Ahead of the Open: Soy FIrm, Grains Weak Heading to USDA March 31 Reports

Posted on Wed, 03/24/2021 - 06:42


Corn: Steady to down 2 cents
Soybeans: Up 2 to 5 cents
Wheat: Down 3 to 6 cents

GENERAL COMMENTS: The soyoil oil rally is pausing but meal is rebounding to provide support to the soybean market amid tightening supply concerns heading into spring and summer. Interior soyoil basis was at least 500 over futures, with refined oil prices much higher or not even offered by processors. Much of the recent soyoil buying has been end users rushing for coverage and that may have run its course amid funds cutting bullish bets.  Corn remains supported by strong Chinese demand, rising fuel demand and stronger demand for domestic feed supplies.  But corn planters are rolling in the South with Louisiana over half done and Texas at 38% planted. Nice rains seen and more in the forecast for dry areas of the western Belt to boost soil reserves ahead of planting.  U.S. winter wheat conditions continue to improve with the solid rains seen the past week. Region could see a lot of double crop beans if this moisture pattern continues.  Grain and soybean trading during the next week will be dominated by positioning ahead of the USDA’s March 31 estimates of quarterly stocks and spring planting intentions.   

Weather leans negative. Argentina will get more rain the next several days and that means the peak in crop stress has likely passed. A dry bias in Brazil the next week supports rapid soy harvesting and final corn planting. However, rain in April will be erratic and that sets the stage for rising concerns about dryness extending into May and increasing safrinha corn crop stress. It looks like Canada will get a shot of rain next week, but little will find its way into the dry areas of the Northern Plains.  Heavy rains fell again yesterday in the northern Midwest and far south/Delta. Extended maps are drier, though both the 6- to 10-day and 11- to 15-day forecasts are starting to show some rain chances from the southern Plains up through the southern and eastern Midwest. Temperatures continue to run above-normal through the first week of April.

Brazil will likely export 16.1 MMT of soybeans in March, projects the association of Brazilian grain exporters ANEC. This is down 300,000 MT from its forecast last week. ANEC expects Brazil to export just 115,000 MT of corn this month, down roughly 21,000 MT from its forecast last week.

Before the reopening USDA did not announced any new daily sales for a third consecutive day after last week reporting nearly 3.9 MMT of corn sold to China.

USDA Secretary Tom Vilsack and Chinese Minister of Agriculture and Rural Affairs Tang Renjian had their first conversation Monday evening, a USDA official said. “They agreed that it is important for the United States and China, as two of the largest agricultural producers and consumers in the world, to work together to address areas of common concern,” the official said. “Secretary Vilsack raised concerns about some of the PRC’s [People’s Republic of China’s] trade barriers that disadvantage U.S. farmers. They also discussed the positive role agriculture can play in addressing climate change. Both officials agreed to keep an open channel to discuss these issues further.”

Meanwhile, Secretary of State Antony Blinken will meet with European Commission President Ursula von der Leyen and the EU’s foreign policy chief Josep Borrell in Brussels today. The two sides are expected to announce the revival of the U.S./EU China Dialogue. The move, first reported by the Financial Times, represents a further step toward the Biden administration’s goal of creating a united response to China’s rise.  

This week Joe Biden made good on his campaign promise to work more with allies to pressure China, coordinating with U.S. partners to impose sanctions over alleged human-rights abuses in Xinjiang. China wasted no time Monday night immediately retaliating with reciprocal sanctions against European Union officials while summoning the bloc’s ambassador to Beijing. China’s assertive response on the heels of a rare public dust-up with U.S. officials in Alaska last week shows President Xi Jinping’s government is digging in against international criticism on what it considers “internal issues,” from Xinjiang and Hong Kong to Taiwan.  

China this week reached out to two long-time friends, Russia and North Korea, both of which have also been on the receiving end of U.S. sanctions in recent years. On Tuesday, Foreign Minister Wang Yi held talks with Russian counterpart Sergei Lavrov on how to counter the hegemony of the U.S. dollar by promoting the yuan and ruble.

