Ahead of the Open: Steady to Firm Grains, Soy Ahead of USDA Report April 9

Posted on Mon, 04/05/2021 - 06:28

GRAIN CALLS

Corn: Mixed; Old-crop steady to weak and new-crop up 3 to 6 cents
Soybeans: Up 10 to 15 cents, with new-crop leading the rally
Wheat:  Steady to up 3 cents

GENERAL COMMENTS:  Last week’s prospective plantings and quarterly stocks report certainly delivered on the USDA reports’ reputation of inducing spikes in market volatility. The acreage fight hasn't subsided after the USDA came in below trade estimates, signaling tight supply through the 2021-22 marketing year. Early planting chances still look solid with dry conditions for most and a generally favorable forecast into mid-April. New selling may be limited in front of this week’s USDA Supply & Demand Report on Friday.

Before the reopening USDA announced private exporters sold 130,000 MT of SRW wheat to unknown destinations for new-crop delivery. That should help to add support to the wheat markets.  

U.S. corn planting is expected to pick up April 10-20 when key crop insurance dates pass. Forecasts for warmer, drier U.S. summer could attract new buying. The weather has midweek rains falling over the midsection of the country, then moving out for the end of the week, with more rains forecast for week two. Down in South America, the forecast models have rains due next week for the center of Brazil. But most other crop areas will continue to dry down raising moisture stress for many Safrinha corn crops from Mato Grosso do Sul and Paraguay to Sao Paulo. Additional rain and shower are forecast for eastern Argentina, where overall conditions are beneficials for late-season crop development.

After the close today, USDA releases its first national wheat ratings from the USDA. Concern may rise from the central and southwestern U.S. Plains this week because of missed rainfall and warm temperatures. Portions of the northern Plains and Canada’s Prairies will get some needed moisture, but much of it will concentrate on South Dakota and Minnesota limiting the moisture boost for some of the drier areas in North Dakota, Montana and Canada’s Prairies.

Most of Europe’s wheat is in good condition. Precipitation in the Black Sea Region was greatest from central Ukraine through the heart of western Russia maintaining moisture abundance in those areas. Precipitation elsewhere was more limited, but soil moisture was still favorable from past weather events and melting snow. APK-Inform forecasts Ukraine’s production of grains and pulses will reach 73.8 MMT this season, up by 13% compared with the prior year. Wheat crop will grow by 10% to 27.5 MMT, barley crop will increase by 2% to 8 MMT and corn increases 19% to 35.7 MMT.

The CFTC Commitments of Traders Report showed less large spec net selling in wheat, soybeans and soyoil and unexpected net buying in corn in the week ended March 30.  Funds boosted net long in corn futures and options to 395,584 contracts from 388,175 a week earlier when most expected net selling. That is funds’ most optimistic corn stance since Feb. 1, 2011, and the move was largely due to the addition of outright longs.  Funds reduced their net long in soybean futures and options by nearly 21,000 contracts to 141,880, their least optimistic view since late August. Funds added just 615 soybean meal futures and options contracts to their net long, resulting in a position of 58,235 contracts. But they were sellers of soybean oil for a fifth consecutive week, with their net long as of March 30 dropping to 80,840 futures and options contracts from 93,977 a week earlier. Funds have established a bearish SRW wheat view for the first time since December. Funds’ net short in SRW wheat was 14,711 futures and options contracts as of March 30 versus a net long of 8,160 a week earlier.  Money managers maintained their bullish views in HRW wheat futures and options through March 30, though their net long of 21,722 contracts is the smallest since September.  

CORN: May corn futures extended the rally to new high but closed lower after touching $5.85, the highest on the weekly continuation chart since July 2013. Prices have traded both sides of unchanged overnight. December corn touched a new contract high at $4.93 on April 1 before paring gains into the close. Prices are back near those high this morning on the smaller USDA estimates for U.S. planted acreage and tighter March 1 inventories. USDA also reported February corn use for ethanol totaled 332.8 million bushels. For the first six months of the crop year, corn use totals 2.448 billion bushels and that is down from 2.684 billion a year ago.  The recent improvement in production suggests USDA may raise its current forecast in Friday’s report.  Archer Daniels Midland said late last week it would restart ethanol production at two of its U.S. corn dry mills this year, as expects demand for the biofuel to rebound from a pandemic-led slump. The company had last April decided to temporarily idle ethanol production at its facilities in Cedar Rapids, Iowa, and Columbus, Nebraska due to lower gasoline demand. Meanwhile, Attorneys General for Iowa, Nebraska, Illinois, Michigan, Minnesota, Oregon, South Dakota and Virginia signed the brief which said that “authorizing the unfettered granting” of SREs would “gut” the Renewable Fuel Standard (RFS) and the broader interpretation of the SRE authority sought by refiners would “cause substantial economic harm to the rural economies of many states.”  The affected refineries have appealed the matter to the nation’s top court which will hear the matter April 27.

SOYBEANS: May futures failed to clear last month’s contract high at $14.60 last Thursday and closed lower, Overnight prices were able to rebounded from the 40-day moving average and cleared the 20-day moving average into the break. overnight, touching $14.56 1/4 before paring most of its gains by the break this morning. November futures are trading just below Thursday’s contract high at $12.85.  The CME announced that maintenance margins for CBOT soybean futures will rise to $3,350 per contract, up 11.7% from the current $3,000, for May 2021 contract. Malaysian palm oil futures closed up 0.1%, paring an early gain of 1.6%. Meanwhile China’s Dalian Commodity Exchange was closed for a public holiday today.  The February soybean crush totaled 164.3 million bu., about 800,000 bu. below expectations and not a record, USDA reported April 1. The total crush for the first six months of 2020-21 is 1.113 billion bu., compared with 1.073 billion last year. The USDA forecast of 2200 million bushels implies March-August crush of 1087.3 million bushels. The Mar-Aug crush totaled 1091.6 million last year.  

WHEAT: Futures are trying to build on last week’s reversal action to the upside. A close below last week’s lows would prove the rebounds were just following the corn and soybean markets. But closes above the March 31 highs at $6.31 3/4 in May SRW futures and $5.87 in May HRW would be positive signals and likely trigger short-covering and new buying.

CATTLE: Steady to mixed
HOGS: Steady to firm

CATTLE:  June cattle moved to new highs and closed lower Thursday and may see some follow-through profit-taking this morning. However, pausing below prior highs still favors further gain eventually.  Boxed beef prices continue to soar with Choice jumping $2.88 and Select rising $2.27 on Friday. Over the past week, Select jumped $19.20, and Choice climbed $15.19, narrowing the spread between the grades to just $5.88. Cash cattle prices climbed to the $117 to $120.50 area late last week, with the western Corn Belt leading gains.

HOGS: Lean hog futures ended last week on a strong note, with bulls in part propelled by a surge in weekly pork export sales to a new high for 2021, with China as the lead buyer. African swine fever outbreaks in China are also lending the market support, with some in the industry saying at least 20% of the breeding herd in northern China had been wiped out. The pork cutout value climbed 65 cents on Friday, but movement slowed to 249.71 loads. Cash hog bids jumped $2.24 nationally on Friday. Summer hog futures topped in April during 2004, 2010, 2011, and 2019 but highs in May are more typical.