Ahead of the Open: Corn, Beans Rally on Tightening Supply Outlook; Wheat Follows

Posted on Mon, 04/05/2021 - 14:39

GRAIN CALLS

Corn: Up 1 to 7 cents with old-crop futures leading higher
Soybeans: Up 9 to 15 cents, with old-crop leading
Wheat:  Up 2 to 4 cents

GENERAL COMMENTS: May soybeans are heading for a second daily gain after plunging April 1, while the November contract has yet to put in a negative close since the surprisingly low USDA planting intentions estimate on March 31. The acreage fight hasn't subsided after the USDA came in below trade estimates, signaling tight supply through the 2021-22 marketing year. Wheat is following the row crops higher despite the U.S. winter crop mostly coming out of winter in good shape after a severe winterkill threat in February. Last week’s prospective plantings and quarterly stocks report certainly delivered on the USDA reports’ reputation of inducing spikes in market volatility.

New selling may be limited in front of Friday’s USDA Supply & Demand Report on Friday. Traders are looking for USDA to cut old-crop corn carryover projections about 120 million bu. from last month’s 1.502 billion bu. forecasts. Old-crop soybean ending stocks seen fractionally lower than last month’s 120 million bu. projection. The ranges for both estimates are relative wide and could lead to more fireworks later this week.

Early planting chances still look solid with dry conditions for most and a generally favorable forecast into mid-April. Forecast maps for the U.S. do bring in plenty of rain chances for the Midwest in the next ten days, to slow super-early progress for corn planting, though overall wetness doesn’t appear to be an issue beyond April 15.  Scattered and light rains continue in the northern Plains and belt this morning, after similar light activity over the past 24 hours. Intensity of those showers will pick up throughout the week, with good coverage expected for the bulk of the Midwest over the next five days. Drier weather outlook is forecasts for the Southern Plains.

Rains fell in far northern Argentina over the past 24 hours, building across most crop areas over the next five days to slow corn and soybean dry down, then drier again for the 6- to 10-day period. Showers were more scattered in Brazil with heavier rains in far southern areas yesterday. Drier weather increasing soybean harvest elsewhere but increasing dryness concerns for the safrinha corn.

Before the reopening USDA did not announce any new private exporter sales. That follow’s Monday’s announcement that private exporters sold 130,000 MT of SRW wheat to unknown destinations for new-crop delivery.

A Chinese carrier group is exercising near Taiwan and such drills will become regular, China's navy said late on Monday in a further escalation of tensions near the island that Beijing claims as its sovereign territory. The U.S. Navy said on Tuesday that its Theodore Roosevelt Carrier Strike Group (TRCSG) entered the South China Sea on April 4 to conduct routine operations, its second such visit this year, amid stepped up U.S.-China tensions. Taiwan has complained of an increase in Chinese military activity near the island in recent months, as China steps up efforts to assert its sovereignty over the democratically run island, which receives weapons and other support from the United States.

American stock futures slipped, suggesting the rally that drove the S&P 500 to an all-time high may pause as concern China is curtailing loan growth tempered optimism stoked by the U.S. economic rebound. The dollar erased earlier gains and fell to the lowest in two weeks and U.S. Treasury yields were steady to slightly lower. European stocks, meanwhile, rose to a record as markets reopened after Monday’s holiday across the region. The global economy is poised for the fastest growth in 60 years in 2021, according to Bloomberg Economics, but the recovery may be uneven as some countries struggle to curb the pandemic and lag behind in inoculations. Oil rebounded, mirroring a broader rally in commodities, ahead of talks on reviving the Iranian nuclear accord. Crude plunged on Monday amid a resurgence in Covid infections in Europe and an imminent increase in OPEC+ supplies, which could swell further with an agreement with Iran.

CORN: May corn was stuck inside yesterday’s range overnight but did close near the session highs after successfully holding support. December corn needs to close above $4.93 1/2 to ignite fresh fund buying. As of April 4, USDA reports 2% of the U.S. corn crop had been planted, which was a point slower than expected and right in line with year-ago and the five-year average. Texas is farthest along, with 55% planted, followed by Kansas at 2% and Missouri, North Carolina and Tennessee all at 1% seeded.

SOYBEANS: May futures cleared Monday’s high overnight and now needed to finish above last month’s contract high at $14.60 to sound the all-clear signal to market bulls. November futures are trading just below Thursday’s contract high at $12.85 at the break this morning.  Malaysian palm oil futures rallied 1.4% overnight to a one-week high on lower April production forecasts and improving exports. Meanwhile China’s Dalian soyoil and palm oil futures both rose 2.7%.

WHEAT: Futures are largely following the corn and soybean to the upside but finding support from a recent improvement in export business for both U.S. and world supplies after last month’s steep drop in prices.  USDA’s initial winter wheat crop rating came in just as expected at 53% “good” to “excellent,” which was a seven-point improvement versus the last update on Nov. 30. The amount of crop falling in the top two categories is down nine percentage points from year-ago, however.  USDA rates 54% of top-producing Kansas’ winter wheat crop “good” to “excellent,” which is an improvement from the 46% it put in the top two categories last fall before dormancy. Three percent of the U.S. spring wheat crop had been planted as of April 4, which is right in line with year-ago and a point ahead of the five-year average. That was a point more advanced than analyst polled by Reuters anticipated.

CATTLE: Steady to higher
HOGS: Steady to weak

CATTLE:  Cash cattle traded at an average price of $118.08 last week, with action ranging from $116 to as high as $120.50, with the western Corn Belt leading gains. Traders are hopeful for additional gains this week, in part thanks to soaring boxed beef values heading into grilling season. Choice boxed beef charged $5.82 higher on Monday and Select shot $2.89 higher, with processing again clipped by Easter downtime on Monday. Yesterday’s kill totaled just 108,000 head, which was 11,000 head below last week at this point, adding to the strength of the beef market.  

HOGS:  The pork cutout value slipped 22 cents to start the week, despite solid gains for ribs and bellies. Movement was also unimpressive at 288.78 loads. Pork features are expected to fade moving forward. Yesterday’s kill was quite light at 331,000 head, down 152,000 head from week-ago and 144,000 head under year-ago, with plants taking time off for the Easter holiday. Cash hog bids fell 86 cents nationally on Monday. Summer hog contracts occasionally post tops in April, and follow-through weakness into week’s end would be a warning sign. China reported another outbreak of African swine fever (ASF) in northwest China’s Xinjiang region. This marked the ag ministry’s ninth official report of an ASF outbreak this year, with most of the reports coming from southern areas of the country. In contrast, industry reports signal “at least” 20% of northern China’s hog herd has been impacted by the virus. Meanwhile, a dead pig infected with ASF washed ashore in northern Taiwan over the weekend. That has prompted the country to begin testing hog herds for African swine fever and limiting movement in the area where the pig washed up.