GOOD MORNING,

Prices are lower across the board on profit-taking heading into the weekend.  The USDA report has come and gone, and we are left looking at weather, stocks, and funds. The gist of the report was that the USDA was conservative except for Safrinha corn.  End-users continue to take advantage of breaks, and with the speed of recent rallies may be behind in pricing.  This will lead to support on pullbacks of size.  There is a general feeling that the old crop corn and bean carry-outs are too high as demand could be underestimated.  

Hedging remains light with basis levels continuing firm.  Chinese and Brazil cash corn moved to new highs this week, with more chatter that China is around the corn market.  World vegoil markets remain strong led by Chinese demand and the ongoing biofuel program.  Lower water levels on the Parana River in Argentina continues to create load problems.  Brazil workers may go on strike.  PRices may be down today, but still view them as potential buying opportunities when technical targets are hit or prices stabilize.

Report recap:

Corn:  20/21 corn exports higher by 100 ml bu with FSI use down 5 mln bu to 6395 mln bu. 20/21 corn carryout was in line with expectations at 1.257 bln bu, below expectations.  World corn carryout at 283.5 mmt was higher than expected.  USDA Brazil corn crop at 102 mmt, and CONAB at 106.0 mmt, ......  trade chatter talks about sub-100 mmt.  21/22 planted corn at 91.1 mln acres which was in line with the Prospective Planting report, and using a trendline yield of 179.5 bpa.   21/22 US carryout at 1.507 bln bu was 180 mln bu above the averagerage trade guess.   21/22 world corn production was higher than expected by 8.8 mmt to 292.3 mmt due to an increase in US and Brazil's carry-out.   China's old crop corn exports were raised 2.0 mmt to 26.0 mmt, and were also forecast at 26.0 mmt for 21/22.   Gist of report was neutral to bearish, and garnered the appropriate reaction with funds selling.

Beans:  No changes for 20/21 leaving carry-out at 120 mln bu.  21/22 planted bean area at 87.6 mln acres was in line with the Prospective Plantings report, and used a trend yield of 50.8 bpa with production for 2021 at 4.405 bln bu. 2020/21 China bean imports were left unchanged at 100.0 mmt.   USDA is forecasting a 3.0 mmt increase in China's 21/22 bean imports to 103.0 mmt.   USDA raised old crop US soyoil carryout to 1818 mln lbs, reflecting a 200 mln lbs decrease in soyoil exports to 2300 mln lbs.  USDA took 1500 mln lbs out of the food, feed and other industrial use category and put into the new biofuel category at 9500 mln lbs, which includes soyoil used for biodiesel and green diesel.  21/22 US soyoil carryout is only 1513 mln lbs vs. 1818 mln lbs in 20/21 due to a 2500 mln lbs increase in soy for biofuel and an 850 mln lbs reduction in US oil exports.  USDA projects a 1.3% increase in 21/22 domestic meal use to 38.600 mmt and a 50 thousand ton increase in 21/22 meal exports to 14.300 mmt.  Gist of report was friendly for beans, and would look to price, cover shorts, and look for places to go long.

Wheat: USDA lowered old crop wheat exports by 20 mln bu to 965 mln bu and lowered food use by 5 mln bu to 960 mln bu, which put carryout at an increased 872 mln bu.  21/22 carryout at 774 mln bu vs. 872 mln bu in 2021 was above expectations.  Russia's wheat production was 85.0 mmt vs. 85.3 mmt year ago, with exports at 40.0 mmt vs. 38.5 mmt year ago.  Wheat remains a market more prone to breaks when left on its own with ample world stocks.  

WEATHER

--US is wet in the Delta which will create delays while dry conditions continue in the north.  Next week's weather turns warmer finally resembling something akin to springtime.  Gist of US weather is OK, but building concerns for dry areas in the north into the Great Lakes.  

--Brazil is warm and dry with limited rains in 1/4 of the south over the next 10-14 days, with possible further crop reductions coming.  Australia will haverage below normal temps.

REPORTS

Export Sales:

Beans:  20/21 net 94,300 mt and 21/22 net 102,500 mt (vs. an expected 20/21 at 250,000 mt and 21/22 net 200-420,000 mt)

Meal:  20/21 net 74,600 mt and 21/22 net 32,000 mt (vs. an expected 20/21 net 75-285,000 mt and 21/22 net 0-50,000 mt)

Soyoil:  20/21 net 800 mt (vs. an expected 0-30,000 mt)

Corn: 20/21 net minus 113,400 mt and 21/22 net 2.08 mt (vs. an expected 20/21 net 100-300,000 mt and 21/22 net 700-2.1 mt)

Wheat:  20/21 net 30,300 mt and 21/22 net 268,000 mt (vs. an expected 20/21 minus 75-110,000 mt and 21/22 net 150-300 mt)

Gist of sales upper end for corn, low end for beans, meal, and soyoil.  Sales report was negative for all but corn.

