Ahead of the Open: Grains Firmer, Soy Weak Ahead of Updated USDA Supply & Demand Forecasts

Posted on Thu, 04/08/2021 - 05:15


Corn: Up 3 to 6 cents
Soybeans: Steady to weaker
Wheat:  Up 7 to 12 cents

GENERAL COMMENTS:  Wheat is leading higher today, providing support to corn and soybeans. Suddenly the trade is concerned over spring wheat seeding amid dryness across the U.S. Northern Plains and Canadian Prairies. Cold temperatures in Europe this week also raises production concerns and there are some drier forecasts developing for parts of Europe and the Black Sea region. Wheat prices have been in extended downtrends since February on perceptions of favorable conditions for most crops across the Northern Hemisphere.

The April USDA Supply & Demand Report is on tap for Friday morning, with corn and soybean stocks seen steady to lower versus the agency’s March estimates for both domestic and world balance tables. The trade will have to wait until next month for the government to officially integrate new-crop acreage estimates from last week, new usage projections and carryover forecasts. It will be a quiet session with a focus on commodity index funds rolling out of May futures beginning today.  

Brazil’s Conab raised its estimates for both corn and soybean crops this morning. Brazil will harvest 108.966 MMT, up from 108.069 MMT estimated in March and above the 102.586 MMT. Soybeans production estimated at 135.540 MMT, up from 135.132 MMT forecast in March and up sharply from 124.845 MMT last season.  

Some relief from dryness has already begun in a part of the eastern Prairies and the Red River Basin and after April 20 World Weather says rain potentials will improve for other areas in the northern U.S. Plains and Canada’s Prairies as well. However, relief will be temporary with returning dryness later in the summer especially in the southeastern Prairies, the northern Plains and upper U.S. Midwest. There is a higher than usual potential for a blocking ridge of high pressure to evolve this year over central North America, but it is not likely to evolve during the spring and that leaves several weeks of opportunity for rain to fall before the blocking ridge evolves, the forecaster said in a note today.

Before the reopening USDA did not announce any daily private exporter sales.  

The weekly export sales report showed old-crop U.S. wheat and corn export sales slowed last week and soybeans were a net reduction. USDA reported a marketing-year low for wheat sales last week, down 75% from the prior four-week average and included China reducing prior sales by 56,700 MT. New-crop sales jumped to 529,900 MT, topping trade estimates for 50,000 to 200,000. China was the top buyer of 260,000 MT last week. Net corn sales slowed 54% from the prior four-week average with USDA reporting 757,000 MT sold, in the middle of trade estimates for 500,000 to 900,000 MT. New-crop sales were just 50,000 MT and at the low-end of trade estimates. Old-crop soybean sales slowed a net reduction of 92,500 MT last week. But new-crop sales were 338,600 MT with China buying 264,000 MT. Traders were looking for 50,000 to 200,000 MT.  

Global food prices climbed 2.1% from February to March, marking the 10th month in a row prices have climbed, according to the Food and Agriculture Organization of the United Nations’ (FAO) food price index. The index now stands at 118.5 points, its highest level since June 2014. “The increase was led by strong gains in vegetable oils, meat and dairy sub-indices, while those of cereals and sugar subsided,” FAO reports. The group expects global cereal production to climb for the third year in a row in 2021. It reports, “current crop conditions point to slightly better prospects compared to earlier expectations, lifting the preliminary 2021 global wheat production forecast to 785 MMT.” That would be a 10.7 MMT rise from FAO’s 2020-21 production estimate.

CORN: May corn is gaining on December futures for a third day. After touching more than $1.02 premium on March 31, the May futures’ premium fell near 61 cents on Monday and this morning it is near 78 cents. A move back above resistance at 85 to 90 cents premium would be a fresh bullish signal. U.S. corn exports in February hit 6.3 MMT, according to official census data published on Wednesday. That tops 2008’s record for the month by 17% and is the largest monthly volume since July 2018. Weekly export data suggests that March shipments reached an all-time monthly record, likely topping 9 MMT. The largest-ever volume was 7.75 MMT in May 2018, and the March high is 6.7 MMT in 2017. Through April 1, U.S. corn sales are now about 1% the USDA current export forecast for a record 2.6 billion bu., well above the five-year average of 82% sold by early April. That supports expectations for USDA to raise it export forecast on Friday.  

SOYBEANS:  Futures were well contained inside of Wednesday’s downside move overnight. Old-crop soybean futures need to rise above last week’s high to reduce the chances of an important top forming. November futures continue to consolidate above the prior highs from early March but may need a fresh weather or demand news event to begin trending higher.  Malaysian palm oil futures reversed a three-day rally, falling 1.5% overnight. Meanwhile China’s Dalian soyoil dropped 2.8% and its palm oil futures declined 2.0%.

WHEAT: Wheat futures are building a base of support with spring wheat leading higher. The results of yesterday’s Egyptian tender were important because it showed Russian exporters were competitive for August deliveries despite the floating tax regime that comes into force on June 1.  Export quotes for Russian and Ukrainian origin have fallen very sharply in recent weeks.

CATTLE: Steady to mixed
HOGS: Steady to weak

CATTLE:  After early weakness, live and feeder cattle futures turned higher by the close, with cash and product market gains continuing to give market bulls the advantage. Weekly beef export sales fell 14% from the prior four-week average and shipments were off 4% from the four-week average. After some light cash cattle trades Tuesday in Kansas at $121, trade picked up across the south at $120 on Wednesday, with prices climbing to $123 to the north. This represented a $3 to $5 gain from action last week that generated an average price around $118. Boxed beef values shot another $3.54 (Choice) to $3.89 (Select) higher on Wednesday, with an impressive 117 loads changing hands.

HOGS:   Tightening hog supplies and ideas African swine fever will keep China as a major buyer of pork helped lift futures Wednesday to new highs. However, this morning’s weekly USDA pork export sales were disappointing. Pork sales last week fell 45% from last week marketing-year high and were 22% below the prior four-week average. While Mexico continued to be an active buyer, Chinese net purchases slowed to 1,200 MT, down from nearly 30,000 MT a week earlier. Support has also stemmed from continued strong pork movement despite lofty price levels. The cutout value climbed $1.30 on Wednesday and 384 loads sold. The average cash hog price rose $1.38 yesterday on good packer demand for live supplies.