or cancelling existing sales on the books. However, China continues to book US corn on weakness with another sale of 1.3 million mt announced this morning.

• The USDA has confirmed that China has now taken 4.3 million mt of 2021/22 US corn with a total sale pegged by exporter sources at 6 million. We believe that the US has sold 8.8 million mt of corn for the 2021/22 crop year or 350 million bu to all importers. End users are aware of the December discount to July and the lack of Brazilian corn supply that will be available from August onward due to their drought. July corn has filled a gap on the weekly continuation chart at $6.58-6.61.

• Domestic end users are seeing the corn break as a gift as they cover forward margins into 2022. The corn break has helped a host of users add to profitable margins in ethanol, livestock feed and food product demand. July corn under $6.50 and December corn under $5.50 are too cheap by our fundamental measures. But these are big ag markets, and price rises or falls further than it should. End users should use future declines as a longer term buy opportunity.

• We hear that China has been a monster buyer of the past 2-day break in soybeans/corn locking in flat price on existing basis sales. China is said to be bidding again on new crop US corn with a purchase of 600,000-1.0 million mt rumoured. China could easily purchase as much as 10 million mt of new crop world corn by the end of May as they bid for US/Ukraine supplies. China does not have phytosanitary agreements with Brazil on corn imports. Most export sources argue that USDA’s 2021 /22 world corn export estimate of 26 million mt is far too low, but they all agree it is a place to start. The Brazilian corn loss and record large Chinese buying argue for that the USDA’s US 2021/22 corn export estimate is too low by 250-400 million bu.

• Chicago brokers estimate that fund managers have sold 22-26,000 contracts of corn, and 1-2,000 contracts of wheat, while buying 4,200 contracts of soybeans. In the products, funds have bought 4,300 contracts of soyoil while selling 3,000 contracts of meal. The funds are big sellers of July corn which is where their length sits. Thursday’s break has fund risk managers exiting corn length (July) based on equity losses. This is the reason why July corn is so weak.

• Market talk has the lnforma/Markit group estimating 2021 US corn acres to expand to 96.8 million acres and soybeans to 88.5 million. This would be a gain of 5.7 million acres in corn and 900,000 acres in soybeans vs NASS March Intentions. Research argues that US farmers will plant an extra 900,000 acres of soybeans (88.5 million) and 900,000 acres of corn (92.0 million) for combined record of 180.5 million acres. The guessing on what US farmers seed will persist through June.

• The midday GFS weather forecast is drier across the N Plains and N Midwest with heavier rain south of the Iowa/Missouri border. The midday GFS forecast brings a tropical system onshore across Louisiana on May 23. Whether this tropical system is correct will determine the accuracy of the forecast beyond the next week. Our comfort with any longer-term Central US weather run is low, other than to state that temperatures will be rising via modest Central US high pressure ridging. It is going to become warm.

• China’s need for world feedgrain/soy imports is massive into early 2022 on expanding demand and limited domestic stocks. Cash corn is trading at record highs in Brazil and China. Increasing. weather importance will be placed on N Plains/NW Midwest and Canadian Prairies dryness in the weeks ahead. This is no place to be turning bearish with record high cash basis bids not uncovering any Central US grain/soy movement.

• HEADLINES: Market continues trend of post-USDA liquidation; Export sales weak; Domestic margins rising.

• It has been an outright washout in Chicago, with corn limit down in mid-morning trade and old and new crop soybeans down 40-50 cents. US corn’s premium to Argentine origin and ongoing weak spot fob soy basis in Brazil has worked to slow nearby US export demand dramatically. Excessively overbought conditions had to be reconciled eventually. Otherwise, there has been no real catalyst for the break and domestic end user margins are improving. We should be prepared for massive volatility between now and the end of summer. This is and will remain a big market.

