4/26/21

Morning Commentary 4/26/21

CBT Scores a New Round of Contract Highs on Arid Brazilian Crop Weather and the Deepening Dryness for N Plains/NW Midwest/Canadian Prairies

6:30 AM CT CBT Prices: May soybeans are up 6.25 cents at $15.46, May corn is up 15.00 cents at $6.705 while May Chi wheat is up 16.50 cents at $7.2675.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning! The week has started off where last week left off with rally to new contract highs in corn, soybeans, and wheat on concerning Brazilian and North American weather. The adverse weather amid strong Midwest cash basis bids heading into 1st notice day against May futures has accelerated the CBT rally. The volume of trade has been sizeable with over 52,000 contracts of July corn, 35,000 contracts of July soybeans, and 25,000 contracts of July Chi wheat changing hands. Sellers are limited to those who are wanting to bank profits.

Preliminary CBT open interest for Friday showed a sharp fall of 39,055 contracts in corn, 19,145 contracts in soybeans, and 1,783 in Chi wheat. The expiration of options and May liquidation pressed May open interest falls.

The Brazilian weather forecast is arid for the next 2 weeks as hope fades for winter corn yields. Brazilian corn will enter its reproductive phase starting later this week and continue into late May under a dire flash drought. A sub 100 MMMTs 2021 Brazilian total corn crop is forecast due to drought stress.

If Brazil’s limited rain profile lasts through May, a 20% fall in the winter corn yield would drop the crop to 68-70 MMTs with Brazil’s total corn harvest to 91-93 MMTs. This would knife Brazilian 2020/21 corn exports by 9-12 MMTs and push that business to the US/Ukraine from August thru next January. And Brazil will be importing increasing tonnages of Argentine corn thru July.

Rumors abound that Argentina is again considering raising export taxes to slow domestic inflation and raise revenue amid surging world prices. Argentina has a long history of the government wanting to participate in grain bull markets by raising export taxes. Argentine farmers beat back the last attempt in January, but this go around may be more difficult.

Egypt’s GASC is seeking world wheat for mid-August and traders are watching to see if Russian exporters can accept the risk of a floating export tax that far in the future? An Eastern European purchase is likely.

In world ag futures trade, June Malaysian palmoil futures fell 43 ringgits to 4,082 RM/MT as a sharp rise in India’s Covid cases is sacking demand. September Paris wheat is up €3.25/MT at €222.50/MT. China’s July Dalian corn fell 7.0 cents/Bu to $10.99/Bu & Dalian July meal rose $2.15/MT to $544.45/MT.

Traders are expecting that US farmers have seeded 18-20% of their corn vs a 5 year average of 20%, spring wheat seeding at 28-30% vs 24% average, and 7-9% of the soybeans vs a 5% average. Planting progress will be active into May 5.

The 10-day forecast offers limited rain for the drought areas of the N Plains with NW Midwest farmers worried about planting in the dust. Rain is needed!

Stats Canada will be out with their 2021 Seeding Intentions on Tuesday. A sizeable rise in canola acres is expected amid record high prices.

Amid historically tight old/new crop stocks, adverse weather is quickly reflected in CBT prices. The bulls are in control wanting to buy any dips. Market volatility is going to be  elevated with value noted on any break in December corn, November soybeans or December soyoil.

North American Weather Pattern Discussion: A progressive weather pattern is offered for the US over the next 10 days. This pattern produces showers/storms for the Delta and the S & E Midwest but leaves the Plains/NW Midwest/Canadian Prairies in an arid flow. Soil moisture losses will be increasing here with farmers having to plant seed in the dust. The need for N Plains/NW Midwest rainfall will be rising after May 10th.

The US GFS 11-15 day forecast has a potent Trough producing rain through the Dakotas, but leaving Nebraska and Iowa dry. The EU and Canadian models have a high-pressure Ridge across the Central US enhancing a warm/dry trend. Our forecast lean is with the often more correct dry EU/Canadian forecast models. 

The attached 10-day rainfall forecast is from the EU model. Mostly dry weather will prevail across the Central US before showers break out Thursday/Friday across the SE Plains with the system trekking NE into the Ohio Valley. Rainfall totals along this path will range from .4-2.00”. Dry and warming weather follows with just a few lite rains across the Eastern Great Lakes. The Western US and most of the Plains and the NW Midwest is dry. Dry concern is elevated for the N Plains and NW Midwest.

Heat Builds Across the Plains Under The Influence of Dry Soils: 

N Plains and NW Midwest Stays in a Drier than Normal Trend: 

High Temperatures in the 80's to the Mid 90's; Heat Stressed Corn: 

GFS Forecast Calls for Much Below Normal Rainfall into May 6th:

Soil Moisture Shortfall Worsens as Flash Drought Builds: 

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