A perfect storm of factors drove grains market to new, multi-year highs past week.
Several days of freezing temps in US and French winter wheat areas.
The continued dryness threatening Brazil safrinha corn.
The suspension of Brazilian import duties on soybeans, corn, meal and oil.
Not for last, ther e was rumors China’s bougth of US wheat and corn, late on past week and purchases of soybeans.
Cold soil temps in the US corn belt are delaying planting and emergence.
Whit a weaker US dollar, the funds that are buying and the spot market grain feed demand on fire, we have also seen basis levels was furthered fueled corn and wheat futures.
In this context, front month corn contracts locked limit up on Thursday at $0.25 while KC wheat hit the $0.40 limit several times while settling just below.
Profit taking was expected on Friday to end the week, but markets held firm with wheat, beans and front month corn contracts finishing positive on the day after mid-session selloffs.
Weather continue to remain a wild card with any ideas of freeze damage in winter wheat really unknown for at least a week to 10 days after the freeze.
Should early signs of damage emerge, the true impact will not be known until harvest as ideal weather conditions between now and then could still result in a bumper crop.
Consequently, CBT wheat futures ended the week session UNCH to 5 cents higher, on a wide ranged Friday.
At the open, May set a new LOC high of $7.14 3/4, a level the front month has not been at since 2014.
KC HRW wheat futures closed 5 3/4 to 6 1/2 cents in the black.
Spring wheat futures gained double digits on Friday, going into the weekend a dime stronger.
Old crop corn futures traded the last trade day of the week in both directions, fluctuating on either side of UNCH.
Prices ultimately closed a nickel higher for May and a penny higher for July.
New crop corn futures traded similarly, but spent most of the day in the red and closed 1 1/2 to 2 cents weaker.
Soybeans peaked on the intraday just before midday, leading to new LOC highs.
Afternoon prices faded before finishing strong for the weekend. At the close beans were 1 3/4 to 6 cents higher.
Meal futures ended the last trade day of the weekend with $0.40 to $0.90/ton gains.
Soy oil futures closed the session mixed within 20 points of UNCH nearby and 34 points lower for August.
Meal limits will increase $5 to $40/ton and BO futures will trade with daily limits of 3.5 cents/lb.
CME will expand winter wheat futures’ daily price limits by a nickel, the daily price limits for corn futures from 25 c/bu to 40 c/bu and the daily price limits for soybean futures from 70 c/bu to $1/bu effective May 3.
Meantime, CFTC’s weekly data release showed managed money funds had flipped back to net long on wheat during the week ending 4/10.
Spec funds OI was a net 1,978 contracts lighter and ended the 3 week net short.
Managed money was also closing shorts in KC wheat through the week ending 4/20, leaving the group 18,747 contracts net long.
In spring wheat futures and options, the CoT report showed managed money was 2,438 contracts more net long to 12,118 contracts.
CFTC data showed managed money had reduced their net long on corn during the week ending 4/20.
The spec fund long liquidation left the group 17,995 contracts less net long to 383,998 contracts.
Commercials were adding coverage to both sides as OI was up 22,627 contracts.
On net, the new buying offset the new shorts, reducing the commercial net short by 6,973 contracts to 728,633.
The weekly Commitment of Traders report showed soybean spec traders expanded their net long 30,286 contracts to a 16-wk high of 172,544 contracts with net new buying.
Commercials were reported at 276,778 contracts net short as of 4/20, as they closed 14,872 longs and opened 21,661 new shorts. In soymeal, CFTC data showed short covering on the week expanded the spec trader net long to 48,047 contracts.
Managed money was 89,992 contracts net long in soybean oil, after a week of net new buying.
The weekly ethanol production at 941,000 barrels / day and the drop in inventories to 20.4 million barrels were in line with traders’ expectations.
The Rosario Grains Exchange upped their Argentine corn output forecast by 1.5 MMT to 50 MMT – citing better yields on increased harvested area for the Cordoba region.
That matches USDA’s Ag Attaché forecast, but is 3 MMT above the official USDA April estimate of 47 MMT.
The Argentine government is also looking at potentially raising export tariffs to capture more revenue from higher global prices and keep a lid on domestic prices.
Consequentily, needs to note that this perfect storm of factors that continues to drive this market may continue.
So, we must expect more volatility in the coming months, which we need to be prepared as operators, wachting the wheat market has moved $1.20 in two weeks and meantime, the feeder market has fallen nearly $18 per cwt in the same timeframe.
Meantime China’s corn import estimates this year continue to rise now seen at 28 million metric tons (MMT) from USDA’s official 24 MMT forecast.
The USDA Attaché in Beijing, however, lowered China’s corn imports next year to 15 MMT as well as wheat due to increased domestic production announced by the Chinese government.
As soybean shipments from Brazil declined due to rain delays and logistics issues, it was reported last week that China imported 320 percent more beans from the US in the month of March.
However, the outlook for China’s feed grains and protein appetite have been clouded by uncertainty around growth, the spread of African Swine Fever and geopolitical tensions across the Taiwan Straits.
To note, that Ukraine is China’s other option when it comes to corn.
Both corn and wheat production estimates for the Ukraine have increased above last year allowing for higher exportable supplies as well.
In contrast, Russia’s IKAR reduced their 2021/22 wheat output forecast by 1.5 MMT to 79.5 MMT citing a need to replant winterkill area.
In Russia, despite the progress of sowing, the delay remains very significant compared to previous years.
In fact, on the eve of the weekend, the authorities were postponing spring cereal sowing of 2.4 Mha out of a total of 3.5 Mha, all crops combined.
During 2019 and 2020, such advancements were already reported on April 12 and 7, respectively.
Thus, the 2-week delay observed at the start of the spring season remains valid.
Temperatures should remain cool compared to seasonal norms for the next 2 weeks.
This delay is therefore not in the process of being quickly absorbed.
On European market, FranceAgriMer posted a good to excellent crop rating of 85% for winter wheats on Friday, down 1 point compared to the previous week.
In winter barley, the crop rating is 81% against 83% the previous week and 87% in spring barley against 88%.
Corn sowing is estimated at 41% as of April 19.
Rapeseed prices continue to show exceptional volatility with last week a historic high reached at 605 € / t on Euronext on the May 2021 deadline.
However, it should be noted the absence of activity on the physical market in harvest 2020 on the French market, which leads to a disconnection between physical markets and future markets.
On the intwernational trade scenario, USDA reported some new crop export sales last Friday.
The first was 336,000 MT to unknown, and private exporters sold 136,680 MT to Guatemala.
USDA also reported a private soybean export sale as China purchased 132,000 MT of new crop beans.
South Korea issued an international tender, seeking 342,000 MT of optional origin corn.
Egypt returns to purchases for the new harvest, loads between August 11 and August 20.
The results for are expected on Tuesday the 27th.
It does not seem that the French origin can compete with the Black Sea origins, despite the implementation of export taxes by Russia.
