Corn prices hit a new eight-year high at last of the week as the outlook for Brazil’s crop dries up in the excessive heat and global livestock demand continues to rise.

New contract highs were made frequently.

End users are scrambling for old crop cash supplies.

The two week gain is 15.6% for July corn, a 99 cent advance.

Surging vegetable oil prices, meantime, continue to support prices for the soy complex.

Soybean futures jumped 55 ½ cents per bushel this week.

Due to the elevated price level, that was only a 3.6% gain.

Soy Meal was up 3.68% or $15.70/ton, with $14.50 of that coming on Friday.

Bean oil was up 3.4%, setting a new all time high on Monday in the front month May contract.

Palm oil and canola futures also set new all time highs this week.

However, another round of African swine flu outbreaks in China’s hog herd could limit global livestock demand for soybeans and soymeal and this has limited surgin in prices.

Wheat prices, on their part, were pulled higher by this week’s corn rally and supported by strong global livestock demand, particularly from China.

Chicago SRW was up 3.7% on the week, with KC HRW 4.7% higher.

Minneapolis spring wheat rose another 4.4% as planting continues and acreage must be kept away from corn and soybeans.

A weaker dollar also helped spur gains in all the wheat complex.

Gulf tributary basis is slightly up as farmer selling remained light and increased domestic demand supported export prices.

Traders said hard red spring basis in the PNW was slightly down due to large old crop supply.

USDA reported U.S. winter wheat conditions improved this week. Winter wheat reported as good or excellent was 49%, 2% ahead of last week’s rating as much needed rain occurred across the HRW producing region.

USDA reported that the southern plains HRW crop was well over 60% headed as of May 2.

U.S. spring wheat for harvest in fall 2021 is 49% planted, well ahead of the 32% five-year average.

Spring wheat emergence is 14%, 4 points ahead of the five-year average.

Storms across Texas brought between 2 and 10 inches of rain greatly improving soil moisture conditions.

Areas of southern and eastern Oklahoma also received significant rainfall this week.

The High Plains, including Kansas, Nebraska, Colorado, and Wyoming, also welcomed rain that reduced areas of severe drought in southwestern Nebraska and northwestern Kansas.

Northeastern Colorado received 2 to 4 inches of rainfall boosting soil moisture.

However, extreme drought conditions expanded in the Dakotas, and Oregon, Washington and Idaho continue to see below-average rainfall.

The latest weekly grain export inspection report from USDA, out Monday morning and covering the week through April 29, showed corn volume continuing to strengthen after moving higher again week-over-week.

In contrast, wheat faced moderate declines, with soybeans coming in at roughly half of the prior week’s tally.

Grain export sales have been robust overall throughout much of the 2020/21 marketing year, but USDA’s latest batch of sales data, covering the week through April 29, didn’t have a lot of helpful data for traders to digest.

Indeed, old crop corn sales plummeted 74% below the prior week’s tally, with old crop soybean sales down 44% week-over-week.

Old crop wheat sales fared the worst, with enough net reductions to push totals to a marketing-year low.

Meantime, rumors on Tuesday and Wednesday about Chinese new corn crop buying, proved correct, with USDA confirming 1.36 MMT sold to China on Friday for new crop delivery.

Going inside the numbers, the weekly Export Sales report indicated poor old crop corn sales of 137,400 MT for the week of 4/29.

New corn crop sales were only 106,200 MT, as it exclude the big Chinese purchase (it will be in next week’s report).

That took the 20/21 shipped and unshipped sale total to 100% of USDA forecast vs. the 89% average.

Corn exports have reached 64% of the WASDE full year projection, with the normal pace at 61% by the end of April.

The report also showed old crop wheat bookings negative 95,600 MT due to rollovers, nominations and cancellations.

Total wheat export commitments for 20/21 are 25.740 MMT, totaling 96% of the USDA projection, vs. the average pace of 105%.

New crop sales totaled 399,600 MT.

Meantime the weekly report saw bean bookings of 165,300 MT for old crop and 192,900 MT for new crop.

Total old crop export commitments for the MY are now 99% of the USDA full-year forecast, compared to the 5-year average pace of 94% for this date.

Shipments have progressed to 91% of that projection vs. the 79% average pace.

