Market Thoughts 04.19.21
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Corn Complex- Corn continued its charge higher with money flow being the biggest factor on the week. Funds now long well over 430k contracts as of last Tuesday. Fund buying was offset by the commercial hedging positions growing as well. National corn basis softened as the week went on as front-end cash needs continue to be met by farmer selling. Deferred basis levels continue to remain elevated. Most areas of the corn belt were slowed by wet and cool soil conditions, parts of Indiana and Michigan did find windows to get seed in the ground. Extended forecasts for most of the corn belt would indicate cool but drier conditions as we approach the first of May. Most fieldwork and fertilizer have been completed and producers will be able to plant quickly once conditions are optimal. Corn sales and shipments for the week were average while trade continues to monitor slow shipment pace vs needed on existing Chinese purchases. Ethanol crush margins have continued to improve with ethanol stocks low versus typical seasonals and production only beginning to ramp up with potential summer demand coming down the pipeline.
Soybean/Canola Complex- Although having one of the more bullish situations on paper the bean complex still has been stuck in range bound trade since the acres/stocks and WASDE reports of the last couple of weeks. Soy crush has dropped to sub-breakeven levels for many plants as meal values have plummeted and soy oil although higher can not make up for the weaker meal leg. The biggest takeaway from the soy complex today is world soy inventory is snug, but really it’s about having the excessive stocks in some regions while others are deficit. Basis will do the work to get that problem solved. Chinese concerns of ASF are still indicative with soy crush margin on both South American and new crop North American beans at negative values all the way thru the end of the year for Chinese domestic crushers. North American animal units as it relates to feed use continue to have question marks as domestic meal demand feels well supplied at least thru mid-summer and many plants offering product cheaper now than just a few weeks ago. New crop canola did put in new highs this last week. We will see StatsCan out on the 27th with new crop acreage estimates for Canada.
Wheat Complex- All wheats continued off lows from two weeks ago as the market continued to add risk premium back to the market with dryness concerns in spring wheat country and freeze concerns for the winter wheat crops across the Midwest. Funds have liquidated some of their holdings in the KC and Chi complexes but have continued to add to the Minnie complex. The frost/freeze event early this next week in KS will need to be watched, but as with most winter wheat crops, they traditionally have one freeze scare during the early growing season. Moisture conditions across much of western third of the winter wheat belt have improved in the last month. With wheat/corn ratios being as tight as they have been for many years, we have continued to see wheat of all classes move more heavily into typical corn diets. We have seen this throughout the high plains for both old and new crop wheat and seeing continued switching in Canada away from corn back to small grains as well.
Outside Markets- Equity markets continue to roar to new highs with Dow Jones Index setting new records for the week. Dollar index stalled out at over 93 points the week prior and has corrected back towards the mid 91-point level. The weakness in the dollar the last couple of weeks also has helped keep a bid under commodities.
21/22 Corn Outlook LHC Projections- See estimated carryouts with a few different scenarios, we will just first look of 21/22 USDA projections in the May WASDE.
21/22 Soybean Outlook- Again tight balance sheet domestically, do we seed decrease in Chinese export demand as we head into 21/22 crop year? Could we see some excessive South American stocks hit US shores late in the year to make up for tightness in the US.
21/22 All Wheat Outlook- Depending on final yields and acres likely see continued flat to declining all wheat stocks in the US.
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