The grains started the week off mixed with wheat and corn higher while soybeans continued to struggle.
The April 9 U.S. Department of Agriculture Crop Production report continued to influence the market early in the week. The report was neutral to negative wheat. The U.S. numbers were negative with USDA increasing U.S. stocks more than expected due to a bigger drop in feed demand than expected. World wheat estimated were friendly as stocks dropped more than expected due to a 5 million metric ton increase in Chinese wheat feeding.
The report was friendly corn as stocks were cut more than expected. A bigger than expected increase in ethanol, feed and export demand helped to give corn strength. The soybean estimate was negative as although U.S. stocks were left unchanged (decrease in crush was offset by decrease in residual and increase in exports) the 2 million metric ton increase in Brazil’s production left a bad taste in traders’ mouths. The increase in production in Brazil also slightly offsets the need for the U.S. to add soybeans acres.
Combine that report with the current weather forecast and you have a market that needs to hold onto its weather premium.
Forecasts are calling for much needed rain for North Dakota. On April 11, rain fell in parts of western North Dakota with most in the form of snow. The system continued to dump rain and snow through April 14, but in the end, less than half an inch of moisture fell in the driest areas. Last week’s U.S. Drought Monitor map was not kind to North Dakota. The report showed the entire state was in some sort of stage of drought but 94% of the state was in D3 or higher. The first quarter of 2021 was the driest quarter in North Dakota’s history. So, although the recent rain and snow were welcome, much more will be needed to break the drought.
The middle of April’s forecast is calling for cold temps to dominate a majority of the major growing region of the U.S., which will delay planting progress of both spring wheat and corn. This will change the outlook for the spring as we will no longer be seeing early planting but an average planting date. Temps are expected to drop back into the 30s for highs and teens for lows, which will make it difficult to plant corn.
The April 12 export inspections estimate brought little to the table as wheat and corn shipments were as expected, while soybeans were a little better than expected. But the big news in soybeans came from reports of two separate export sales. China was in and bought 132,000 metric tons of soybeans while Bangladesh bought 110,000 metric tons. That's a good sign since this was the first reportable soybean export sales since January.
But the April 12 session seemed to be more about money flow than it did about fundamentals and charts. The S&P 500 once again put in a new contract high. The strength in the stock market keeps pulling money out of the commodities.
The April 12 Weekly Crop Progress report was friendly to the grains as most of the estimates came in below trade expectations. As of April 11, corn planting progress was estimated at 4% completed versus 3% average, but 2% lower than expected by the trade. North Dakota is reporting corn planting progress at 2% complete, which seems a bit aggressive for the state, especially since the crop insurance first planting date was April 10. This week does not look good for planting progress. Weather forecasts continue to call for wintery conditions in the Northern Plains, cold dry conditions for the Corn Belt and rain for the Southern Plains.
Spring wheat planting was estimated at 11% complete versus 6% average and well ahead of expectations of 8%. This is largely due to the early start and extremely dry conditions across the region. Winter wheat conditions were left unchanged at 53% good/excellent, as expected.
Corn took the bull by the horns on April 13, pushing both old and new crop contracts to new contract highs. Corn has captured the leader role with most of the support coming from strong demand, slow planting progress and the need to add acreage. At this point, corn’s ending stocks appear to be very tight.
At this point, the assumption is corn needs to add acreage. U.S. demand remains strong, and the last two USDA reports confirmed tighter supplies of corn are on the horizon. But what crop will give up acreage? Wheat would the logical crop to give up acreage. Soybean traders are still working on whether or not soybeans need to add acreage. Most are expecting the 2 million metric ton increase in Brazil’s production estimate will help reduce the need to buy more acreage in the U.S.
That might change if soybean demand starts to rebound. If crush returns to all-time highs, then soybeans will be forced to add acreage as well. At this point, using the Prospective Plantings estimates and the demand picture from the Ag Outlook Forum, 2021 ending stocks for corn look to be close to 1.1 billion bushels while soybeans appear to be close to 26 million bushels. It will be interesting to see the adjustments USDA makes in the May WASDE report to avoid showing those estimates.
Other news helping to give wheat direction came from reports that China only sold 13% of the offered reserve wheat at auction at a price of $9.76. That could help explain why China imported 2.93 million metric tons of wheat the first quarter of 2021, double last year’s number. In export news, Japan is tendering for 90,169 metric tons of U.S. and Canadian wheat.
The expectation that spring wheat producers will start to look at switching acres to a later season crop due to the delay in planting added support and has helped spring wheat to new contracts highs by midweek. The midweek rally in wheat seems to be a sign that wheat is accepting its role replacing corn in the feed ration as at this point, corn and wheat seemed to be linked together.
In other corn news, traders remain concerned about Brazil’s safrina corn crop as weather forecasts are calling for the next two weeks to be dry. Brazilian officials are estimating the first crop corn harvest at 72% completed versus 71% average.
Last week’s ethanol production estimate showed a slight reduction coming in at 941,000 barrels per day, 34,000 barrels lower than the previous week. Stocks were estimated at 20.52 million barrels, 124,000 barrels lower than the previous week.
Soybeans saw some support from reports that China’s first quarter soybean imports were 21.18 million metric tons, up 19% from last year as their hog herds rebound from last year’s African Swine Fever outbreak.
Brazil’s soybean harvest is now estimated at 85% complete versus 79% last week. Brazil expects to export 17.15 million metric tons of soybeans in April, which would shatter the old April record of 14.9 million metric tons.
Cattle pushed higher with early week support spilling over from the lower grain complex. Last week’s cash trade was between $120 and $125 with most at $123. But late in the week technical selling dominated cattle with the initial selling seeming to be a risk off session in the commodities.
The lack of a cash trade accelerated the sell off in cattle late in the week. No cattle traded on the FCE Online Auction due to buyers and sellers being too far apart. Ask was at $122 while bids were at $121. Feedlots in the south passed on $126 as they were looking for $128.
Feeder cattle posted heavy losses due to pressure from the sharply higher corn market. Cattle are also seeing long liquidation as open interest is declining, which means traders are exiting positions and heading to the sideline. Cattle prices have been very strong and producers who are having calves hit the ground this spring should be looking at using Livestock Risk Protection to protect strong fall prices.
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