The commodity markets, past week, proved the bull market is far from over.
Chicago May corn futures ended the week above the $7.70 mark.
December corn futures reached $6.36.
Soybean prices had a similar story, with old crop finishing Friday above $16.
July corn prices were up 58.25¢ and July soybean prices were up 55.75¢, for the week ending May 7.
Chicago July wheat prices were up 27.75¢, taking advantage of the tension on the grain markets to appreciate and thus mark a new high in the 2021 harvest to $7.62.
Global cash markets have followed Chicago futures higher, and the cash price for Russian wheat was quoted at US$280/t, $6/t higher on the day, while Black Sea wheat futures also rallied $6/t.
Canadian canola has also gained, with Winnipeg July cracking the C$1000/t barrier on Friday.
Australian delivered wheat markets finished the week slightly firmer, with most market zones picking up around AU$5/t for the week.
Selling liquidity seems limited as Australia pushes through the winter-crop sowing window.
Aussie new-crop canola is the talk of the country, with growers attempting to find the right combination of production risk versus price reward.
Meantime, the NSW Port Kembla track reached new short-term highs of $772/t for new-crop canola.
Also European market ended the week with a further increase in grain prices for the 2021 wheat and corn harvest in a still tense context.
In the old harvest, corn prices hit new highs on Euronext’s June 2021 deadline.
In wheat, today we will see the close of the May 2021 maturity in wheat, a maturity which experienced a very strong variation on Friday, finally returning to display at € 243.75 / t and thus registering a net decline compared to in the previous days.
Rapeseed ended the week up in a still tense context.
The August 2021 deadline, the first deadline for the 2021 harvest, is now above 540 € / t, taking advantage of the outlook for tension in Europe and also the tension on canola.
As we can see, so, both corn and soybean futures prices hit eight-year and 8-1/2-year highs, respectively.
The price action has been fairly straight up, but there are a laundry list of things at play in the markets.
In a way, the weather market has already started.
There’s strong demand, especially from China.
In fact, higher prices are seemingly not impacting Chinese demand.
Last Friday, export demand strengthened with USDA announcing a big buy of new crop corn with China purchased 1.36 MMT, which is the biggest sale since January and the 16th largest purchase on record.
The inflationary pressures, are pushing plus fund buying, the commercial buying.
Additionally, there’s one other major factor at play: the lack of farmer selling.
Farmers don’t have any grain left to sell in warehouses and now they’re very, very reluctant on selling more corn until they see it in the ground.
Of course, the main factor of this rally was the back of deteriorating weather across the growing regions in the US and established a fundamentally bullish makeup of the supply and demand balance sheet.
The US growing areas will need to see a nearperfect planting and growing season, combined with a significant slowdown in demand to see any meaningful change in fundamental support in current markets.
The western half of the US continues to face drought, which will affect wheat production (KW and MW) and support the overall grain complex.
However, most of the wheat price move higher was on the back of the firm 15% rally in corn prices.
At plenty of destinations, the price of corn is now higher than Feed wheat, which would mean world feed wheat demand could significantly increase.
In fact, the weather forecast in brazil suggests a significantly worse crop.
Total corn crop for brazil was earlier estimated in the range of 100-105 million mts; now, with the impact of dry weather, current estimates stand between 89 to 95 mmts.
In add, yields are currently being established on the northern hemisphere crops, and current dryness is only adding to supply worries.
Bullishness from the corn will only continue to support the wheat prices.
The Black sea export program remains undersold, as there is still uncertainly related to tax structures.
However, if that were resolved, the physical market could see some selling pressure, though it would be limited as corn would continue to provide the major price support.
So, the continued strength on new crop and old price will be a function of how the weather develops in the coming months.
About oilseed complex, the Brazilian stocks are drawing down, and less than ideal weather has only increased the probability of a significantly tighter carryout.
Soybeans and soybean oil balance sheet is unsustainable at the current demand pace and expected supply.
Oilshare also rallied in line with soybeans’ strength.
However, for crush demand to reduce, soybean prices will have to rally comparative to soybean meal and oil.
Any adverse weather event will push the new crop values significantly higher.
Funds positions, meantime, have primarily remained the same over the last two weeks, with only marginal change in long corn positions.
To note, so, that ratio of long positions vs. short remains close to 90%, indicating a strong consensus in the fund position view, which increases the chance of a sharp pullback if there is fundamentally bearish news.
Obviously, the approach of the USDA monthly report for May which will be published mid-week Wednesday May 12 should encourage some portfolio readjustment operations and some anticipated profit taking.
Based on all the information going into this report, many in the trade expect the report will be bullish.
However, USDA could change exports and usage expectations, as high prices are making it expensive for end users to feed or crush grain.
In addition, this report will be the first time USDA can update its new-crop yield expectations.
NASS officials job is not to speculate.
Their job is to present and look at the facts.
The facts right now are the crop is going in early, which usually means a better yield.
So, they also could raise the yield.
