Yesterday, historically tight supplies for both corn and soybeans has traders concerned more, as the seasonally cool, wet weather is pumping the brakes on planting progress.
Corn tracked 4% higher.
Soybeans up nearly 2.5%.
Wheat prices soared, with most contracts adding more than 5%, due worries over winterkill damage in the U.S. Plains and overall strong demand.
On macro markets, energy prices were lightly mixed.
Crude oil gained nearly 0.4%.
Diesel rose more than 0.5%.
Gasoline was down around 0.25%.
New jobless claims in the US hit a new multi-month low (back to pre-corona levels) again – supporting the views of those who hope the US economy is at the start of a substantial post-covid recovery across the country.
The Biden Administration has proposed taxing income above $1 million at a rate of 39.6%, versus the current rate of 20% – a move that created some selling pressure.
Consequently, fears over the potential for higher capital gains taxes pushed the Dow down 329 points trading to 33,815 while the U.S. Dollar firmed moderately.
Coming back on grains market, May and July corn futures each locked limit up yesterday, moving 25 cents higher to close at $6.5050 and $6.3150, respectively.
May corn futures have risen about 33% higher so far year-to-date.
May soybean futures jumped 36.5 cents to $15.3375, with July futures up 35 cents to $15.1450.
May Chicago wheat SRW futures rose 37 cents to $7.1025 (clearing $7 per bushel for the first time in seven years), May Kansas City HRW futures climbed 35.75 cents to $6.6650, and May MGEX spring wheat futures added 30.5 cents to $7.09.
In this context, CBOT is increasing margin requirements on corn and beans by US$125/contract.
As May futures expiry is approaching, we will see futures moves quotations in the July contract at the start of next week.
Consequently, today’s options expiry is getting a lot discussion.
With the rally a number of previously out of the money options are now either in or near the money, with one more trading day left.
As we know M2 money supplies are up $4.3 trillion since the beginning of the pandemic and much of that money has made its way back into the markets and is available.
Its seeking a home and, obviusly, the best story.
Many factors really leaves the grain and oilseed market as the most attractive avenue.
However more caution need thrown now, because once these markets do stop, if come a different ingredient in there for fundamentals, they can tip over and they can go back down pretty quickly.
Meantime, the USDA will be pushing to pull some 4 million acres back out of crop production through increased CRP enrolment this year in a claimed push against climate change and in direct contrast to their stated goal of supporting new/beginning farmers.
Regular export sales were mixed with 0.24Mt old crop wheat sales (mostly to Mexico), 0.374Mt new crop wheat sales (including a Chinese boat), 0.4Mt old crop corn (again, mostly Mexico – more than offsetting Chinese reductions), and 0.064Mt old crop beans, again with a Chinese cancellation in the mix.
Milo/sorghum sales had a near zero net, with more Chinese demand but all switched from unknown, and two boats of new crop milo sold to China.
Corn export shipments were more robust, but still shifted 18% below the prior four-week average.
China was the No. 1 destination.
Soybean export shipments fell 47% below the prior four-week average to a marketing year low.
Mexico was the No. 1 destination.
Wheat export shipments improved 11% versus the prior four-week average,
The Philippines led all destinations.
From South America, another strike is underway in Argentina, this time it’s tugboats.
Talks are reportedly underway but there are no indications as to whether they will be successful yet.
Argentina’s Rosario grains exchange has upped its forecast for the country’s 2020/21 corn production to 1.968 billion bushels, citing more planted acres and good yields in the Cordoba province, where record yields are likely.
Argentina is the world’s No. 3 corn exporter.
Meantime, an unfavorable climate for Brazilian crops is still contributing to the rise in prices.
From Europe, also on european market, grains and seeds rich in oils keep their foot on the accelerator, moved by tense fundamentals and notable climatic risks.
Wheat in particular accelerated in the green in the face of the dry climate that is taking hold in the United States as well as in Western Europe.
At the same time, demand remains strong, mainly chinese demand.
China, indeed, has been an active buyer of French wheat, recently booking purchases of at least 18.4 million bushels to be shipped between July and September.
The grain is expected to go to mills and for animal feed use.
France has also sold more than 45.9 million bushels of new crop barley to China since last November.
Corn takes advantage of the good shape of wheat to engage in a sustained uptrend.
Rapeseed has also recorded massive gains, in particular on its old campaign contract which soared to € 33.50 / t!
The deadline even momentarily exceeded 600 € / t during the session.
New season prices are also climbing rapidly in a booming oil market (Malaysian palm, US soybean oil, etc.) and in the face of worrying 2021 production prospects.
In MY2021/22, total EU grain production is anticipated to rebound nearly 7 MMT to 286 MMT.
After persistent drought last season, yields in the main producing European Union (EU) Member States are expected to return to average levels.
Favorable planting and overwintering conditions signal prospects for a sizeable crop in MY2021/22.
Final yields will depend on the incidence of late frosts and the pattern of spring precipitations. For the rest of MY2020/21 and for MY2021/22, the crop outlook of European corn suppliers and competition from other large wheat exporting countries will determine EU’s grain trade flows.
The status of COVID-19 restrictions, and the state of animal health in the EU and in key export markets will drive EU’s grain demand.
From Black Sea basin, Russia’s IKAR consultancy has lowered its expectations for the country’s 2021 wheat crop by around 55 million bushels, for a total production of 2.921 billion bushels.
Some areas face replanting issues after adverse weather this winter. Russia is the world’s No. 1 wheat exporter.
The Ukrainian government plans to limit exports of sunflower seeds by introducing a zero quota from May 15 to September 30, 2021 in order to ensure the country’s food security and stabilize domestic prices.
Earlier this week, the sunflower oil export target of 5.38 Mt was set until the end of the current season.
From China, the USDA local office forecasts China’s marketing year (MY)21/22 corn imports at 15 million metric tons (MMT) as market signals are encouraging additional domestic production over MY20/21 levels.
It estimates MY20/21 corn imports at a record 28 MMT. The increase from past estimates is due to continued feed demand and a supply deficit that supports restocking of reserves.
China’s MY21/22 total feed and residual use are forecast to increase by 17 MMT, a 6.7 percent increase over MY20/21.
Corn prices remain high and commercially held corn stocks are at levels not seen in 15 years.
Record volumes of old rice and wheat stocks are entering feed mills and deep processing plants as substitutes for high-priced corn.
Industry members forecast the corn supply-demand situation will not change until late calendar year 2021 or 2022 at the earliest.
In this context, chinese buyers have also been reported in the markets for more new season US corn, though we note, no flashes yet, and Ukrainian corn, buying out the curve in substantial fashion.
Aussie local markets getting excited already with the board rally of yesterday, and not hurt any by the weaker dollar either.
On the internatinal trade scenario, as expected, Japan purchased 3.1 million bushels of food-quality wheat from the United States and Canada in a regular tender that closed yesterday.
Of the total, 70% was sourced from the U.S. The grain is for shipment in June.
Tonigth we will see how the sessions will close.