• Markets are transitioning from tight old crop supplies and the recent incredible basis push immediately into weather and new crop supply potential, and whether the USDA’s US supply forecasts are proved accurate. There are no glaring weather threats present across the Central and Eastern Midwest, but elevated yield uniformity is required to exceed trend. Exceeding trend yield, in turn, is required to prevent further corn and soy stocks/use contraction. The message is that price determination between now and August is left to Mother Nature. It will be difficult to prove both the bulls and bears yield cases until the middle part of summer. However, concern over intensifying drought across the Dakotas and Upper Great Lakes remains elevated.

• There is also still massive uncertainty surrounding the return of barge traffic along the southern MS River. Some commentators remain optimistic, but this afternoon the navigation committee will meet to discuss logistical priorities. Whether that includes the movement of grain will be closely followed.

• US export sales through the week ending May 6 featured net old crop corn cancellations of 4.5 million bushels as China/unknown cancelled 21 million bushels, and new demand was limited to routine business from Mexico, Korea and Japan. Old crop soy sales were 3 million bushels, vs. 6 million the previous week. New crop US wheat sales were a meagre 10 million bushels.

• Yet, the difference between near-term term and potential new crop demand is sizeable. China this morning secured another 680,000 tons of US origin, and additional purchases are said to be in the works. Adding recent known sales to China and Mexico, US new crop corn export commitments sit at a record high 7.3 million tons. We also note that new crop futures-based ethanol production margins have risen to $1.00 per gallon. New crop soybean crush margins have expanded to $1.35 per bushel. Breaks in the marketplace only work to boost consumption, which further raises the burden on Midwest yields this summer. This is a place to add to end user coverage.

• Model guidance has extended complete dryness in Brazil into May 27, and amid ongoing heat, there is no hope for salvaging safrinha yield potential.

• A complete lack of rainfall during pollination continue to suggest that a sub-95 million mt Brazilian crop is probable. A sub-90 million mt crop is possible, and at this point importers have no choice but to maximise purchases from the US and Ukraine between August and the middle of 2022.

• The midday GFS weather forecast is wetter in portions of the Dakotas and Southern Canada in the 11-15 day period but is otherwise consistent with this morning’s output. Confidence in extended range forecasts is low as model performance in the last 30 days has been poor. We also note that the better performing EU and Canadian ensemble forecasts maintain ongoing arid conditions across the N Plains, Upper Midwest and Canada into May 27. The GFS’s near-term forecast maintains soaking rainfall of 2-5″ across the Southern Plains, Delta and far Southern Midwest. Temperatures reach more normal levels beginning next Tuesday.

• Liquidation following monthly USDA reports has been a market theme since winter amid the USDA’s measured approach to raising US exports and cutting Brazilian corn production. This week is no different, but the arrival of the growing season has heightened price sensitivity. Weather/supply risks are unchanged and still very large.

• HEADLINES: USDA May report offers something for everyone; Bullish vegoils/soybeans and disappointment for corn/wheat; It is all about weather into July.

• The USDA May Crop Report was slightly bearish as the report cut US wheat, soybean, and corn exports far more than expected (relative to the current crop year). The US export cuts were made despite a 7 million mt cut in the 2021 Brazilian corn crop and the political obligation for China to secure at least $43.5 billion of US ag goods. Once again, the USDA is being conservative with its US ag trade forecasts, even as the world economy exhibits its best economic growth rates in a decade. Chicago grain/soy futures sold off on USDA report data. However, the need for US crushers and exporters to secure additional cash soybeans/corn from the producer is real. We would advise waiting for a deeper correction to make new purchases. This is no place to chase a rally, unless N American weather forecasts take a turn for the worse in coming days.

• The USDA estimated 2021/22 US corn end stocks at a larger than expected 1,507 million bu by cutting US corn exports 325 million bu compared to the old crop year. The 2021/22 US corn export pace is a conservative 2,450 million bu. US 2021/22 feed/residual use was left at 5,700 million bu, even with a US 2021 harvest that was 800 million bu larger. US 2021/22 US ethanol use was raised 225 million to 5,200 million bushels.

