Midday Comments: 4/23/2021

Grains were hit with modest profit-taking on Thursday night as Asian traders took advantage of Thursday’s upward surge to book pre-weekend gains.  New-crop corn & bean contracts were under the most pressure as traders bet that US farmers would eventually get back in the field & that Brazil’s Safrinha corn crop would get some needed rainfall this weekend.  Overnight losses were trimmed by mid-Friday morning as traders continue to buy weakness.  It would appear that markets are trying to value the last bushels of the 2020/21 US corn & soybean crops.  That can be a volatile & messy process.  In past years of price rationing, markets often take 3-6 weeks to prove a market top.  An upside breakout in a tight stocks year as occurred on Thursday therefore rarely lasts only one day, & traders are cognizant of that fact.  At the 7:45 am pause in electronic trading, May & July corn futures were down 4.5c after having set new contract highs at last night’s open, Dec. corn was 7.25c lower after failing to set new highs. Soybean & soymeal futures were also weaker after failing to set new highs overnight. At the “biscuit break”, May beans were down 3.25c, July beans were 4.5c lower, Nov. beans were down 8.5c, & May soymeal had declined $2.50/ton.  May soyoil did post new highs overnight, but had edged 0.17c/lb. higher by the pause.  May SRW wheat was 2.75c lower & July SRW wheat was down 3c at 7:45 am after failing to surmount Thursday highs. With the morning rebound May & July corn futures were each down 3c, Dec. corn was 6c weaker, May beans were 1/2c lower, July beans were down 5c, Nov. beans were 2c lower, May soymeal was down $0.10/ton, May soyoil was 0.24c/lb. lower, May SRW wheat down 6.25c & July SRW wheat was 4.25c lower at 10:30 am.
 
Recapping Thursday’s price action, grains saw profit-taking at Thursday’s regular session reopen after having surged to double-digit gains on Wednesday night. When prices eased in response to USDA’s Weekly Export Sales data released at 7:30 am that showed moderating demand, the pullback gave speculators & commercial entities a chance to reload ownership.  The 8:30 am selloff failed to take out overnight lows. Traders then soon retested & exceeded overnight highs, triggering chart-based buy-stops that pushed grain futures to fresh contract & 8-year highs.  Weather worries that potentially threaten new-crop yields in both the US & Brazil are a key driving force right now, but strong basis levels amid tightening old-crop inventories are worrisome if you are an end-user.  The recent rally argues that processors & exporters are trying to cover summer needs & finding that supplies are uncomfortably difficult to acquire.  Farmers who sold grain off the combine last September-October rue their early sales & are trying to average up with the highest prices they can get.  Because cash flow was long ago satisfied & bank credit lines are now lined up for 2021, the motivation to sell is relatively low & continuing gains only solidifies farmers’ decision to hold tight to remaining stockpiles until signs of a top emerge.  With prices accelerating higher on Thursday, charts gave buy signals that sparked new purchases.  At Thursday’s close, May & July corn futures were each locked 25c limit-up, Dec. corn gained 16.75c, May beans rocketed 36c higher, July beans blasted up 34.75c, Nov. beans soared 28c, May soymeal jumped up $9.70/ton, May soyoil soared 2.33c/lb. higher, May soft red winter wheat surged up 37c & July SRW wheat vaulted 35.5c higher. At Thursday’s midday highs, corn futures locked up the 25c limit, soybeans were up more than 45c & wheat was limit-up 40c on Thursday.
 
Where are the next price chart targets?  Corn futures spiked to levels not seen since mid-July 2013 with an open chart gap at $6.84 the next upside target. Bean futures filled an open chart gap created in early July 2013 at $15.345 & rose into weekly chart resistance from May-June 2013 at $15.49-15.59. Above that, the 2013 high was $16.30 & the all-time high for beans was set at $17.9475.  Wheat futures traded to $7.1325 on both Thursday & Thursday night, but did not fill a gap from May 2014 at $7.155.  SRW wheat futures peaked at $7.35 in May 2014 & at $7.4175 in late March 2013, the next resistance on continuation charts.  
 
In export news, USDA announced on Friday 2021/22 US corn sales of 13.228 mb to unknown destinations & 5.381 mb to Guatemala & 4.850 mb of 2021/22 US beans to China. The farm agency did not report any daily export sales on either Wednesday or Thursday, but markets were buoyed at mid-week by rumors that China was shopping for US grains. Japan’s ag ministry bought at total of 3.127 mb of US & Canadian milling wheat in a regular weekly tender on Thursday. 
 
