Corn rose nearly 1.75% yesterday on Chicago.
Soybeans up around 1.5%.
Some wheat contracts trended more than 2% higher.
Solid expectations that the USDA will lower its estimates of domestic stocks for corn, soybeans and wheat in today’s WASDE, led to a round of technical buying that significantly lifted grain prices.
On the macro markets hand, the CBOE Volatility Index (sometimes called the “fear index”) climbed to two-month highs, yesterday.
Indeed, on Wall St., the Dow tumbled 473 points lower to 34,296 on lingering concerns over inflation and overvalued tech stocks.
Energy futures, meantime, were on the rise, with crude oil up around 0.5%.
Diesel rose more than 1%.
Gasoline was up around 0.4%.
The U.S. Dollar softened slightly.
Coming back on grain markets, corn prices rose steadily higher on anticipation that USDA will trim US stocks in its WASDE report of this morning.
Dry weather in Brazil has lent additional support in recent sessions.
Also soybean prices jumped, as traders expect already historically tight US stocks to continue to tighten.
The July 2021 contract closed yesterday above $ 16 / b for the first time, reaching the record level of July 2013, and marks a new increase this morning, returning to the levels of September 2012.
Wheat prices trended significantly higher, with most contracts closing with double-digit gains as traders squared positions ahead of today’s WASDE.
Spillover strength from corn and soybeans lent additional support.
Corn plantings reached 67% completion through Sunday, up from 46% a week ago and in line with analyst expectations.
This year’s pace is slightly faster than 2020’s pace of 65% and well above the prior five-year average of 52%.
And 20% of the crop is now emerged, up from last week’s mark of 8% and slightly ahead of the prior five-year average of 19%.
Ahead of WASDE report, analysts are expecting USDA to further trim 2020/21 corn ending stocks from 1.352 billion bushels in April down to 1.275 billion bushels in May.
Soybean planting progress moved to 42% through Sunday, which was two points above the average trade guess and well above the prior week’s pace of 24%.
Farmers are also planting much faster than 2020’s pace of 36% and the prior five-year average of 22%.
Soybean emergence is at 10% among the top 18 production states, getting there faster than 2020’s pace of 6% and the prior five-year average of 4%.
Ahead of WASDE report from USDA, analysts expect the agency to slightly trim 2020/21 soybean stocks from 120 million bushels in April down to 117 million bushels in May.
Spring wheat plantings jumped from 49% a week ago up to 70% through Sunday.
That’s much faster than both 2020’s pace of 40% and the prior five-year average of 51%.
Twenty-nine percent of the crop is now emerged, up from the prior five-year average of 20%.
The 2020/21 winter wheat crop is shifting slowly closer to harvest, with 38% of the crop now at the heading stage.
That’s moderately behind 2020’s pace of 42% and the prior five-year average of 46%.
Quality ratings moved a point higher, with 49% of the crop in good-to-excellent condition.
Analysts thought USDA would hold ratings steady this past week.
Another 33% of the crop is rated fair (unchanged from last week), with the remaining 18% rated poor or very poor (down a point from last week).
Ahead of Wednesday morning’s WASDE report from USDA, analysts expect the agency to show 2020/21 wheat stocks on the decline, moving from 852 million bushels in April down to 846 million bushels in May.
Planting progress, however, proved to be largely a nonfactor yesterday, but need to note that the 2021 crop is going into the ground much faster than it has in recent years, which could create some downward pressure later this spring especially related with today’s WASDE figures and to weather conditions.
The agency’s latest 8-to-14-day outlook expects a return to seasonally wet weather for the central U.S. between May 18 and May 24, meantime, and widespread warmer-than-normal conditions are also likely.
In this context, corn basis bids showed some variability at two Midwestern ethanol plants while holding steady elsewhere across the central U.S..
Soybean basis bids moved 2 cents higher at two interior river terminals, while holding steady elsewhere across the central U.S.
From South America, operators are also awaiting a dry cut of the Brazilian crop, as a result of the dry and hot conditions that have plagued the country for many weeks.
