Morning Commentary 4/23/21

CBT Takes a Breath In Overnight Correction; Midwest Cash Basis Levels Strong with Bids Shifting to July Futures; Brazilian Winter Corn Dryness Unrelenting

6:30 AM CT CBT Prices: May soybeans are down 5.25 cents at $15.28, May corn is down 6.25 cents at $6.44 while May Chi wheat is down 5.00 cents at $7.0525.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning! What a week it has been with corn gaining $.59/Bu, soybeans $.95/Bu and Chicago wheat $.50/Bu to date. The weekly gains were the biggest in years and likely sets up the volatility that is ahead for the spring/summer US growing season. Market volatility, CBT margin deposits and cash basis levels will all stay elevated with Mother Nature determining price direction thru summer. CBT futures are not for the fait of heart with the volatility levels on call/put options staying at historically high levels. There are no cheap dates in this market.

Morning values have set back from Thursday’s sharply higher trading session on profit taking with the market needing a rest. However, Midwest cash basis levels are every bit as strong as midweek level with May’s 1st notice day a week away. Midwest elevators will be rolling their cash bids to July by early next week which will look to cause even a more frenzied push for cash grain.

Thursday’s CBT preliminary open interest totals reflect a rise of 9,134 contracts in corn, 1,447 contracts in soybeans, and 3,440 contracts in Chicago wheat. In May futures specifically, open interest declined 15,556 contracts in corn, 16,002 contacts in soybeans, and 4,712 contracts in wheat.

Traders will be on alert to see of China is confirmed as buying US corn or soybeans amid their recent inquiries. Talk persists that China is also seeking Ukrainian corn while purchasing at least 500,000 MTs of French wheat. The prospect of new China buying will place a peg of support under the CBT. 

Other fresh news is limited to South Korea booking 2-3 cargoes of Argentine corn. The market lacks a flow of fresh news this morning.

In world ag futures trade, May Malaysian palmoil futures fell 69 ringgits to 4,351 RM/MT. The seasonal increase in palmoil production is expected to start in May and the market is looking forward to building supplies. September Paris wheat is down €3.50 at €217.250/MT. China’s July Dalian corn rose 9.0 cents/Bu to $11.065/Bu. Dalian July soymeal rose $5.25/MT to $542.30/MT.

The Brazilian weather forecast is dry for winter corn for another 10-14 days. The monsoonal flow of tropical moisture will be ending in early May leaving Brazilian corn to draw from limited subsoil moisture reserves.

The US spring seeding pace is quickening amid the warming temperatures. US farmers will be out in force seeding crops in coming days. The only issue is the acute lingering dryness for the N Plains and the NW Midwest.

The bulls are out of the barn and a perfect growing season will be needed to calm end user’s nerves. Dec corn has support under $5.30 and Nov soybeans under $13.00. The market needs a correction on overbought chart conditions, but don't get caught in believing that this bull market is even close to finished. The best values are in December corn and November soybeans on any correction.

South American Weather Pattern Discussion: A dry weather pattern holds across Central and Southern Brazil for another 2 weeks. The monsoonal flow is ending across N Brazil which offers dryness for the Mato Grosso and Goias thru May. Brazilian winter corn crop will have to rely on subsoil moisture for their reproduction and fill development phases. Soil moisture is short to very short and additional crop stress will be witnessed into May 10th.

The attached 10-day rainfall forecast is from the EU model. There will be a few showers across the northern half of Mato Grosso next week, but rainfall for Parana, Mato Grosso Do Sul and Goias will be limited to a few lite showers with totals less than .25”. Such rain will be less than evaporative losses causing a further loss of soil moisture. High temps range from the 80’s to the lower 90’s – some 3-5 degrees above normal. A return of mid 90 degree heat is possible in the 11-15 day period. The lack of rain and building drought is causing acute corn crop stress.

Central US Weather Discussion: The overnight forecasts offer limited rain chances for the Northern US Plains and the NW Midwest next week. The chance of rain has been shifted south and east beyond the next 7 days. ARC will shift this page’s focus on North American weather next week. High temps will be seasonal

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