Morning Commentary 5/12/21

It is USDA Report Day; CBT July Soybeans Rip to New Highs on the Hunt for Supply; Dryness Issues to Worsen Across N Plains/Canadian Prairies

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

6:30 AM CT CBT Prices: July soybeans are up 30.00 cents at $16.4475, July corn is up 6.25 cents at $7.2825 while July Chi wheat is up 4.00 cents at $7.4575.

AgResource Morning Grain/Soy Comment & Analysis: Good Morning - it is a USDA Report Day! The May USDA Crop reports will be released at 11 AM CT. NASS will release its 1st survey-based US winter wheat crop production estimate while WASDE will use the March Planting Intentions estimates to update their initial February Outlook Forum US Supply/Demand balance sheets for 2021/22. WASDE will also update 2021/22 world production and end stocks for the 1st time. It is a big day for USDA data, the reports offer a starting point for assessing 2021 US/world crop production and measuring 2021/22 stocks and stock/use ratios.

The average trade estimate for US 2021 winter wheat production is 1,877 Mil Bu, up 50 Mil Bu from last year. US 2021/22 US corn end stocks are forecast at 1,354 Mil Bu with soybean stocks at 132 Mil Bu. Both would produce record low stock/use ratios looking backwards to 1974 (for the May WASDE report).

US old crop corn stocks are forecast at 1,260 Mil Bu with soybeans at 118 Mil Bu. The corn stocks estimate is down 92 Mil Bu from April while soybeans would be down 2 Mil Bu. US 2020/21 wheat end stocks are pegged at 849 Mil Bu, down 3 Mil Bu. WASDE is expected to raise US old crop corn exports by 75-100 Mil Bu.  Important for both crop years is WASDE estimates of China corn/soy imports.

There are industry rumors that WASDE will use their own 2021 US corn, soybean and spring wheat seeding estimates. These are just errant rumors! There is no historical precedent for WASDE to alter 2021 NASS March Seeding Intention forecasts in the May WASDE. In fact, such a May WASDE change would be a pure slap in the face to NASS. WASDE will utilize the NASS March Seeding Intention data in both the 2021 May and June WASDE reports, and wait for the June 30th Final NASS Seeding data to adjust their seeding estimates in July.

CBT futures have pushed higher overnight with old crop soybeans the upside leader. July soybeans have pushed above $16.50 in a hunt to find supply. US crush margins are just above $1.00/Bu and Midwest crushers are willing to push basis bids to garner any remaining supply. Cash pushes are becoming normal.

June Malaysian palmoil futures rose 143 ringgits to 4,749 ringgits/MT as world vegoil supplies stay exceptionally tight. Paris Sept wheat futures is down €1.00 at €225.75 on improved EU weather and the expectation that WASDE will release a big world wheat crop estimate today. China’s July Dalian corn futures rose 10 cents per bushel to $11.24/Bu while July soymeal rallied $13/MT to close at $568.60. New highs are being scored in China corn values.

The primary weather models offer limited rainfall for the N Plains, the N Midwest, and the Canadian Prairies over the next 10 days. The remainder of the Central US will enjoy near to above normal rainfall. Temps will stay cool thru the weekend with warming next week and well into the 11-15 day period.

The May WASDE Report should hammer home that US corn/soybean stock/use ratios will be record tight raising the importance of summer growing weather. End users/importers are hoping for a bearish report to extend their ’21 purchases. Good Luck with the report. AgResource expects that traders will fade either a bullish or bearish report amid the uncertainty of Central US summer growing weather.

North American Weather Pattern Discussion: The 3 primary weather models are in better agreement. The forecast maintains arid weather conditions across the N Plains, the far NW Midwest, and the Canadian Prairies into May 24th. There is no evidence of needed rain that would dent the deepening drought. And temps look to warm across this area with readings 6-10 degrees above normal starting next week. The combination of warming temperatures and limited rain will add early drought stress. The only chance of rain for this area is with a passing cold front next week Thursday and Friday.   

The attached 10-day precipitation forecast is from the GFS model. Soaking and in some cases flooding rain will impact the S Plains, Delta and the W Gulf States. The heavier rains will spread eastward into the E Midwest early next week keeping soils well-watered. The forecast thru the weekend appears dry for the E Midwest. The best chance of rain is from late Sunday through next Thursday for the E Plains and the Midwest.

Temperatures will stay cool for another few days with marked warming starting on the weekend. High temps will rise to the 70’s to the mid 80’s which will accelerate crop growth rates. Lows will be in the 50s.

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