Just a few short weeks ago, cold and rainy weather (with some unseasonably late snow!) put the brakes on planting progress for corn and soybeans, but better conditions this past week helped farmers make immense progress, especially when it came to corn.

That crop is now nearly half planted, according to USDA’s latest crop progress report, covering the week through May 2.

Indeed, about 46% planted as of last Sunday (36% is the average), and several areas getting good progress in this week.

Rain is expected across most of the Corn Belt over the next 5 days.

In the short term, the pace of planting and USDA’s upcoming May 12 World Agricultural Supply and Demand Estimates could determine whether this phase of the rally still has legs.

After that comes a long growing season and the government’s next reports on acreage and stocks will be only for the next June 30.

Meantime, in Friday’s CFTC commitment of Traders report, we have seen spec funds in corn futures and options trimmed their net long position by 6,115 contracts as of 5/4 to 372,548.

The net short commercial position stood at 722,640 contracts, an increase of 12,044 on the week. Collectively, the end users bought enough cash corn to cut their long hedges by 14,513 contracts for the week, while elevators moved enough down the track to trim their short position 2,469.

The large spec traders in CBT wheat futures and options cut 2,676 contracts from their net long position as of Tuesday, dropping it to 10,723 contracts.

In KC wheat, they added a net 3,962 contracts to bring the net long position up to 34,000 contracts.

After being net short for more than two years in MPLS wheat, the managed money spec funds have now been net long that market for 7 months.

September Minneapolis futures are the 5th highest all time for the month of May, and the highest during May since 2014.

Meantime, the report also showed managed money spec funds in soybean futures and options cutting 5,215 contracts from their net long position, taking it to 174,799 contracts on May 4.

They had held their largest net long for beans since December 29 the previous week.

In this context, CBOT soft red winter (SRW) futures rose 31 cents to close at $7.73/bu.

KCBT hard red winter (HRW) futures were up 29 cents to end at $7.27/bu.

MGE hard red spring (HRS) futures gained 26 cents to close at $7.89/bu.

CBOT corn futures jumped 32 cents to end at $7.72/bu.

CBOT soybean futures gained 50 cents to close at $16.21/bu.

StatCan announced Canadian stocks of wheat (excluding durum) at March 31 lower than expected, at 13.5 Mt, against 15.5 Mt a year earlier.

Milling wheat bids in SK have strengthened with 1 CWRS 13.5 at $9.00/bu for May delivery and $9.20 for June.

Values for fall delivery are at ~$8.50/bu for S/O.

Canadian. durum exports for week 38 amounted to 108,000 mt, for a year-to-date total of 4.6 million mt, 26% higher than last year-to-date.

Annualizing year-to-date exports to the end of the crop year it would mean 6.3 million mt, while AAFC is using only 5.6 million mt of exports for this year.

If 5.9 million mt of exports can be achieved, this would lower ‘20/21 Canadian durum ending stocks to ~560,000 mt.

Old crop durum in SK is trading at ~$9.00-9.15/bu delivered.

New crop durum is still bid at $8.25-$8.50/bu FOB farm SK.

Canadian canola stocks fell by 4 Mt over one year, to 6.6 Mt, which represents the lowest reserves in the country since March 2013!

Winnipeg canola July contract closed the week to $1006.70.

From South America, dryness in Brazil continue to play an important role.

The main driver of shallowness along all Parana River is dry weather in Brazil, where the waterway starts.

Argentine soy and corn harvesting is being driven by ideal weather conditions but the lack of rain that is helping farmers bring in crops is also contributing to the shallowness of the Parana River, which has begun to dent agricultural exports.

Lack of navigability on the river, which carries about 80% of Argentine grain exports, is “an underestimated problem” for exporters.

The Buenos Aires exchange forecasts a 2020/21 soy crop of 43 million tonnes, but that could increase thanks to better than expected yields in Cordoba and Santa Fe provinces, it said.

The exchange forecasts a corn harvest of 46 million tonnes.

The soy harvest progressed by more than 20 percentage points over the last week to cover 53% of planted area, according to the exchange, and the corn harvest was nearly 23% completed.

But the situation on the river is very serious and not expected to get better until late in the year.

So navigability on the waterway will worsen.

Ships are loading 5,500-7,000 tonnes less due to low water levels.