Also a report from Brazil’s CONAB, will be out tomorrow.
Meantime, one of the key numbers the market will be watching in WASDE report, is just the Brazilian corn production figure.
USDA is currently sitting on 109 million tonnes (Mt), while the street is ranging from the low to mid 90s.
Interestingly, the average trade guess as to where the USDA will end up is 103Mt, with the low print being 100Mt.
The report then becomes a game of expectation management rather than what the trade thinks the actual number is.
Dr Cordonnier, one of the more followed crop forecasters, and one that focuses more on South America, lowered his Brazilian corn number to 97Mt from 100Mt last week.
Conversely, he increased his soybean crop estimate by 1Mt to 134Mt and left his Argentinian soybean crop at 45Mt.
While this report will be all about corn, the implications for global wheat balance sheets could be significant.
Cuts in corn production and potential increases in global demand have to be satisfied somehow.
The easy solution is via substitution to wheat feeding.
This then adds a level of pressure to both balance sheets.
In the past, the USDA has been slow to move, particularly on the demand side.
This may have caught up to them, with China corn demand seemingly unstoppable.
Indeed, private exporters reported to USDA another large corn sale to China yesterday.
The sale was for 680 kt and will be delivered during the 2021/22 marketing year, which begins September 1.
Since last Friday, the Middle Kingdom has thus contracted 3.12 Mt of American corn.
On European market, yesterday’s session offered a rebound in prices, in the wake of the Chicago market, after the decline session recorded Monday both on the physical market and on Euronext.
Weather conditions remain a major stressor at present also in Europe.
Old harvest corn prices are still showing firmness in the face of South American fears and availability.
This is supporting the prices of the new crop as well.
Meantime, French Ministry of Agriculture also communicated yesterday its rotation estimate for the new harvest in France at 1.44 M ha for corn, thus confirming the expected decline due to the increase in soft wheat areas still displayed. at 4.89 M ha.
Rapeseed areas are timidly revised downward in France compared to last month.
The ministry thus communicates on an area of 989,000 ha, down -11% compared to last year, the lowest for nearly 25 years! .
Consequentially, rapeseed prices due August rebounded to a technical support zone and marked a new maturity high.
From Black Sea basin, spring 2021 was much later than usual in Ukraine, responsible for a vegetative delay for winter crops and a sluggish progress of seedlings.
In recent days, the mercury has risen significantly.
This warming is accompanied by scattered rains which should ensure a good establishment of the spring crops.
Producers are now taking advantage of weather conditions to protect crops.
In areas where the yield potential is the lowest in winter cereals (south of the country), producers will now be busy spraying insecticides, fungi and herbicides as quickly as possible, most often in a passage which in many cases will prove to be the only one of the season.
Meantime, Russia’s SovEcon consultancy estimates that the country’s wheat exports in April reached 40.4 million bushels.
If realized, that would be a month-over-month improvement of 19% but otherwise far below the typical monthly volume seen earlier this marketing year.
Russia is the world’s No. 1 wheat exporter.
Palm oil prices are also under strong pressure, marking a new high this morning in Kuala Lumpur a few hours before the publication of the USDA monthly report.
Aussie local markets were weaker across the board yesterday on new-crop wheat, barley and canola.
Canola track values were down AU$10-15/t and ASX Jan 22 wheat settled the day out at $317/t, with smalls trading over the day.
Current-crop values were relatively unchanged and we continued to see those small parcels hit the market and trade.
Current-crop up-country domestic bids have started to push a little firmer on wheat, while the port export bids have remained steady.
The eight-day Bureau of Meteorology forecast has scattered showers for Western Australia and north-east Victoria.
There is nothing substantial to keep growers confident on planting activity through South Australia, and Victoria’s Wimmera and Mallee districts.
On the international trade scenario, Japan issued a regular tender to purchase 4.5 million bushels of food-quality wheat from the United States, Canada and Australia that closes later this week.
Around half of the total is expected to be sourced from the U.S. The grain is for shipment in July.
Tonigth we will see how the session close.