Wheat: Sales down from previous week with increases primarily for Mexico. Old crop sales were poor but better than expected.  US is not competitive for now but substitution as a feed wheat is evident.

Corn:  Net reductions a marketing year low, with 21/22 net sales of 2,083,600 mt primarily to China.   US should continue to be a key exporter given the crop reduction in Brazil for Safrinha.

Beans:  Sales down 43% from previous. week and 38% from the 4-week average.  poor sales, as SA is much cheaper.  

Meal:  Sales down 63% from previous. week and 47% from 4-week average.  Increases from Mexico.  Poor sales with stiff competition from SA

Soyoil:  Sales down 87% from previous. week and 77% from 4-week average. 

Reaction to report intensified selling pressure into the close.

ANNOUNCEMENTS

Argentina's Ag Ministry reported that farmers have sold 17.3 mmt of beans for 20/21, after transactions were registered for 886,100 tons for the week ending May 15.  Ministry data showed the pace of soy sales were slower than the previous. season, as farmers held beans as a hedge against a weaker peso.  Last year's sales were 21.4 mmt by the same time period.

Strategie Grains kept its monthly forecast for soft wheat production unchanged for the EU this year as a weather - related reduction for France was offset by favorable prospects in the southeast.  The French firm expected the EU to produce 129.6 mmt of soft wheat, up 8.4% from last year's 119.4 mmt.  

DELIVERIES

wheat:  15  Wells Fargo put out and stopped 15

beans:  124   Term put out 124 and Bunge stopped 119

CALLS

Calls are as follows:

beans:  20-22 lower

meal:  6.00- 6.50 lower

soyoil:  50-60 lower

corn:  16-19 lower

wheat:  8-10 lower

Prices closed on the lows of the trading range.  If there is a gap-lower open will invite further selling.  

OUTSIDE MARKETS

A slightly lower stock market, down 10 pts, and a weaker crude oil market at $64.09/ barrel.  The US dollar is trading at 90.58.

TECH TALK

• July corn prices are most likely trying to set up a trading range heading into the summer and looking for stable lows.  For now, the four tops at $7.30 to $7.33 have held, switching up the pattern a bit, and though key support is at $7.00 the market may take a bit to prove it.  The close under $7.00 on the lows could lead to a test of $6.80. The ADX trend is still strong at 57, meaning one should be scale down covering a short or pricing something down here.  Dec. corn broke out to the upside from $5.75, and it becomes the key spot now to cover a short, price, or go long for a possible $5.75 to $6.20 trading range. 
• July wheat price action continues to show itself as the weakest trade, breaking down when not following strength elsewhere on the board.  Prices hit key support at $7.18, and if short may want to cover something in as there are multiple lows in this vicinity to cushion a break, and prices are trapped in a large sideways trade.  
• July bean prices back and fill and are close to testing the trendline resistance level which was taken out yesterday which crosses at $16.20.  Should prices break $16.20 there is not much back support until we get to $16.00 once again.  Trend is still higher, and therefore would be looking to trade this from the long side if we test $16.00 once again.  
• July meal chart breaks down to $440.00, with best support moving up to $435.00.  While the uptrend is intact, this market has been prone to breaking down easily, so if needing to price would wait to see if $435.00 can be broken which will likely lead to a pullback to $425.00.  
• July soyoil retreats from its contract high at 6744c, which was close to the 6750c target.  Very strong support and a buying opportunity would be at 6450c should we go there, with interim support at 65c as well.  If needing to price or cover a short, a break towards 6450c to 65c is a good place to do so and think it may hold for still higher contract highs.  

DECEMBER CORN

Correction or a major top?  The ADX is strong at 54, and the market is probably heading into a wide trading range vs. the placement of a market top.  Prices should see support from trendline shown in the slanting red line at $5.75, and certainly more at $5.65.  The break alleviates all overbought conditions which now stands at 69%.  Think we should stabilize at $5.65-$5.75 and retrace part of the break with better resistance now a bit lower at $6.18 vs. the recent contract high at $6.38.  If needing to price, would scale down do so from $5.65 to $5.75, as recent breaks of size have also invited more global buying interest. 

TAGS – Feed Grains, Soy & Oilseeds, Wheat, North America