The Buenos Aires Grains Exchange (BAGE) in its 2021/22 outlook estimates wheat production to be an all-time high of 19.0 MMT as yield has improved and farmers expanded planted acres.

Meantime, inflation in Argentina has reached 13% in the first quarter of 2021 according to the Argentine Central Bank.

The government is weighing an export duty hike on grains to bring in more U.S. dollars and stem inflation.

However, market participants warn that a tax hike would just deter greater famer planting, as historic USDA data indicates.

In this context, Argentina domestic prices fell by ~ $5/mt as a result for both old and new crop wheat.

FOB values, in contrast, for May 12% protein Argentine wheat ranged from $265-270/mt, up ~$2/mt from last week.

Argentine farmers have sold 16.4 million tonnes of 2020/21 soybeans, including deals registered over the last week for 869,200 tonnes, the Ministry of Agriculture said on Wednesday in a report with data updated through April 28.

The sales are lagging behind last year’s tempo.

At this point in 2020, some 20.8 million tonnes of Argentine soybeans had been sold, according to official information.

Despite high international prices, growers on the Pampas farm belt are clinging onto their crops as a hedge against the swooning local peso.

The currency has weakened 28.5% over the last 12 months to 93.75 to the greenback, making it more profitable for farmers to save in beans rather than cash.

The hoarding has weighed on the inflow of export dollars needed to replenish central bank foreign currency reserves strained by a three-year-old recession exacerbated by the COVID-19 pandemic.

In Brazil, global grains merchants are using satellites and spies to surveil Brazil’s soybean heartland and deploying an army of lawyers to ensure farmers deliver promised crops instead of finding a different buyer at prices that have doubled since deals were made.

At stake are billions of dollars and the sanctity of crop contracts in Brazil, the world’s top soy exporter accounting for roughly 50% of the global trade.

Soybeans have rallied to an eight-year high and Brazil soy exports have soared in particular.

If farmers deliver, traders make the profits.

If farmers can break their deals, they could double their income.

The disputes have tested a somewhat informal business culture in rural Brazil.

Farmers say traders are demanding delivery even when no contracts were signed.

There are cases when only a verbal agreement was struck on Whatsapp.

Other commitments were made over the phone or by email.

Those deals are much less appealing to farmers now, as prices soared 71% from May 2020, when many were closed.

Traders say farmers should honor their agreements, and lobbyists for top grains merchants such as Archer-Daniels-Midland Co (ADM.N), Bunge Ltd (BG.N), Cargill Inc and Louis Dreyfus Co (LDC) detailed to Reuters the tactics they are using to keep farmers to their word.

The last wave of Brazilian farmer delivery defaults came in 2003 and 2004, when soybean rust disease devastated crops.

This year, traders say force majeure clauses apply to a tiny number of farmers, with most looking to cash in on high prices.

Traders say trust in the integrity of contracts sustains Brazil’s $45 billion soybean industry, from input and machinery sales to crop financing.

Last year, Brazilian soybean farmers sold an unprecedented volume of crops before planting a seed, as prices seemed attractive. Soon, dwindling supplies spurred an even bigger rally. .

Traders arrange to buy soybeans in advance to secure supplies and fix purchase prices.

Trades are hedged, and commitments to process or export are tied to these contracts.

Sources at trading firms and their lawyers said tough tactics are needed to enforce contracts, formal or informal.

Farmers insist that a washout clause gives them the right to exit contracts without paying fines of 30% to 50% of the spot price of the soybeans committed.

Meantime, the trade on average believes USDA will drop their Brazilian corn production estimate to 103.2 MMT on Wednesday.

Some private estimates are as low as 94 MMT.

No change on Euronext, with cereal prices which confirm their good energy and follow the sessions in the green.

In fact, evevn if Euronext ended the week with Matif May wheat futurea at 7,50 lower from last week, Matif September wheat futures, gained 12,75 euros to end at €232,00/t.

Matif corn June futures raised 21,75 euros to close at €263,00/t.

Matif rapeseed August futures, jumping 36,75 euros to end the week at €640,75/t.

The weekly publication of the COT by Euronext shows that the financiers have increased their long positions in wheat to 133,450 lots against 120,471 lots last week.