Weekly grain usage reports issued on Wednesday & Thursday suggested demand is moderating.  Wednesday’s EIA Weekly Petroleum Status data reported that ethanol production in the week ended April 16 was steady for the week at 276.654 mil.gal.  While that was 111.132 mil.gal. (+637.14%) above last year’s massive shutdowns, weekly corn crush was about 94 mb.  Ethanol crush needs to average about 100 mb per week thru the end of August to reach USDA’s 4,975 mb ethanol crush forecast. Ethanol stockpiles continued to decline, down 2.982 mil.gal. (-0.35%) to 858.774 mil.gal.  That was the least since Nov. 13, & 304.160 mil. gal. (-26.15%) below last year’s stocks that exploded higher due to COVID-ravaged demand loss. High corn prices & uncertain demand are still keeping substantial ethanol crush capacity idled. 
 
Thursday’s USDA Weekly Export Sales report for the week ended April 15 showed corn sales at the low end of trade expectations, soybeans & soy product sales in the middle of trade forecasts & wheat slightly above consensus guess.  USDA reported old-crop corn sales at a 2-week-high 15.255 mb, nearly 10 times the weekly sale average needed thru the end of August to reach USDA’s 2,675 mb export projection for 2020/21. Cumulative corn sales stand at 2,645.5 mb, 485.6 mb larger than any previous marketing year at week #33.  Traders will closely monitor whether exports of huge unshipped commitments are actually achieved. An additional 1.161 mb of 2021/22 corn was also reported for the week.  Grain sorghum eased to 0.276 mb last week, only one-third the weekly sales pace needed to reach USDA’s 295 mb 2020/21 export forecast.  But 4.567 mb of new-crop milo were reported, easing concern about ongoing demand.  Cumulative old-crop grain sorghum export commitments total 277.6 mb, the fastest sales pace at week #33 since 2015/16.  Old-crop soybean sales edged higher for the week to 2.363 mb, equal to the average pace needed to reach USDA’s 2,280 mb export projection for 2020/21.  USDA also reported that 11.585 mb of new-crop beans were sold for the week.  Cumulative 2020/21 soybean export commitments have reached 2,235.0 mb, 188.3 mb above the previous week #33 record pace set in 2016/17. Old-crop wheat export sales improved to a 3-week-high 8.830 mb, & 13.735 mb of new-crop sales were also reported.  All-year total wheat sales of 22.564 mb were slightly above the 3.7-22.0 mb range of trade expectations, & weekly old-crop sales were a touch above the 8.4 mb of sales needed weekly thru the end of May to reach USDA’s 985 mb export forecast for 2020/21.  Cumulative wheat export commitments of 932.2 mb are 1.4 mb below the 2-year average at market week #46.  The two previous years averaged only 951 mb of final wheat exports, -34 mb below the current 2020/21 forecast. China was a mixed influence on US exports last week. Its buyers net cancelled 4.878 mb of corn purchases with those sales switched to Taiwan & South Korea. China also cancelled 1.881 mb of old-crop beans commitments. Chinese firms also bought 5.118 mb of old- & 4.567 mb of new-crop milo, 0.037 mb of old- & 2.388 mb new-crop wheat, 84,000 running bales (55.0% of total sales) of cotton, 13,100 mt (40.5% of total new sales) of pork, 3,100 mt (12.6% of total sales) of beef &  198,300 (55.3% of total sales) of cattle hides. USDA reported a net reduction of 22,100 mt in pork export sales last week, saying that 54,476 mt of pork sales to Mexico for 2021 had been previously reported in error.  With last week’s sales & adjustments, cumulative Chinese purchases of 2020/21 US corn stand at 910.8 mb, of beans at 1,309.9 mb, of milo at 251.3 mb, & of wheat at 117.7 mb.
 
After posting a 2c gain on Wednesday, local corn basis eased 2c lower on Thursday. Soybean & wheat basis levels were steady each day. Thursday’s upsurge in futures sent St. Louis terminal cash corn & soybeans to their highest closing levels since July 22, 2013 & cash wheat to its highest daily close since May 7, 2014.
 
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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.