Ahead of the Open: Corn Leads, Touching New Highs After Smaller Planting Intentions

Posted on Thu, 04/01/2021 - 05:24


Corn:  Up 12 to 16 cents
Soybeans: Up 2 to 17 cents, with new-crop leading the rally
Wheat: Down 1 to 4 cents

GENERAL COMMENTS:  Yesterday’s prospective plantings and quarterly stocks report certainly delivered on the USDA reports’ reputation of inducing spikes in market volatility. Following the reports publication wheat, corn and soybean contracts soared with corn, soybeans and soymeal all closing limit up, mostly as planted acreage for corn and beans fell far below consensus and corn stocks on March 1 were below trade ideas.  Prices continued higher overnight, led by corn gains as supply concerns are back front and center. Wheat is slipping lower amid generally favorable weather for this year’s Northern Hemisphere crops. Trading may be quiet today after the surge yesterday and overnight ahead of the three-day holiday weekend with the markets closed tomorrow in observance of Good Friday.

Yesterday’s USDA intentions numbers came in more than two million acres below the average trade estimates. The combined corn plus soybean acreage of 178.7 million acres was 4.5 million below the average guess and below the 2017 record of 180.4 million acres. Even adding in wheat’s strong 46.4 million acres give a combined three crop total of 225.1 million up 7 million from last year but below final tallies from 2012 through 2018.  Yesterday’s numbers will not show up until the first USDA estimates for 2021-22 until the May report. Next week’s April WASDE update is expected to show tightening carryover supplies for both old-crop corn and soybeans. Smaller-than-expected planting of the two main cash crops in the United States would heighten concerns about global food and animal feed supplies after importers and domestic processors loaded up on grain and oilseeds earlier this year.  

Before the reopening USDA did not announce any new grain or soybean export sales.   

Weekly corn, soybean and wheat export sales in the week ended March 25 were at the lower end of trade estimates. USDA reported this morning that exporters sold 797,300 MT of old-crop corn and just 60,000 MT of new-crop. Old-crop wheat sales were 250,100 MT and new-crop sales remains quiet at 81,000. Old-crop soybean sales were 105,800 MT and new crop business was 131,000. China recorded 124,000 old-crop purchases last week, but 66,000 MT were switched from prior purchases reported as unknown destinations.

Ukraine's grain ending stocks will be up 17% at the end of this season from a year ago on a sharp increase in corn reserves, analysts at APK-Inform consultancy said on Thursday. Corn stocks are likely to rise 51% to 2.4 MMT, with high reserves putting pressure on domestic grain prices in the medium term, APK-Inform said in a report. 

A cold and snowy spring has led to a delay in the start of 2021 spring grain sowing in most regions of Ukraine and Russia, prompting farmers to accelerate field work to meet optimal deadlines. Ukrainian southern regions usually begin sowing at the end of February, but this year field work started at the end of March when the snow melted, and the fields dried out. Analysts told Reuters that farmers in Russia had started sowing with a 10-day delay compared to the average. Despite the delay, analysts in Russia and Ukraine say farmers are likely to have time to sow all planned areas and the state of the fields gives reason for optimism.

Tensions between the U.S. and China remain. The Biden administration raised concern about some of the policy tools China is using to spur its economy, saying they crowd out international companies and will skew markets. “Made in China 2025,” a key 10-year plan released in 2015 and laying out Beijing’s industrial-policy aspirations, includes a wide array of state intervention and support that restricts and discriminates against foreign enterprises, the U.S. Trade Representative said in its 2021 estimate report on foreign-trade barriers released yesterday. Beijing hit back at the report on Thursday, with Foreign Ministry spokeswoman Hua Chunying saying: the “U.S. side’s accusations on China’s industrial policies are groundless.”

CORN: March corn futures surged extended its limit gains to $5.85, the highest on the weekly continuation chart since July 2013 before paring the advance into the break this morning. December corn touched a new contract high at $4.93 and is holding near session highs at the break.

SOYBEANS: May futures failed to clear last month’s contract high at $14.60 overnight, touching $14.56 1/4 before paring most of its gains by the break this morning. November futures touched $12.85 overnight, a new contract high before paring gains into the break this morning. Malaysian palm oil futures rose 3.5% following U.S. soyoil futures higher. Meanwhile China’s Dalian most-active soyoil contract rose 3.2%, and the palm oil contract was gained 3.6%.    

CATTLE: Steady-firm
HOGS: Higher

CATTLE: Boxed beef prices extended their impressive rallies on Wednesday, with Choice pushing $2.29 higher and Select gaining $2.21. Movement was decent considering elevated prices at 116 loads. The product market surge has padded already strong packer profit margins. HedgersEdge.com reports they are now earning an average of $430.60 per head as of Wednesday, up nearly $61 from the week prior. On the cash market front, Kansas and Texas have seen some light action at $116 to $117, and trade picked up in Nebraska yesterday at $118. Last week, trade ranged from $115 on the Southern Plains to mostly $117 in the western Corn Belt. Beef export sales in the week ended March 25 slipped 1% to 18,700 MT from a week earlier but included 5,900 MT sold to China.

HOGS: USDA reported pork export sales last week jumped 43% above the four-week average to 61,000 MT, a new high for the year. China bought nearly half of the total and will provide fresh support to the trade to start April.  A wave of African swine fever outbreaks this year has wiped out at least 20% of the breeding herd in northern China, industry sources and analysts told Reuters, exceeding expected losses and raising fears about the potential for further impact in the south. An exceptionally cold winter, a higher density of pigs following a year of restocking, and new strains of swine fever triggered a fresh wave of outbreaks across the northeast, northern China and Henan province, the country's third-biggest hog producing province. Packer profit margins have tightened over the past week, dropping to $7.25 per head from $14.45 the week prior. The pork cutout value rose $2.08 yesterday, but movement slowed to 306.24 loads. The market has signaled some retailer resistance to rising prices this week.