11 May 2021

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  • HEADLINES: Chicago rallies on strong Midwest cash basis; Fresh China purchase of US new crop corn; Drier central US weather forecast; Fall in Parana corn crop ratings
  • Chicago grain/soy futures are sharply higher with old crop corn/soybeans pacing the gain. Traders are certain that the old crop summer row crops have a bullish story on the tightness of nearby cash supply. The USDA is not expected to raise or lower their 2020/21 soybean stocks estimate of 120 million bu, which is viewed as the bare minimum or pipeline. Old crop corn stocks are expected to fall due to rising export demand with USDA boosting China’s corn imports from the US as sold cargoes ship.
  • Wheat and new crop corn/soybeans are following the strong gains in old crop summer row crop futures. November soybeans are back to challenging contract highs at $14.43 while May soybean futures have scored a new 8.5 year high at $16.48/bu. The discount of July futures (to May) will underpin old crop corn and soybean futures on breaks.
  • We look for a higher close with the market risk to the upside on a cut in the 2021 Brazilian corn crop and boost in 2021/22 US corn exports. US 2021/22 soybean end stocks are forecast to be pipeline at 120 million bu. A sharp rally or a sharp break on Wednesday is likely to find traders that are willing to return to a large net long position or bank windfall profits amid the recent strong price rise. Fading the number will be a popular sport tomorrow.
  • Chicago traders estimate that funds have bought 5,000 of wheat, 12,000 contracts of corn, and 9,900 contracts of soybeans. In the products, money managers have booked 4,300 contracts of soyoil and 3,900 contracts of soymeal.
  • China appears to be clamping down on grain and crush information flow to the world. COFEED, a China ag statistical provider, has suspended release of its ag information. Chinese soybean crush rates have been expanding and have correlated well with monthly and annual totals. The COFEED shut down makes estimating China soybean imports even more difficult. The Chinese Government appears to be increasinly sensitive to domestic prices and trade. We note that Chinese domestic corn prices are reaching levels close to the early winter price highs.
  • FAS announced the sale of another 680,000 mt of US corn to China in a new crop position. This takes China’s known US corn purchase commitments to 3.0 million mt, a record large amount with the start of the crop year still 3.5 months away. We hear that China is still bidding for US and Ukraine corn on breaks. It will be interesting to watch if China is a buyer on any bearish reaction to the May USDA report.
  • Parana’s DERAL corn crop rating this week fell to 30% poor to very poor, with 45% of the crop rated average and just 25% of the crop rated good. Last week, 28% of the corn crop was rated good. On April 6, 92% of the Parana corn crop was rated good, which has declined sharply due to acute dryness. Further falls in ratings are forecast with rains absent in the forecast into late May at the earliest.
  • The midday GFS weather forecast is slightly drier than the overnight run across the Northern US Plains, Canada, and the N Midwest. The prospect of rain is pushed further south into S Iowa, Northern Illinois, and N Indiana. Moreover, excessive wet weather is further west into C Texas and out of the key cropping areas of E Texas and Louisiana. The dryness across the N Plains, Canadian Prairies and N Midwest follows a weather trend that extends back into mid-winter. The GFS forecast maintains a cool to cold temperature trend for the eastern half of the US into May 24. The relative cool will slow emergence and further hamper crop development. The cool temperatures are starting to worry corn producers as the crop is slow to emerge and set a root structure.
  • Monday’s Chicago decline was a mere “speed bump” in an overall bull market. The structure of the 2021 grain bull market is little changed with the Brazilian corn crop in decline, US cash basis bids remain strong for nearby delivery, and China continues bidding for US new crop corn. The only difference is that traders are wanting to take risk off the table amid the unpredictability of the upcoming USDA report. We expect that any sharp Chicago decline (should the report be bearish) would uncover end user pricing.