The condition of French soft wheat declined for a fourth consecutive week but remained well above the level a year earlier, data from farm office FranceAgriMer showed on Friday, as crops emerged from a chilly, dry April.

An estimated 79% of French soft wheat was in good or excellent condition in the week to May 3, down from 81% a week earlier, FranceAgriMer said in a cereal crop report.

The drop was less than the four-point decline in the previous week, suggesting last week’s return of rain in parts of France may have helped some crops.

The good/excellent score for winter barley edged down to 76% from 77% the previous week while durum wheat and spring barley ratings were unchanged on the week.

Grain markets are watching to see if more widespread showers forecast for this week and next in France, the European Union’s biggest grain producer, will provide a boost to crops that endured record temperature lows and limited rain during April.

Crop ratings remained up from a year ago, when crops had suffered from torrential rain. The soft wheat good/excellent score compared with 57% at the same point last season.

For grain maize, the sowing campaign was nearing an end with 89% of the expected area seeded by May 3, up from 74% the previous week and 76% a year ago, FranceAgriMer said.

Meantime, the latest data from the European Commission indicates that EU corn imports during the 2020/21 marketing year have reached 12.34 million tonnes against 17.67 last year to date.

That’s a year-over-year decrease of 30% so far.

European Union soybean imports for the 2020/21 marketing year are trending fractionally above last year’s pace after reaching 453.4 million bushels through May 2.

EU canola imports at 5.43 million tonnes against 5.30 million last year to date, are also up slightly year-over-year, with EU soymeal imports down moderately during the same period.

European Union soft wheat exports for the 2020/21 marketing year are 665,000 t in April, bringing the total to 22.14 million tonnes since the start of the campaign against 30.0 last year to date.

EU barley exports are roughly even from a year ago, meantime, with 6.61 million tonnes.

April French soft wheat exports outside of the European Union and UK were the lowest since 2012.

French export data shows total 2020/21 French wheat exports are expected to be their lowest in four years.

Traders blamed the slow exports on a price rally that made French wheat uncompetitive overseas and dwindling supplies from the poor 2020 French harvest.

Rapeseed prices have risen sharply this week again, because the “damage is real” on crops whose seedlings “were less, for rapeseed” this year.

“In rapeseed , if the daily rise in prices is spectacular, it is due to the double effect of the prospects for weak harvests in Europe combined with an oil that is competitive with respect to its main competitors, namely palm oil and that of soybeans ”.

Palm oil was indeed taking off again, standing well above the symbolic threshold of 4000 Ringgit per tonne, on the Kuala Lumpur stock exchange.

From North Africa, the Moroccan government said on Thursday it will reintroduce customs duty on soft wheat and durum starting from June 1, in order to cut imports amid expectations of a larger harvest this year.

Morocco expects a cereals harvest of 9.8 million tonnes this year, up 206% from last season. The harvest includes 4.82 million tonnes of soft wheat, 2.34 million tonnes of durum and 2.6 million tonnes of barley.

Egypt said on Sunday it has harvested around 1.2 million feddans of wheat since the beginning of its domestic wheat harvest season in mid-April.In press statements, Minister of Agriculture El-Sayed El-Quseir said that around 1 million tonnes of wheat have been procured by the supply ministry.

He said wheat production this season was promising due to the implementation of quality agricultural practices and seeds with a commitment to technical recommendations issued by the ministry periodically during the harvest season to farmers.

Egypt, the world’s largest wheat importer, plans to procure around 4 million tonnes of wheat from farmers this season.

Its strategic reserves of grain are sufficient for 3.6 months.

According to a draft budget for FY2020/2021 seen by Reuters, Egypt is expected to provide 8.6 million tonnes of wheat to the public, with around 5.1 million tonnes imported.

From Black Sea basin, Russian crop continues to look good even if agriculture consultancy IKAR has lowered its 2021 Russian wheat production forecast to 79 million tonnes from 79.5 million tonnes, on Friday.

But, for the moment at least, this doesn’t matter – its all about corn and the risk that the US has an issue throughout their growing season so, risk premium remains.

The rise recorded on the world market, indeed, is also having repercussions on the Black Sea origins.

All products combined, indeed, have recorded a further significant rise in prices since the beginning of the week.

