Update for May 11th, 2021
U.S. corn and soybean prices are maintaining strength this week ahead of the USDA report later this morning and now sit at 8 year and 8 ½ year highs. In fact, U.S. old crop soybean supply/demand is now the tightest on record. A couple of the catalyst that are largely responsible for this prolonged rally are: estimates for significant reductions to Brazil’s Safrinha crop, and strong demand domestically and from exports.
Poor crop conditions persist in Brazil with many areas facing extreme levels of drought. There has been no yield saving precipitation in the region and temps of +90 have reduced several of the latest corn yield estimates for the Parana crop by -50%. Parana is not alone; some traders say that approximately 60-70% of the country’s key corn growing regions are in some stage of drought. New weather outlooks are trending a bit wetter for southern and far northern areas but most of the key regions will remain dry, extended forecast for May 20th through the end of the month show more opportunities for precipitation but it may be too late for many areas.
Monday exporters reported a new crop sale of 1,020,000 MT of new crop U.S. corn to China, this follows a sale of 1,360,000 MT to the Chinese on Friday. They were back in the market yesterday purchasing an additional 680,000 MT, bringing the 3-business day total to 3,060,000 MT or 120 million bushels. These orders are more evidence that a significant need that still exists within China. The USDA also reported that Chinese buyers booked 54 million bushels for delivery during the 21/22 marketing year.
This week planting progress for corn advanced from 46% completed one week ago to 67% vs the average of 52%.
Iowa is still leading with 86% of the state’s corn crop planted.
South Dakota 66%
Emergence is slightly ahead of normal with 20% reported as emerged compared to 8% last week and the average of 19%.
U.S. soybean planting progress is running ahead of normal pace as well. This week’s report showed that 42% of the crop is already planted compared to 24% last week and the average of 22%.
Iowa is also leading the pace in soybean acres planted with 67% complete.
South Dakota 32%
The crop is 10% emerged, up from 0% a week ago and the average of 4%.
The USDA May Crop Production and WASDE report will be released today at 11:00 a.m. Many corn traders are anticipating the agency will report an increase in exports, ethanol demand, and feed and residual usage. Net-net most traders are expecting further reductions to U.S. ending stocks. A lack of confidence exists regarding China’s commitment to take delivery of all orders which adds some uncertainty on how much of an adjustment the USDA will make to demand at this time. Some traders expect small adjustments over-time in an effort to reduce the impact to the market in case there are any cancelations of orders from the Chinese. Just yesterday they canceled some old crop orders and rolled them into new-crop bushels. With the domestic corn price in China now over $11.00 a bushel, few cancellations of orders are expected.
Last Friday Jerry Gulke of the Gulke Group shared some of his thoughts on the current situation and today’s USDA report. Gulke also see’s demand from China and the big weather issues in South America and the U.S. as the main factors supporting these high prices. And based on all of the positive information going into the report he says it isn’t surprising that the trade is looking for a bullish report. “That’s part of the reason the price of grain has been going straight up, because who wants to be short going in that report? That’s a little red flag for me. It may be an opportunity for me to price some grain. I like to be 40% price of my new crop as I’m planting and I think I’ll be there.” He worries that the high prices in the marketplace are making it expensive for end users to feed or crush grain and could lead the USDA to adjust export and usage expectation. Gulke said, “NASS officials once told me their job is not to speculate. That’s my job; I can speculate on what’s going to happen. Their job is to present and look at the facts. The facts right now are the crop is going in early, which usually means better yield. So, they could raise the yield.”
The 6-to-10-day outlook shows a warm-up is finally in store for most of the country with above normal precipitation expected for much of the Corn Belt.