10 May 2021

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  • HEADLINES: Chicago endures a correction day; Bull structure unchanged with midday forecast arid for Canadian Prairies, Northern Plains, M Midwest and Brazil.
  • Chicago grain/soy futures are sharply lower at midday on fund liquidation ahead of the USDA May Report which will be out on Wednesday at 5pm UK time. Fund managers hold windfall profits on long Chicago positions and banking some of that profit makes perfect sense ahead of the unpredictability of a USDA report.
  • However, the May USDA report will only include NASS production estimates of 2021 US winter wheat. US corn, soybean, and other spring grain production estimates are derived from using trend yields and the NASS March Seeding Intention estimates. They will also produce world 2021/22 balance sheets for the first time and estimate China’s corn/soy imports in the 2021/22 crop year.
  • The report is one of the most important of the spring, and the recent conservative nature of the USDA regarding China has placed fund managers on the defensive. We look for a lower Chicago close, but spread price action between old and new crop futures argues for a late day bounce. We doubt that traders will want to position short ahead of the May USDA report.
  • Chicago traders estimate that funds have sold 9,000 of wheat, 12,000 contracts of corn, and 4,900 contracts of soybeans. In the products, funds are flat in soymeal while selling 3,200 contracts of soyoil.
  • The USDA/FAS announced the sale of 1,020 million mt of US corn to China in the 2021/22 crop year. This takes 2-day China corn purchases to 2.38 million mt on a known basis. China also cancelled 280,000 mt of old crop corn which is rumoured to be a large livestock producer in China. Export sources report that the cancelations are not COFCO, suggesting that most of the remainder of the old crop Chinese corn purchases on the books will ship. The cancelations are said to be part of TRQ purchases, not China’s State Trading entities.
  • FGIS estimated weekly US export shipments for the week ending May 6 were 67.2 million bu of corn, 8.7 million bu of soybeans, and 20.0 million bu of wheat. For their respective crop years to date, the US has exported 1,778 million bu of corn (up 787 million or 79%), 2,046 million bu of soybeans (up 786 million or 63%) and 870.7 million bu of wheat (up 9 million or 1%). The US must average just under 70 million bu /week on a Census export basis to reach a record 3,000 million bu 2020/21 US export estimate. Last week’s US corn exports were revised upwards to 87 million bu. The US is on track to export 3,000 million bu of 2020/21 corn.
  • It is difficult to accurately forecast the USDA report on a new 2021/22 balance sheet, but the Outlook Forum provided a starting point. USDA estimated 2021/22 US corn end stocks at 1,552 million bu and soybeans at 145 million bu with 2021 corn seeded acres of 92 million acres and 90 million acres for soybeans. NASS indicated 2021 US corn seeding at 91.1 million acres with soybeans at 87.6 million acres. NASS soybean seedings were 2.4 million acres (120 million bu less via trend yield) which means that the USDA will have to cut demand to leave stocks at pipeline (120 million bu.)
  • The USDA cut 20/21 US corn end stocks in April to 1,352 million bu via an increase in ethanol/export demand which drops the Outlook Forum US 2021/22 corn end stocks total to 1,402 million bu. Making a further adjustment in 2021/22 corn production via smaller seedings drops 2021/22 stocks to 1,250 million bu. We do not see 2021/22 US corn end stocks of 1,250 million bu or US soybean end stocks of 120 million bu as bearish. By far, the new crop soybean stocks estimate is more bullish, but the loss of 5 bushels/acre of corn yield would justify December corn at $7.50-8.00. Therefore, anything but perfect weather holds a potent bullish price impact.
  • The midday GFS weather forecast is drier than the overnight run across the Northern US Plains, Canada, and the NW Midwest. This follows existing weather trends and must be watched closely into late May. A dire drought is building across the N Plains and Canada that is highly concerning to yield.
  • Today’s drop is a correction. Brazil’s corn crop is falling by the day while China is adding to forward feed coverage. US soybean stocks are measured at pipeline for TWO consecutive crop years. The market risk is to the upside on concerning N American weather trends. A bottom should form in Chicago values either today or by early Tuesday. Cash corn and soybean basis bids are strong and keep rising in the hunt for supply.