For the 2021 harvest, wheat and corn are standing shoulder to shoulder for harvest delivery at price levels now above the psychological threshold of $ 250, in Odessa rendering.

On the cereals side, only barley is not showing at its highest levels, for lack of a Chinese appetite which seems to be satisfied for this crop in the medium term.

The rapeseed, still for harvest 21 delivery, is now at price levels nearly $ 200 higher than those offered last December on the CPT-Odessa basis.

The sunflower seed, still harvesting 21, is approaching the threshold of $ 600 / t, delivered to the factory, 14% VAT included.

In this context, according to the APK-Inform agriculture consultancy, Ukrainian wheat export prices have risen $14 a tonne over the past week.

Bid prices for high-quality soft milling wheat increased to $264-$270 a tonne FOB Black Sea port.

Feed wheat rose by $12 a tonne to $258-$264 FOB Black Sea.

Corn bid export prices rose by $13 over the past week to $273-$280 FOB, while bid prices for Ukrainian-origin barley rose by $6 to $238-$248 per tonne FOB Black Sea.

Ukrainian grain exports, however, have fallen by 24% to almost 39 million tonnes so far in the July 2020 to June 2021 season, agriculture ministry data showed on Wednesday.

The exports included 15.13 million tonnes of wheat, 19.14 million tonnes of corn and 4.12 million tonnes of barley, the data showed.

Traders have used around 86.5% of the total wheat export quota of 17.5 million tonnes imposed for the whole 2020/21 July-June season.

The ministry and traders have said wheat exports were unlikely to reach the full quota this season.

Ukraine is among the largest global grain exporters, selling about 57 million tonnes to foreign buyers in the 2019/20 season.

Exports could decline to 45.7 million tonnes in 2020/21 because of a smaller harvest, the government has said.

Pakistan’s government announced it will import 4.0 MMT of wheat this year to meet domestic consumption.

Wheat and wheat flour prices have doubled over the last three years, and inflation skyrocketed 11.1% in April alone.

On April 27, Pakistan’s finance minister said the country had enough total wheat stocks to last two and a half weeks.

Pakistan imported 3.6 MMT of wheat in the first nine months of the fiscal year.

The government estimated 2021/22 wheat consumption at 29.3 MMT.

From Middle Kingdom, China’s 2021 corn output is forecast to rise 4.3% from the previous year to 272 million tonnes.

Corn acreage in 2021 is expected to increase 3.3% from the previous year to 42.63 million hectares (105.3 million acres), China National Grain & Oils Information Center (CNGOIC) also said in a statement published on its official WeChat account.

The estimates come after China’s domestic corn prices hit record highs amid tighter supplies of the grain.

China has cut corn acreage in recent years to reduce state stockpiles and boost output of other crops like soybeans.

But it said earlier this year that corn acreage would increase in 2021 as temporary reserves of corn had dwindled, while typhoons hurt output in 2020.

The national policy on soybean is shifting. Incentives are not as (strong) as a couple years ago.

In fact, China’s 2021 soybean output is expected to fall 6.1% from 2020 to 18.4 million tonnes, while acreage of the oilseed is seen dropping 6.9% to 9.2 million hectares, according to CNGOIC.

China’s 2021 wheat output, meantime, was seen up 1.6% from the previous year at 136.4 million tonnes, while rice output was seen up 1.5% at 215 million tonnes, according to CNGOIC.

China was also expected to produce 14.5 million tonnes of rapeseed in 2021, up 2.8% from the previous year.

Meantime, China’s state economic planner has pulled the plug on any economic talk between Australia, sighting Australia’s cold war mindset and ideological discrimination.

However, Australia’s Trade Minister Dan Tehan indicated the decision was disappointing as the economic dialogue was an important forum for Australia and China to work through issues relevant of economic partnership.

And just to remain in Australia, Australian weather maps have built some more precipitation in the models for SA with the 8-day outlook increasing to a widespread 10mm across the cropping areas.

Favourable conditions for western and north eastern Victoria while the Wimmera/Mallee regions still look tough again for rainfall over the next 10-15 days.

Meantime Aussie local current crop values were again relatively unchanged across the boards and we saw a spike in liquidity being traded with the focus still being execution and delivered into the ports.

