Midday Comments: 4/20/2021

Grains have surged to fresh contract highs on Tuesday as freezing temperatures in the Midwest, continued dry weather in the US northern Plains, the Canadian Prairies, parts of Europe & Brazil’s Safrinha corn growing region threaten to further tighten 5-year-low global grain stockpiles.  May corn futures are working further into an 8-year-old continuation chart gap created at $6.84 & May beans are at levels last seen in June 2014 when weekly charts peaked in mid-May at $15.3675.  Faced with near-record old-crop world supplies, wheat is a follower on Tuesday morning, trading at 2-month highs. What a difference a year makes!  WTI crude oil futures bottomed in a selling barrage on April 20, 2020 at a **negative** $40.32/brl all-time low. Late April, 2020 saw May corn futures bottom at $3.0025 & May bean futures sag as low as $8.0825.  By late June 2020, July soft red winter wheat had plunged as low as $4.6825. The fact that crude oil is over $103/brl higher, corn has more than doubled, beans are up nearly $7, & SRW wheat is more than $2 higher than their 2020 lows is testimony to how COVID & weather pared supplies & central bank & government anti-recession policies inflated the money supply & sustained economic demand.  With markets spiking to new highs this morning, chart-based trading systems are buying & markets are seeking levels that rations usage.  History argues that weather will ultimately be the force that dictates how high prices must go. The fact that farmers in both North & South America have already aggressively sold their 2020 output will lessen the amount of hedge pressure one would normally find in April-June.  That lack of old-crop inventory continues to allow May grain futures to rally more than new-crop months because farmers are still rewarding rallies for crops they have hope to harvest in 2021.  Overnight trading that pushed May corn up 5.25c, Dec. corn 4c higher, May beans up 24c, Nov. beans 15.25c higher, May soymeal up $4.60/ton, May soyoil $1.68/lb. higher, May SRW wheat up 5c & July SRW wheat up 4.75c by the 7:45 am pause in trading.  Grains extended their gains as the regular session resumes at 8:30 am, but stalled between 9 am & 9:30 am with May corn up 19.75c, May beans up 35.75c & May SRW wheat up 26.75c.  At 10:30 am, May corn futures were 13.25c higher, July corn was up 11.25c, Dec. corn was 8c higher, May beans were up 20.75c, July beans were 19.75c higher, Nov. beans was up 15c, May soymeal was $4.20/ton higher, May soyoil was up 1.67.c/lb., May SRW wheat was 16.5c higher & July SRW wheat was up 16.5c.
 
 
 
Recapping Monday’s trading activity, traders pushed corn & soybean futures towards a retest of 2020/21 weekly chart highs as cold weather hit the US & dry weather persisted in Brazil. Private analysts in Brazil are lowering their Safrinha corn production projections, noting the situation could get significantly worse if the current dry weather pattern does not change soon.  While old-crop months only retested previous highs, new crop corn & soybeans futures set fresh contract highs as traders bet world feed grain, vegoil & protein supplies would stay tight in 2021/22. Traders mostly shrugged muted weekly export inspections data for the week ended April 8. Corn inspections slipped to an 8-week-low 60.028 mb, but that still exceeded the Census-adjusted 53.4 mb needed weekly to reach USDA’s 2,675 mb 2020/21 export forecast.  Cumulative corn inspections stand at 1545.1 mb, the fastest export pace since 2007/08. Grain sorghum inspections jumped to 12.389 mb, the highest weekly pace since Nov. 26 & more than triple the 4.0 mb weekly average pace needed to reach USDA’s 295 mb 2020/21 export projection.  Cumulative milo inspections stand at 207.7 mb, the fastest pace since 2015/16.  Soybean inspections sagged to a 58-month-low 6.760 mb, still better than the 5.85 mb Census-adjusted shipments needed weekly to reach USDA’s 2,280 mb 2020/21 export forecast.  At 2020.7 mb, cumulative soybean inspections are still the highest ever by 246.1 mb!  Wheat inspections rose to a 2-week-high 22.546 mb, just above the Census-adjusted 20.6 mb needed each week thru May 31 to reach USDA’s 985 mb 21020/21 export estimate.  Cumulate wheat inspections now total 809.2 mb, up 0.749 mb from last year & the fastest inspections pace in 4 years.  China was again a huge influence on US exports last week.  China was the top corn (12.389 mb), sole milo (12.389 mb), 3^rd-largest wheat (2.444 mb) & 6^th-best soybean (0.332 mb) destination last week.  Wheat struggled to low-range, mixed closes on Monday as near-record world wheat supplies must compete as a feed ingredient.  At Monday’s close, May corn futures gained 6.5c, July corn rose 6.75c, Dec. corn rallied 8c, May beans surged up 16.5c, July beans jumped 14c, Nov. beans were up 10c, May soymeal were $5.30/ton higher, May soyoil edged 0.06c/lb. lower, May soft red winter wheat ticked down 1/4c & July SRW wheat eased 1.25c lower.  
 
Monday afternoon’s USDA Weekly Crop Progress report for the week ended April 18 offered few surprises. The farm agency estimated that 18-state US corn intentions are 8% planted, up 4% for the week & equal to the 5-year average.  Farmers planted only 1% of their grain sorghum last week.  At 15% planted, the milo seeding pace is 4% behind the 2016-2020 average pace. Owing to dry soils in the northern Plains, farmers have sowed 19% of their spring wheat intentions, up 8% for the week & 7% ahead of average.  Winter wheat conditions were unchanged for the week at 53% good-excellent & 17% poor or very-poor. Last year, winter wheat deteriorated during the same week to 57% G-E (-5%) & 13% P-VP (+3%).
 
In export news, USDA announced on Tuesday that 4.500 mb of 2020/21 US corn were sold to Mexico. The farm agency did not report any daily export sales on either Friday or Monday.
 
After being steady on Friday, local corn basis was a penny weaker on Monday. Soybean basis added 3c on Monday to the 2c improvement posted on Friday. Wheat basis was steady on both days.
 
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"Top Ag Comments" are written by David Marshall, AgTraderTalk LLC, Nashville, IL.  To learn more about his farm marketing advisory or commodity brokerage services, contact him at dmarshall@agtradertalk.com or call (618) 327-4370 (voice/fax) or (618) 314-0918 (cell). This commentary is not intended for specific trading strategies. We strive to insure this information is reliable, but we cannot guarantee its accuracy or completeness.  Commodity trading involves risks. You should fully understand those risks before trading.