US End Stocks (million bu)

2019/20    2020/21    2021/22

Corn             1,919        1,257        1,507

Soybeans      525        120        140

Wheat           1,028        872        774

• NASS pegged US winter wheat production at 1,283 million bushels, up 112 million on last year, using a yield of 52.1 bushels per acre. Year-over-year yield cuts of 6-12 bushels/acre were made across the PNW. Year-over-year increases are expected in alt regions. If realised, NASS’s May yield projection will the be the third highest on record.

• Old crop US wheat end stocks were raised 20 million bushels on reduced exports. HRW, HRS and SRW stocks were increased 12 million each, with white stocks cut 11 million. New crop stocks are pegged at 774 million bushels, though USDA’s export and feed use forecasts are viewed as too tow.

• The US average corn farmgate price was forecast at $5.70/bu with USDA adjusting 2020/21 US corn exports up by 100 million to 2,775 million bu. The 2021/22 US corn farmgate price shows a gain of $1.35/bu compared to 2020/21.

• World 2021/22 corn end stocks were forecast at 292.3 million mt, up 8.8 million with China forecast to import 26.0 MMTs. The USDA raised their estimate of Chiina corn imports in the old crop year to a like 26.0 million mt. Brazilian corn production was estimated at a much too high 102 million mt in 2020/21 and a record 118.0 million mt next year. Brazil looks to export 43 million mt ofn 2021/22 corn, which appears high.

• The USDSA estimated 2021/22 US soybean end stocks at 140 million bu by cutting exports to 2,075 million bu. This is down 205 million from the current crop year and far too low. US soybean crush was raised to a record large 2,250 million bu on massive biodiesel demand. USDA forecasts that the US would consume 12.0 billion pounds of soyoil for biodiesel, up 2.5 billion pounds, while exports are cut to just 1,450 million pounds (down 850 million pounds). The USDA appears willing to cut US soybean exports to buy time to gauge ftnal US soybean seedings in June.

Global End Stocks (million mt)

2019/20    2020/21    2021/22

Corn            304.5        283.5        292.3

Soybeans    96.5        86.5        91.1

Wheat         299.4        294.7        295.0

• 2021/22 World soybean production was estimated at 366.5 million mt (up 23 million) while world trade only grew 1.5 million to 172.8 million mt. China looks to import 103 million mt of soybeans in 2021/22. 2021/22 world soybean end stocks are forecast at 91.1 million mt with a Brazilian crop of 144 million mt. This is up 4.6 million mt assuming the world weather is normal for a year. November soybeans at $14.75 and above is overvalued. This is no place to chase a Chicago rally.

• Major wheat exporter stocks are projected to rise only 840,000 mt in 2021/22, with stocks/use declining slightly amid enlarged export demand. Total world wheat trade in 2021/22 is forecast to reach a record 202 million tons, we note that world trade is very often understated in May. Exporter stocks of 62 million tons also assumes a Russian crop of 85 million mt vs. trade estimates of 78-81 million and a Ukrainian crop of 29 million, vs. 25 last year. Big wheat crops are needed to keep world wheat exporter stocks stable.

• The USDA has set the benchmark for new crop supply and demand. It is all weather going forward, and the adjustment in yield/production that follows. The USDA has bought itself (and the market) time to better understand North American, Russian, and Asian weather patterns with deep US/world export cuts. If the US finds additional planted acres in June, you can bet that US/world trade totals will enlarge. We see Dec corn below $5.70, November soybeans below $14.00, and July KC wheat below $6.60 as cheap, with the summer growing season ahead. We look to buy breaks into late May. The decline of 595 million bu of US corn, soybean and wheat exports looks too big amid a smaller Brazilian corn crop and pledges by China to secure $43.5 billion bu of US ag goods by year end. We estimate that China will book 40-44 million mt of US soybeans or 1,540 million bu meaning that “others” are all going to secure Brazilian beans.