Indeed, Aussie bids for delivery during 2020/2021 season, finished the week with Brisbane APH1 to $345 Jul/Sep, Darling Downs SFW1 to $321 May/Jun, Western Downs SFW1 to $317 May/Jun.

New crop canola markets continued to fire higer!

KWI port zone finished the week with bids over $800 FIS and is set to keep firing more higher.

This week was also caratterizzzata issue of the monthly report of FAO, on the price index.

World food prices, indeed, increased for a 11th consecutive month in April, hitting their highest level since May 2014, with sugar leading a rise in all the main indices, the United Nations food agency said on Thursday.

The Food and Agriculture Organization’s food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 120.9 points last month versus a revised 118.9 in March.

The March figure was previously given as 118.5.

The Rome-based FAO also said in a statement that new forecasts pointed to growth in both world wheat and maize output in the coming season.

FAO’s cereal price index rose 1.2% in April month-on-month and 26% year-on-year.

Worries about crop conditions in Argentina, Brazil and the United States pushed maize prices up 5.7% last month, while wheat prices held largely steady.

By contrast, international rice prices slipped, FAO said.

FAO’s vegetable oil price index rose 1.8% on the month, pushed higher by rising soy, rapeseed and palm oil quotations, which offset lower sunflower oil values.

Meantime, FAO raised its forecast for global cereal production in 2020 by 1.7 million tonnes to 2.767 billion tonnes, 2.1% up on 2019 levels.

The U.N. agency also provided its first outlook for wheat in the 2021/22 season, forecasting production at 778.8 million tonnes, up 0.5% on the 2020 estimate, lifted by an anticipated 6% increase in output in the European Union.

FAO also said that early prospects for global coarse grains production in 2021 pointed to a likely third consecutive year of growth, mostly related to maize.

It said the forecast was driven by expectations of increased planted areas in Brazil, China, Ukraine and the United States, as well as recovering yields in the EU.

Despite bigger grain crops worldwide this year, higher demand has left closing stocks overall unchanged from last year while corn will register its ninth year of decline, according to latest the International Grains Council Grains (IGC) Market Report.

Total grains 2021/22 production, projected at 2287 million tonnes (Mt), was 3pc higher than the 2226Mt production in 2020/21.

Closing stock, projected at 609Mt in 2021/22 for the second consecutive year, has declined by about one per cent each year since 2018/19.

Of the wheat and coarse grains monitored by IGC, it is the corn stock reduction that was most significant this year compared with last.

At 264Mt 2021/22 carryout, corn stock would be 7 per cent lower than previous year and consecutively lower by 26pc, 29pc and 17pc than the three previous years.

Corn stock would fall during 2021/22 to the lowest in nine years while wheat would continue to build to a record.

Though all prices are higher this year, strong gains in the corn price index (figure 1), up by 93pc this year, several times larger than the increase in the wheat price index, has led to wheat being substituted for corn especially in livestock feeding.

Corn consumption has nonetheless increased this year mainly through greater industrial use.

The GOI climbed 8pc this month to an eight-year high, as tightening supply outlooks and weather worries sparked solid gains in maize, wheat, soyabean and barley export prices.

The maize sub-index rallied 13pc this month, buoyed by concerns about worsening crop prospects in Brazil, slow US sowing pace and firm US cash markets.

The IGC wheat sub-index this month lifted 10pc, boosted by heightened uncertainty about inclement weather in parts of the northern hemisphere and strength in rowcrops.

The soyabeans sub-index rose 7pc on tightening US supplies, USDA’s smaller than expected 2021/22 plantings figure and broad-based strength across global vegetable oil markets.

Meantime, to note also the Baltic Dry Index (BDI), an assessment of the average cost to ship raw materials such as grains, coal and iron ore, that gained 6% on the week to end at 3,183.

The U.S. Dollar Index, in contrast, decreased from last week’s 91.26 to close at 90.56.

Watching next week market, the weekly Export Inspections and Crop Progress reports from USDA will be out on Monday.

On Wednesday, EIA will show weekly ethanol production and stocks data.

Wednesday also will feature the USDA Crop Production and WASDE reports, with their first official looks at 2021/22 production. Fast forward to Thursday and we get the weekly Export Sales report.

May’s grain and oilseed futures expire on Friday.

Have a good weekend.

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