GOOD MORNING,
The bulls continue to roll on with more strength overnight emanating from a strong close and reversal from Monday's weakness that more or less aided in defining trading range lows. The May Supply and Demand report will be released at 11:00 central time. The reaction to the report will be as important as the numbers considering the funds purchased into the numbers on this week's correction. Managed funds are going into the report record long corn and beans. This report will include the first estimates of 21/22 supply and demand.
Beans led the rally after spending much of last month in a wide trading range, now gaining on corn. A continuing strong US cash basis helped to rally prices from overnight lows and bullspreads are firm. Crush and demand is probably higher than what it was in April, so will the USDA acknowledge it? They would be hard pressed to go much under 120 mln bu, which is pipeline thin. Given the quiet export picture, USDA could be forced to lower bean demand to balance out the numbers.
Corn futures rally along with spreads. The July/Dec corn inverse bounces back over 1.00c after trading down towards 85c as new money flows gave buyers a chance to get the spread purchased at cheaper values. New corn sales to China remain supportive as some speculate that buying from them could be potentially higher than current numbers. Traders will watch to see how much USDA reduces the Brazilian Safrinha crop, but if the USDA comes in too high, the private estimates provide enough skepticism for the trade to ignore it.
Wheat futures remain a follower of other markets, tagging along for the ride. China continues to auction wheat from its reserves, and interest in US origin continues. The weaker US dollar yesterday was also price supportive. There is some talk that US spring wheat farmers may switch wheat acres to beans.
Quick review of ending stocks:
corn: 20/21 ending stocks 1.275 bln bu and 21/22 net 1.344 bln bu
wheat: 20/21 ending stocks 845 mln bu and 21/22 net 730 bln bu
beans: 20/21 ending stocks at 117 mln bu and 21/22 net 138 mln bu
This morning, Brazil's CONAB cut its forecast for the 20/21 corn crop due to drought, and beans as well. Total corn production is now forecast at 106.4 mmt vs.109.0 mmt in April, and 135.5 mmt of beans, (still a record), vs. 124.8 mmt for 19/20. Citing drought, CONAB cut the Safrinha corn crop to 79.7 mmt vs. 82.608 mmt in April.
STORIES
China's influential farm consultancy Cofeed, which provides agricultural data for grain and oilseed supplies, suspended its operations without an explanation. It has stopped supplying daily and weekly data to Refinitiv, the financial data company, which published an advisory for clients.
WEATHER
--US weather continues to show mild improvements with rains in dry areas of the Midwest over the weekend, and more to come this week. A system is coming out of the Gulf crossing parts of eastern Neb., Mo., southern Iowa, and central Illinois. The western Corn Belt remains dry along with the PNW and Northern Plains. The 6/10 day calls for warm and wet conditions, which should be helpful for crop development. Few rains for PNW and Northern Plains, which will be very problematic should it continue into the weekend.
--Brazil weather remains dry, Argentina weather is good for harvest.
ANNOUNCEMENTS
Egypt's Supply Ministry said 2.2 mmt of domestic wheat has been purchased by the government, and that they are expecting to purchase a total of 3.t mmt of domestic wheat.
China's 21/22 corn production was forecast at 271.8 mmt, up 4.3% vs. the prev. year, as forecast by the Ag Ministry.
Ukraine grain exports fell by 24.1% to 39.6 mmt so far for the July 2020 to Jun3 2021 season, as reported by the Ag Ministry. The exports included 15.3 mmt of wheat, 19.6 mmt of corn, and 4.1 mmt of barley.
DELIVERIES
Meal: 35 ADM put out 35 and JP Morgan stopped 35
Soyoil: 38 Term put out 38 and Bunge stopped 38
KC Wheat: 11 ABN Amro put out 10 and Wells Fargo stopped 10
CALLS
Calls are as follows:
July beans: 22-25 higher
July meal: 3.20-3.50 higher
July soyoil: 80-90 pts higher
July corn: 2 1/2-3 higher
July wheat: 2-4 lower
OUTSIDE MARKETS
Crude oil at $66.31/barrel, and the US dollar recovered back to 90.41. The Dow is off 90 pts.
TECH TALK
- July bean prices continue to perform as the bull market it is, trading to new contract highs at $16.53 1/4 which is over the crossing lines of resistance at $16.40, and over the major line of resistance that crossed at $16.10. The lower end of the market now moves up to $16.10, and would look for any pullback towards $15.90-$16.00 to offer up a place to cover a short or try the long side of the market. The chart remains extremely constructive, and triple lows on a hard break to $15.75 also offers up an excellent buying opportunity, though it may be tough to get there. A close under $15.75 would offer up suggestions of a top.
- July meal prices move upward and trendline support moves with it, with first support now moving up to $438.00. Gains are building as there is not much resistance to stop an advance towards $455.00 to $458.00. Look to likely go there if beans work higher.
- July soyoil prices held the correction to 63c and prices are now climbing back towards prev. contract highs at 66.28. The target high is 6750c should we make new contract highs and would look for 6475c to offer up first support for the day.
- July corn has now posted four highs at $7.30-$7.33 without the ability to move through them, and the chart is now beginning to back away from this level, which is a bit problematic for the bull. If prices hold this resistance today could potentially set up for a large sideways trade from $6.90-$7.35 into the growing season.
- July wheat is lower this morning backing away from $7.50, and once again demonstrates that it has the leading edge when a chart comes to working lower. Look for prices to remain sideways from $7.20-$7.70, which becomes perfect to straddle or strangle.
NOVEMBER BEANS
The market remains bullish with contract highs at $14.43 1/4 matched with overnight trade to new contract highs of $14.49. The ADX is strong at 45, meaning buyers will be there on breaks to cover and go long. Beans often walk back to test key benchmarks once they are bypassed, as was the case this week. The $14.00 level held and the chart continues to build in support. Look for prices to likely trend towards $14.75, as there is not much back resistance to stop an advance. Trendline resistance comes into play at $14.75. Look for a likely $14.00-$14.50 trading range but based on chart conditions the target high at $14.75 is entirely doable.
TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America