Tuesday was the one-year anniversary of the Covid-19 low in U.S. stocks after the unprecedented health crisis sent the S&P 500 tumbling 30% in just 22 days in the fastest bear market sell-off ever. The equity benchmark has bounced about 80% from that bottom, marking the best start to a new bull market on record, data from LPL Financial showed. Today, global stocks are caught between several forces, with the recovery trade still ongoing, the shadow of inflation not completely banished and risks from the pandemic remaining. Interesting that stock option volumes in the U.S. have come off significantly since the beginning of February. There have been dips before, but this one is fairly notable and suggests the markets may pause.  

Dry freight prices have been on the rise in recent weeks with the Baltic Dry Index reaching its highest since mid-September 2019 in recent sessions. This comes on recent reports of vessels waiting in Brazilian ports for loading of agricultural commodities, which were delayed due to heavy rains in the past month. The delays in loading the vessels will mean delays in those vessels arriving at their next destinations and slowing loadings further down the supply chain. This comes on news this morning that one of the largest operating container ships, Ever Given, has grounded in the Suez Canal, blocking passage for at least 100 vessels on one of the world’s busiest trade passes. With the big US to China corn program loading the next five month, the demand for timely 0cean freight will continue to increase. Freight values climb from $40 per MT last year to close to $60 per MT currently.

CORN:  Without followthrough, old-crop corn keeps a small pause on the table, which could set the stage for a new rally attempt. Yet, Tuesday’s bounce was “meager” and weakness overnight suggests corn is weighed down by large speculative fund longs.  

SOYBEANS:  May soybean futures are well contained inside of yesterday’s range after futures closed above their 20-day moving average for third session.  Soyoil gapped higher, touching new contract highs before paring gains and closing below the open. A close below yesterday’s gap at 56.37 to 56.45 would be negative today. May soymeal futures are trying to bounce back from the lowest level since Dec. 18. Malaysian palm oil futures reversed earlier losses and closed unchanged overnight with forecasts for palm supplies to be cut in half in Indonesia, the biggest producer. China’s Dalian most-active soyoil contract rose 0.6%, and the palm oil contract was up 0.3%.  

WHEAT: All three wheat markets are likely pausing;  with SRW and spring wheat holding above support, but HRW below a major barrier. Closing below recent lows in all may well spark renewed selling. Traders are focused on shrinking weather concerns.   

CATTLE: Steady-firm
HOGS: Steady-firm

Cattle: Resilience in the cattle complex is legitimately encouraging, but strength must produce more than pauses to further validate optimism.  Bulls have the edge to start trade today. After Choice and Select boxed beef values shot $3.04 and $2.18 higher, respectively, on Tuesday. Movement also picking up to 143 loads. Traders are increasingly confident the product market has put in a seasonal low with summer grilling season and fresh stimulus checks likely to bolster the product market going forward. All is quiet on the cash market front. Packers were bidding fully steady Tuesday and today’s cash trade will set the tone to close this week. Slaughter so far this week is down 9,000 head from a year ago, but a large Nebraska plant is coming back online today.

Hogs:  Hogs affirmed setbacks Monday were corrective with April rising to a new contract high. Rallies may well last into mid- to late May, but resistance isn’t far away with a USDA set to update the herd size on Thursday. On Tuesday, the pork cutout value jumped $2.52, with bellies leading the charge with a $14.63 price surge. Movement also picked up to a moderate 362.32 loads in the face of rising prices. Meanwhile, cash hog bids climbed another $1.20 yesterday. There was a notable drop in hog slaughter Tuesday, with processing sliding 23,000 head from year-ago to 476,000 head. This week’s kill is now lagging year-ago by 4.1%.  China reported a new case of African swine fever that involved had 466 pigs, 280 which had died due to the virus. The remainder will be culled. After a multi-month hiatus, China has reported a handful of new ASF cases this year. Industry reports signal new strains of the virus are causing more trouble for China’s herd rebuilding efforts than the country has let on.