7 May 2021

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  • HEADLINES: Early Chicago sell the fact break uncovers new fund buying; Corn/soybeans rally to new highs at midday; Weather to key Sunday evening trade.
  • Chicago grain/soy futures are higher at midday as “sell the fact” corn trading had only a momentarily bearish impact. FAS/USDA confirmed that 1.3 million mt of US corn was sold to China. We believe that an additional 3-4 million mt were also sold to China on Monday/Tuesday with the total purchase of around 5-6 million (Gulf for Oct-Nov and PNW Dec-January). And that China is still asking for new crop corn and soybean offers this morning.
  • China is behind in their US ag purchases and their booking of new crop reflects that their feedgrain shortage will extend into the new crop, when their farmers start their own domestic harvest. China normally slows or halts corn imports when their farmers start cutting new crop corn and focus on soybean imports. Like the US, China cannot withstand anything but perfect weather this summer without looming feed shortages.
  • We look for a higher Chicago close with the upside leader being the soy complex/soyoil as world vegoil prices surge. Whether it is palm, canola, rape, sun or soyoil, world spot vegoil supplies are extremely tight while demand rationing shows no evidence of starting. The morning break in corn occurred on shrinking volume, a close above $6.30 December corn sets an initial target of $6.60-6.80 while November soybeans look to target $14.50-14.70/bu on tight 2021/22 stocks.
  • Chicago brokers estimate that funds have bought a net 4,200 contracts of corn and 5,300 contracts of soybeans, while selling a net 1,300 contracts of wheat. In soy products, funds have bought 1,100 contracts of soymeal and 3,900 contracts of soyoil. The fund buying returned on the morning dip.
  • The USDA/FAS announced that 1.36 million mt of US corn were sold to China with another 188,468 mt to an unknown destination.
  • Statistics Canada estimated their all-wheat stocks at 16.2 million mt, canola at 6.6 million mt, and oat stocks at 1.8 million mt. The wheat, oat, and canola stocks were slightly under trade estimates and in the case of canola, some 34% below last year. The April Canadian stocks were mildly bullish with Canadian farmers not selling grain due to Prairie drought concern. The dry weather is hampering seeding and emergence, and causing farmers to slow cash sales. Any loss of the new crop Canadian wheat/canola crop will have a massive impact on world prices.
  • Another week ends with Brazilian winter corn struggling without rain. The 2021 crop year is likely to go down in the record books as being the driest in 50 years of weather records. The lack of rain during pollination along with rising temperatures has caused some corn fields to be zeroed out. Producers are abandoning fields which complicates the overall sums in determining production.
  • The biggest hope of end users is a bearish USDA May report. However, we doubt that the May Report could be bearish enough to end the bull market. In fact, record low US new crop corn/soybean stock/use ratios could accelerate the rally. Moreover, there is a chance that the USDA could revise Chinese grain/corn stocks lower, which would help justify a larger import estimates in 2021 /22. May is normally the report where the USDA engages in long term statistical housecleaning.
  • The midday GFS weather forecast is like the overnight run, but compared to the Canadian and EU models, the GFS is too far north with rain into lowa/N Illinois. The bias of the Ensemble models is to keep the N Plains and N Midwest dry over the next 10 days. There is rain hinted at in the 11–15-day period, but the models have had a very poor track record beyond the next 10 days.
  • The loss of 12-20 million mt of Brazilian corn supply makes the world corn exporter balances sheet exceptionally bullish. Add on top of that the ongoing dryness across Canada/US and you end up with a dynamic bull market with fund managers adding to purchases. May was supposed to be the month of improving soil moisture, it is turning drier much like April. Stay with a bullish bias as any weather problem in the US, Black Sea or Canada will shoot values to new highs. Seasonal highs are not expected until sometime in July or August.
To download our weekly update as a PDF file please click on the link below:

6 May 2021

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  • HEADLINES: New crop Chicago futures maintain leadership; Talk of Chinese corn demand; Brazilian drought continues.
  • Chicago grain/soy futures are mostly higher at midday with new crop soybeans and corn scoring new contract highs. Funds are adding to net long positions as the Brazilian corn crop shrinks and Central US weather is far from perfect. We need to remember that anything short of near perfect US weather is unacceptable with corn/soybean stocks expected to be historically tight. Tight stocks not only impact US corn and soybeans, but also the world. It is right to say that the world grain cupboard is bare, and it will take multiple years to replenish supplies with China actively starting to seek new crop supply. We expect a higher Chicago close today with the market backing and filling on Friday. Trade next week will depend on upon Brazilian/North American weather.
  • Chicago brokers estimate that funds have bought 6,700 contracts of corn and 8,300 contracts of soybeans, while selling 2,300 contracts of wheat. In soy products, funds have bought 4,600 contracts of soymeal and 3,900 contracts of soyoil. It is interesting that there just is not much selling above the market. US elevators report that Midwest/Plains farmers have already sold their largest percentage of a US crop in a decade. The Chicago rally has coaxed farmers into selling which they have done in some volume.
  • FAS reported that for the week ending April 29 the US sold -3.5 million bu of old crop wheat and 14.7 million bu of new crop, 5.4 million bu of old crop corn and 4.2 million bu of new crop, and 6.1 million bu of old crop corn and 7.1 million bu of new crop. The sales of soybeans were as expected while corn and wheat were light. For their respective crop years to date, the US has sold 2,671 million bu of corn and 2,252 million bu of soybeans. The US remains on pace to export 3,000 million bu of corn and 2,350 million bu of soybeans in the 2020/21 crop year.
  • We believe that China has secured about 2.0-2.5 million mt of US new crop corn in recent days. With COFCO being the buyer, it is uncertain when it will be announced by FAS since COFCO is a registered US grain merchant and the announcement only needs to be made when the corn is shipped overseas.
  • Moreover, China is also seeking to start Phase Two negotiations for the period beyond January 15, 2022. The Phase One Agreement that was signed in January of 2020 was a two-year agreement. The willingness of China to start new negotiations reflects their desire to enhance future food security. Moreover, China’s Premier called for China to work on building its food security in the year ahead with farmers being encouraged to boost yield and plantings. We doubt that China’s call to boost production will have much impact.
  • We hear that Brazilian farmers are looking to abandon 2021 winter corn fields on poor pollination. Corn is being disked down in the hope of rain and planting a winter wheat crop. The yield outlook stays poor.
  • The midday GFS weather forecast is similar to the morning run but still at odds with the better performing EU and Canadian models. The GFS forecast maintains a more northward bias with Midwest precipitation over the next 4-5 days. Cumulative rainfall of 1-3″ will favour the whole of Iowa, Illinois, Indiana, Ohio and Michigan. Recall the EU model places soaking rainfall across the far Southern Midwest, mid-South and Delta, leaving the core of the Great Lakes region dry. Key is whether the afternoon EU run follows the GFS with its northerly precipitation bias. We note that soaking showers are indeed needed across the Great Lakes region amid deeply negative soil moisture anomalies there.
  • The trade is at long last better understanding the severity of Brazilian corn production loss, which is a big deal. Nov soybeans also appears to be digesting enlarged corn seedings,  rather than soy, which even a mid trend yield confirms another year of pipeline US stock levels. We continue to strongly advises against being short as the growing season begins in earnest in the next 2-3 weeks.

