Market Thoughts 05.17.21
Current Clients we will be sending out a separate email with the weekly Market Algo readings.
Corn Complex- Both old and new crop corn liquidated into the end of the week with a relatively neutral WASDE report as the spark for the move lower. With much of the worst-case Brazilian second crop priced into the market, we just ran out of bullish news to make yet another leg higher. Planting pace and early crop condition looks to be in good shape for the moment with some lingering pockets of dryness across the main corn belt looking to get moisture in the next few weeks. We did have a raft of Chinese sales announcements this week, but all were for 21/22 corn and we even saw them cancel small amounts of 20/21 corn. Some would view this as bullish, but this exactly what the market is telling them to do with a larger inversion out to new crop futures months. Funds were shown exiting their long prior to the WASDE report and estimates by end of week have them just over 200k long vs almost 400k long at the start of the month. Much to the comments from one week ago, your local dentist jumped into fray and may ended up a little late to the party. We continue to see good strength in basis and futures spreads which imply a continued tight market for cash corn to finish this marketing year, but we will likely need a summer weather event from this point forward to propel us back towards the highs in futures we have seen.
Soybean/Canola Complex- Soybeans corrected off their near-term highs, but implied balance sheets for old and new crop both keep US and world carryout snug even with projected larger crops in SA next year. Canola also corrected for the week but remains elevated as the market remains concerned about dryness across the Canadian prairies. We have continued to see additionally South American beans working into US ports as basis levels in SA have dropped and maintained historically low levels even with the large Chinese program. We continue to watch Chinese crush margins stay historically weak even thru expected US new crop export windows.
Wheat Complex- Wheat complex also corrected off its highs taking its cues from corn. Soft red and KC both falling harder on the week than HRS as more rain is forecast for the southern plains and eastern wheat belts. EU and Black Sea wheat conditions continue to remain in good shape with no real weather threat occurring currently in either major growing region. With the recent run up in prices the US wheat has priced itself back out of most of the world markets.
Outside Markets- Equity markets did pull off of recent all-time highs with head winds seen coming from slowing employment growth and upticks in many inflationary readings of the economy. US dollar has corrected back towards the 90-point level.
WASDE Recap- See below for report numbers vs expectations. Most values were with in range of expectations. We also go to see first looks at US and World 21/22 thoughts from USDA. Quick glance would say that high prices look to incent producers worldwide to increase production. Assuming no major weather events carryouts look to rise or stay stable yoy. Following chart below are projected US and world carryout and stocks to use ratios.
US and World Corn Carryout Charts
US and World Soy Carryout Charts
US and World Wheat Carryouts
This material should be construed as market commentary, observing economic, political and/or market conditions, and not intended to refer to any trading strategy, promotional element, or quality of service. Information contained herein was obtained from sources believed to be reliable but is not guaranteed as to its accuracy. These materials represent the opinions and viewpoints of the author.