Morning Commentary 5/10/21

CBT Corrects on Better Weekend Rain for IL/IA Ahead of USDA May Report; China Buys Ukraine and Canadian Corn; Dryness to Remain for N Plains/Prairies

AgResource Farm Marketing Advice for Monday: 1/ No new advice.

6:30 AM CT CBT Prices: July soybeans are down 6.5 cents at $15.835, July corn is down 8.00 cents at $7.2425 while July Chi wheat is down 13.50 cents at $7.4825.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning! CBT values came under pressure overnight with corn, soy and wheat futures slipping from Friday’s highs on the better-than-expected weekend rainfall across IA/IL and the coming May WASDE Report on Wednesday. The market needed a rest following 2 weeks of solid gains and the overnight correction has been modest.

The bullish aspect of a dire Brazilian drought for their winter corn crop along with the reflation trade have not changed. The CBT had become technically overbought and needed to consolidate. ARC doubts that CBT grains are forging seasonal or annual high amid historically tight old crop cash supplies and WASDE May US corn/soybean balance sheets (on Wednesday) that will reflect the lowest new crop US stock/use ratio on record.

China remains active in the world grain markets securing at least 1.5 MMTs of Ukraine new crop corn on Friday along with 500,000 MTs of Canadian old crop corn. US exporters tell ARC that China is still bidding for US new crop corn this morning after securing an estimated 5-6 MMTs last week. China will likely use any acute CBT weakness to add to their forward feed coverage.

CBT corn open interest grew 19,108 contracts and wheat 364 contracts, while soybeans fell 2,375 contracts. Fresh speculative buying of the grains was noted on Friday with index funds willing to extend their ownership on budding inflationary fears. Energy, metal, and lumber prices continue to rally. Iron ore futures in China rose 10% just today on strong demand and tight supplies.

Malaysian palmoil futures fell 54 ringgits to 4,264 ringgits/MT as April stocks came in at 1.55 MMTs, a 7.1% gain from March. Yet, May 1-10th palmoil exports are up 29% and the seasonal gain in production is being absorbed by rising world demand.

Paris September wheat futures are down €5.75 at €226.50 on profit taking on last week’s rally amid weather forecast that looks okay.

China’s July Dalian corn futures rallied 9 cents per bushel to $10.99/Bu while Dalian July soymeal lost $4.80/mt to close at $545.40/MT.

Brazil’s weather forecast stays arid for their winter corn crop for another 2 weeks with increasing reports of producers abandoning fields on low yields. The odds are growing that Brazil’s 2021 winter corn crop will be just 62-64 MMTs with the total Brazilian corn harvest under 90 MMTs.

There is zero slippage for US corn/soybean/wheat yields and on tight US stocks. US spring weather has been far from perfect with cold/wet or cold/dry conditions delaying crop emergence. The N Plains and the Canadian Prairies are looking at another 10 days of dry weather which is raising producer concern.

End users and importers are hopeful for a bearish USDA May report to secure a break. The risk of summer weather lies dead ahead, and China is likely to ramp up their soy/feed demand on any meaningful CBT correction. Do not sell breaks.

North American Weather Pattern Discussion: The 3 primary weather models are in fair agreement on the 10-day forecast. The differences are mostly in days 9-10 as the forecast models pull a trough eastward try to work through the location and amounts of rain for the W Midwest and the C Plains. All the models maintain an arid weather pattern for the Canadian Prairies and the Northern Plains. This is a trend that extends backwards to September and is likely to persist. The Northern Plains and Canadian Prairie drought is expected to be a draw for a high-pressure Ridge later this spring/early summer that produces heat/dryness.

The attached forecast is from the GFS model. Arid conditions persist across the Western and Northern Plains, Canadian Prairies, and the Northern Midwest into May 20th. Cool/wet weather across the Gulf States, Illinois and Southern Iowa will slow seeding/ germination. The best chance of rain is during the middle of next week as a Low Pressure Trough pushes eastward across the Plains.

The overnight forecast is warmer than prior runs with the coldest weather occurring this week followed by warming on Sunday and most of next week. High temps will push into the upper 60’s to the lower 80’s which will aid crop growth. Seed that was planted several weeks ago is struggling to emerge amid cold soils.

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