5 May 2021

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  • HEADLINES: New crop corn, soy extend rally; Midwest forecast colder in mid-May.
  • Chicago grain/soy futures are mostly higher at midday with any selling being in old crop corn futures and tied to China cancelling out of 140,000 mt of old crop corn. The USDA also confirmed that Mexico booked 184,100 mt and an unknown buyer of 147,320 mt of US new crop corn. We believe that China has booked 1.5-2.50 million mt of new crop corn for delivery this autumn. Traders are wondering if China is rolling some of their old crop corn purchases to new crop with the July-December spread reaching $1.10/bu yesterday. We doubt that old crop cancellations/rolls will be widespread with China having already booked a considerable amount of ocean freight for May, June, and early July.
  • Soybean and wheat futures have been followers of the corn market this morning. Old/New crop soyoil spreads have been under pressure as Cargill added to their deliveries of soyoil by putting out another 201 contracts with Bunge/CHS the stoppers. The Cargill deliveries in soyoil have pressured nearby spreads at the same time, cash basis and bids remain firm. Traders argue that Cargill is rolling renewable biodiesel hedges backwards to the much cheaper December soyoil futures contract. The cash concern for US soyoil supplies develops as the US soybean crush rate slows amid a lack of local soybean supplies.
  • Chicago brokers report strong bear spreading in old/new crop corn and old/new crop soybeans/soyoil as Central US weather becomes a focal point of traders. The cheaper new crop futures appear to offer a lower risk position to be long with Chinese buying likely to be focused on new crop corn and soybeans this summer.
  • Managed money has been active on the buy side of the marketplace. Brokers estimate that funds have bought 2,100 contacts of wheat and sold 5,900 contracts of corn and 2,900 contracts of soybeans. In soy products, funds have bought 1,200 contracts of meal and sold 3,900 contracts of soyoil.
  • The US aviation/biofuel industries met with a US House panel on Tuesday to discuss ways to expand the production of low carbon aviation fuels. Several major US airlines met with US President Biden back in February to discuss the tax incentives for a low carbon jet fuel. An aviation industry movement is underway to uncover alternatives to fossil fuels that are favourable to the environment. US renewable biodiesel demand is quickly ramping up and there will not be enough vegoils/tallows (or other feedstocks) available that could meet expanding jet fuel demand.
  • The US weekly ethanol grind was up slightly with production of 280 million gallons. EIA indicated that last week’s production was down 8% from 2019, but up 2 million bu from last week. US ethanol stocks rebounded to 859 million gallons, up 30 million from the week prior, but down 20% from 2020. There is no indication of corn price demand rationing in US ethanol production with ethanol prices rising.
  • Like the EU/Canadian models, the midday GFS weather forecast has shifted any meaningful rainfall southward into the southern half of the Midwest. The N Plains, Canadian Prairies, and the Northern Midwest (I 80 north) hold in a below to much below normal rainfall pattern. Near to below normal temperatures look to prevail with lows ranging from the mid 30′s to the mid 40′s with highs in the 50′s and 60′s. The cool temperatures look to slow emergence and crop growth.
  • New crop futures are pacing the rally on the concern of summer dryness and cooler than normal temperatures for the next 2 weeks. The tolerance for US corn or soybean yield losses is zero with end stocks already projected to be as tight or tighter than old crop. To date, there is no evidence that $15.00 soybeans or $7.00 corn is producing demand rationing or imports that would prevent localised shortages by July or August. And we are doubting that the soyoil rally is over with cash markets holding strong. July soyoil futures have strong support between $61-63.00 cents.

4 May 2021

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  • HEADLINES: Chicago expands overnight rally; Delta, southern Midwest forecast too wet.
  • Chicago grain/soy futures are sharply higher at midday amid unrelenting cash basis levels and a lack of change in climate patterns across the US Plains. Canada and Brazil. Other breaking news is absent, but there remains no indication that supply issues will be solved for any length of time.
  • The early morning surge has been led by July corn, which has broken through $7.00 surprisingly easily. Spot Gulf corn prices are no doubt slowing summer export demand relative to prior expectations, but any material decline in the pace of corn sales will be short-lived on ongoing historic Brazilian dryness. Importers will be forced to return to the US marketplace in August, when Brazilian exports typically arrive in bulk. However, this year Brazil’s domestic market will absorb the early safrinha harvest. We note that domestic Brazilian corn prices remain perched above $7.80 per bushel. Additionally, Census May corn exports were a record 347 million bushels, and the corn export market’s physical demand pull will stay intact into summer.
  • Safrinha corn in Parana in Southern Brazil this week is rated at just 28% good/excellent, vs. 40% last week. Crops rated as poor jumped to 27%, vs. 18% a week ago. We fully expect Parana good/excellent to drop to or very near zero by mid-May as subsoil moisture is depleted almost entirely. Temperatures across the southern third of Brazil in the next 10 days will be routinely in the upper 80s and low to mid-90s. Still no rain is advertised in any region of Brazil’s safrinha corn region into May 20.
  • Brazil’s forward cash soy market is also finding strength. Brazilian fob soy basis for August delivery is now quoted at $0.90 per bushel over Sep Chicago, and indeed Brazilian supplies will be dwindling rapidly in the months ahead. Brazilian exporters shipped a record 17.4 million tons of soybeans in April. FebruaryApril shipments total 33.5 million tons, or roughly 40% of the USDA’s full annual forecast, vs. 30.6 million last year. Brazilian soy exports typically peak in April and decline rapidly beginning in August. Recall a year ago, Brazilian soy fob basis soared to $2.50 over spot futures during the autumn months once supply was exhausted.
  • The message is that enlarged Northern Hemisphere crops are required to satisfy global corn and soy demand over any 12-month period.
  • September Paris milling wheat has expanded its early morning rally to €3.75 per ton ($0.12 per bushel}. Global rapeseed/canola futures are sharply higher as spot EU rapeseed oil scores a new all-time high equivalent to $0.71 per pound. Rising vegoil markets have sustained profitable oilseed crush margins worldwide.
  • Compared to its overnight run, the midday GFS weather forecast is drier in Indiana and Ohio but much wetter in Missouri, southern Illinois, Indiana and Kentucky. The overall pattern into mid-May maintains active showers across the Delta and Eastern Midwest throughout the next 10 days. Lasting delays in seeding will be only regional in nature.
  • Unfortunately, meaningful rainfall across the Northern Plains will bypass major crop areas, while drought intensifies across the far Southern Plains and Canada. Soaking rain will be needed across the Dakotas and Canadian Prairies no later than mid-May. Already there is talk of producers in ND switching from spring wheat to corn amid insurance date considerations.
  • Upside old crop targets have been hit. However, US and world corn balance sheets continue to tighten on a complete lack of Brazilian rainfall and positive soy crush margins. Breaks in wheat will be short-lived until Northern Hemisphere row crop production is known.

3 May 2021

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  • HEADLINES: Chicago corrects as funds pare risk on margin/limit hikes; US corn exports to China strong; Not enough rain for the N Plains/NW Midwest into mid-May.
  • Chicago grain/soy futures are mixed at midday with July corn leading the rally while fund managers pare their market risk amid rising margin/daily position limits. Morning selling is due to “Value at Risk” (VAR) calculations as Chicago daily limits rise along with position limits. Both increases have risk managers telling traders to trim their exposure due to coming increasing market volatility and capital requirements. VAR is a key measure for risk managers and the ability of the soybean market to trade in a $2.00/Bu and corn in a $.80/Bu, and wheat in a $.90/Bu daily range speaks to smaller Chicago positions. We wonder if Monday’s VAR selling will reduce or change the prospect of a turnaround Tuesday. Much will depend on daily Central US weather forecasts. We argue that it does not pay to chase rallies until traders become worried by a decline in US yield prospects on adverse weather.
  • Chicago brokers estimate that managed money has sold 4,100 contracts of wheat, and 4,600 contracts of soybeans, while buying a net 3,900 contracts of corn. Fund managers have bought 9,200 contracts of corn early, before selling out 5,300 contracts after the morning Chicago opening. In soy products, funds have sold 3,600 contracts of soymeal and a net 1,200 contracts of soyoil.
  • We have previously suggested that Chicago is moving into a several week period of “extreme choppiness” due to the coming USDA May 12 WASDE Report and varied Midwest soil moisture and weather conditions. Some Midwest areas are extremely dry while others are well watered. It is just too early to make any bullish or bearish bets on yield when the seed is jonly ust reaching into the ground.
  • US weekly export inspections for the week ending April 29 were 84.2 million bu of corn, 5.3 million bu of soybeans, and 18.7 million bu of wheat. For their respective crop years to date, the US has shipped out a record 1,707 million bu of corn (up 771 million or 83%), 2,038 million bu of soybeans (up 796 million or 64%), and 849.8 million bu of wheat, equal to last year. China was the big US corn exporter of 30.3 million bu with Mexico the US’s largest weekly soybean exporter of 2.1 million bu. China has been ramping up its US corn export pace which will cause the USDA to raise their 2020/21 US corn export forecast on May 12.
  • Private Brazilian corn crop estimates continue to erode based on warm/dry weather conditions with some 50% of the Parana and MGDS corn crop now in pollination. In 2-3 weeks, rain will not make much of a difference to Brazilian total crop estimates that are likely to slide to 93-96 million mt. The loss of 13-16 million mt of Brazilian corn is massive in a world marketplace that is short of feed. The loss of Brazilian corn will bolster US August forward corn export estimates with the crop loss likely helping boost 2021/22 US corn exports to 2,700-2,900 million bu .
  • The midday GFS weather forecast in S America maintains complete dryness across Central Brazil’s safrinha belt. Even the northern third of Mato Grosso is forecast to be dry. Temperatures hold in the 70′s to 80′s with warming early next week as the 90′s return. The forecast is too warm/dry and a further decline in the Brazilian corn crop is expected. The importance of Brazilian weather will be diminished beyond mid-May as corn pushes into the fill stage. But for the next few weeks, a further decline in Brazilian corn production is forecast which dramatically strains world feed stocks and pushes pressure on US corn availability.
  • Argentine cash corn markets are showing signs of bottoming on strong demand as world importers scour the world for supply. US corn exports will stay massive as China exports its corn purchases through summer. We do not see much downside potential in July corn below $6.60 or December corn below $5.50. July soybeans have support below $15.00 and November below $13.30. We would use dips (like this morning’s) on VAR risk reduction to make purchases. Weather is concerning for the dry areas of the N Plains or NW Midwest into mid-May. Our weather concern is now starting to rise without soaking NW Midwest/N Plains rain.

30 April 2021

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  • HEADLINES: Cash corn basis stays strong with reports of big pushes for corn; Soybeans shrug off talk of soyoil deliveries; US corn seeding at 50% on Sunday?
  • Chicago grain and soy futures are mixed to higher at midday. The volume of trade has been well down from recent days as most of the world is celebrating the May Day Holiday while China is out on holiday for the first 3 days of next week. Active corn/wheat spreading has been noted with Chicago wheat trading at a 15.5 cent premium while KC May wheat is priced at a record 31 cents under. The wheat market cannot fall too much farther as cash corn prices rise. Corn values are acting as the bullish lynchpin of the entire Chicago marketplace.
  • Corn has been the upside leader as cash basis levels are steady/firm with reports of exporter pushes for spot supply. Ethanol producers, livestock feeders and exporters are fighting to encourage an increased supply of nearby cash corn. So far, no one has had much luck in getting the farmer to part with stored supply. Cash bids firming and old crop futures following with May corn priced at a record large 63 cent premium to the July. If cash corn is tight today, it is hard to imagine how much tighter cash corn supplies this summer become if China goes ahead and executes its old crop purchases. China has some 510 million bu of corn purchased, but not shipped through August 31 . The market must work to get China to cancel or roll some of those corn purchases into new crop.
  • Chicago brokers report that funds have bought 14,000 contracts of corn, 1,000 contracts of wheat, and 3,500 contracts of soybeans. In soy products, funds have bought 4,500 contracts of soyoil while being flat in soymeal.
  • Safras dropped their Brazilian 2020/21 corn crop estimate to 104 million mt, an 8% fall due to recent dry weather conditions. The winter crop is forecast at 70.7 million mt with the first and third harvests making up the difference. WE see the 2020/21 Brazilian corn crop at 99 million mt currently with a negative bias going forward. The drop in the crop will spur larger Argentine imports with a margin estimated at over $20/mt. However, the Brazilian infrastructure is not set up to handle large scale imports. A few cargoes are occurring but so far, it is going to be difficult to forecast that Brazil imports more than 1.2 million mt.
  • Cargill was the big stopper of Chicago soyoil receipts back in December which had some scratching their heads as to why. At that time, renewal biodiesel was just starting to be discussed and no one knew for sure of the pending demand.
  • Today, Cargill retendered 629 contracts which were largely from crush and storage facilities that were not associated with the firm. The thinking is that renewable biodiesel plants are taking longer to come online, and that spot hedge coverage needed to be reduced. We hears of just 4 US renewable biodiesel plants that are operating today. But a host of plants are set to open in Q4. December 2021 soyoil futures likely offers a more economic hedge with May soyoil priced at a 14.6 cent premium to December.
  • The midday GFS weather forecast in S America maintains complete dryness across Central Brazil’s safrinha belt, with an improved chance for rain across Parana and Santa Caterina late next week. The Northern third of Mato Grosso will also see 0.5-1.50″ of rain which will aid a limited amount of corn acres. Temperatures hold in the 70′s to 80′s with warming next week when lower to mid-90′s return. The forecast is too warm/dry and a further decline in the Brazilian corn crop is expected. The importance of Brazilian weather will be diminished beyond mid-May as corn pushes into the fill stage.
  • The cash corn market is unrelenting, and China shows no willingness to slow the export of open US purchases. If China exports all 13-15 million mt of corn that they have bought, July corn will continue to gain on December to $1.60-1.80 over. The corn/KC wheat spread has pushed wheat feeding in the Plains, but it will not be enough to alter the tightening supply of cash corn. July corn looks to test contract highs at $6.80. Midwest spring seeding is moving ahead rapidly with the midday GFS forecast offering rain for the N Plains/NW Midwest in the 11–15-day period.
To download our weekly update as a PDF file please click on the link below:

29 April 2021

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  • HEADLINES: Chicago mid-morning rally fails as May futures turn mixed into delivery on Friday; US export sales as expected; May day holiday looms for the EU/Asia.
  • Chicago grain and soy futures are mixed to weaker at midday as the leadership of the May futures contracts fades. The volume has subsided from recent activity with most traders awaiting to see whether any cash deliveries will be posted against May futures. Tightening US corn and soybean supplies prevail and will maintain strong cash basis bids, but with the next delivery period 8 weeks away, the market’s focus will shift back to the US’s premium to S American and European grain offers. We looks for a sloppy mixed close with many traders off on Monday for the May Day holiday. The extended weekend for Asia and European traders will cause trading activity to decline. We would mention that Friday is the end of the month with bullish funds looking to lock down hefty profits.
  • Chicago brokers estimate that managed money has sold 2,600 contracts of wheat and 4,100 contracts of soybeans, while buying 2,100 contracts of corn. In soybean products, funds have bought 2,200 of soyoil while selling 4,500 contracts of soymeal. The volume has been off from recent days with funds likely holding a record long corn and soyoil position to be reported on Friday.
  • Questions abound as to how low can the Brazilian 2021 corn crop get with continued arid weather. We note that if you use prior record low winter corn yields on this year’s expanded acres, a winter crop of 70-72 million mt appears about right. The first Brazilian corn crop was 23.6 million mt with the third Brazilian harvest estimated at 3-4.00 million. So, if you add 23.6 plus 3.5 million and a 70 million mt winter crop, the sum offers a crop of 97.0 million mt. This year may see yield losses in Parana greater than 35% which could drop the Brazilian total harvest to 95 million. Our point is that USDA will start the process of crop reduction in May with a likely cut of 5-8 million mt to be followed with additional reductions in June and July. We doubts that the total 2020/21 Brazilian corn harvest will fall below 94-96 million mt.
  • The US corn market this week has been openly discussing a sub 100 million mt 2020/21 total Brazilian corn crop. There is some additional leeway for a further crop reduction, but a sub 95 million total Brazilian corn harvest is going to prove to be difficult based on existing Mato Grosso conditions and the third corn harvest which will be record large due to domestic cash bids of $7.50 and higher.
  • US export sales for the week ending April 22 were 8.2 million bu of wheat, 20.5 million bu of corn, and 10.7 million bu of soybeans. For their respective crop years to date, the US has sold 940 million bu of wheat (down 13 million or 1.4%), 2,666 million bu of corn (up 1,222 million or 85%), and 2,246 million bu of soybeans (up 817 million or 56%). The US corn and soybean sales pace is slowing due to strong US Gulf FOB prices with Mexico being the primary buyer/importer.
  • The midday GFS weather forecast in S America maintains complete dryness across Central Brazil’s safrinha belt, with an improved chance for rain across Parana and Santa Caterina. The Northern third of Mato Grosso will also see 0.5-1.50″ of rain which will aid a limited amount of corn acres. Temperatures hold in the 70′s to 80′s with warming next week when lower to mid-90′s return. The forecast is too warm/dry and a further decline in the Brazilian corn crop (total) to 97-98 million mt is expected. The importance of Brazilian weather will be diminished beyond mid-May as the damage will be done and reversal of crop losses is near impossible.
  • The best two words that we have heard explaining the coming Chicago marketplace for coming weeks is “extreme choppiness”. The bulls nor the bears will be happy as rallies and breaks will not carry through. Funds have loaded the boat long in the last half of April. US farmers have scored active planting progress this week. We see support for December corn under $5.25 and November soybeans below $13.00. We await sharp breaks to return long in the hope for a June weather scare. Until then, be prepared for extreme chop.