Grain Outlook: Line to buy corn is very short

The following marketing analysis is for the week ending April 21.

CORN — We were treated to choppy trade early in the week in the corn market before bearish influences overwhelmed traders. An absence of fresh export sales, fund selling, and variable Midwestern weather pushed July prices to their lowest since late March. The December contract took out last month’s low and was nearly 25 cents off this week’s high. Early week strength came from weather that ranged from a winter blizzard to heavy rains with cooler temperatures.

More noise from Russia about not extending the Black Sea grain agreement beyond the May 18 expiration date added to supply uncertainty. Russia wants sanctions lifted to make it easier for them to sell their grain, fertilizer, etc. to customers. Russia interrupted grain inspections over the weekend before resuming them on April 18. The uncertainty over this region stays heightened. Some EU countries were halting the importation of cheap Ukrainian grains that were dampening grain prices. Poland reached an agreement where Ukrainian grain could transit through the country, but not unload the grain. Other countries were working through their plans. The EU was also preparing a plan to supplement payments to farmers in bordering states who were hurt by Ukrainian imports.

I will stay with my assumption that U.S. planting will proceed at an average pace. It’s estimated that as of April 23 U.S. corn planting will reach 15-20 percent complete. As of April 16, corn planting was 8 percent complete. Remember last year that by May 1 Minnesota had no corn planted, Illinois was 7 percent planted, and Wisconsin was 1 percent planted. All went on to have record yields.

The 90-day forecast from the National Oceanic and Atmospheric Administration released this week didn’t forecast any growing season obstacles. Brazil’s safrinha corn crop is essentially planted with favorable weather in the short-term forecast. The Buenos Aires Grain Exchange pegged Argentina’s corn harvest at 15 percent complete vs. 27 percent complete on average.

The U.S. Department of Agriculture did not announce any fresh daily export sales flashes and the weekly sales report had the lowest old crop sales figure in 14 weeks. Weekly sales were 12.3 million bushels for old crop to bring total commitments to 1.5 billion bushels. This is 33 percent behind last year when the USDA is expecting a 25 percent decline in year-on-year exports. New crop sales were 16.6 million bushels with total commitments at 95.4 million bushels vs. 132.4 million bushels last year by this date. New crop sales were almost non-existent at 100,000 bushels. New crop total commitments are just 65 million bushels compared to 373.4 million bushels on the books last year.

Weekly ethanol production was up 6.8 percent for the week at 1.02 million barrels per day which was an eight-week high and a new record for this week. Ethanol stocks were up 165,000 barrels at 25.3 million barrels. Margins fell by 8 cents to 31 cents per gallon. Gasoline demand was at a nine-week low at 8.52 million bpd.

After recent economic reports, the Chicago Mercantile Exchange FedWatch estimates there is an 83 percent chance the Federal Reserve will raise interest rates 25 basis points at their May meeting.

A United Nations report this week predicted India could surpass China as the world’s most populous country by the middle of this year. India is estimated to have 1.43 billion people by July.

Outlook: A lack of demand was felt this week without any new sales announcements. The May/July corn inverse continued to grow this week, reaching 48.5 cents for a new contract high. Cash and futures have converged so this may be the high point. Many locations have already moved their bids vs. the July.

The Black Sea grain initiative remains in doubt with Russia crying “foul” that sanctions have not been lifted to allow it easier for them to sell their grain and fertilizer to global customers. The current agreement ends on May 18. 

Flooding in the Corn Belt has closed and will close portions of the mid- and upper Mississippi River; but Gulf values are not indicating there is any panic for supplies.

Uncertainty over what the Federal Reserve will do with interest rates at their May meeting was also cited as pressuring prices.

For the week, May corn fell 3 cents to $6.63.25, July plummeted 20.5 cents to $6.15.25, and December was 12 cents lower at $5.48 per bushel.

A little December corn history: since 2000, the time frame from January to November before expiration, the high was in May five times and in June five times.

SOYBEANS — Soybeans jumped higher out of the gate to begin the week, only to be stymied by mid-week as Brazil’s soybean and meal basis slid lower and on a lack of demand interest. Weakness was also seen in the soy products. Soybean prices posted new lows for the month late in the week. 

Brazilian soybeans are headed to the east coast of the United States. It was reported that 79,000 metric tons of soybeans would be shipped from northern Brazil to the United States between now and May 1. Brazil’s soybean basis has crumbled to 19-year lows, according to a research center at the University of Sao Paulo. 

Weekly export sales were dismal and below the lowest estimate at 3.7 million bushels —  the lowest in four weeks. Total old crop commitments at 1.85 billion bushels are 12 percent behind last year. The USDA is forecasting a 6.6 percent decline in year-on-year exports. China imported 4.8 million metric tons of U.S. soybeans in March, up 43 percent from last year. China’s bean imports from Brazil in March were down 42 percent from last year at 1.67 mmt due to Brazil’s slow start to harvest.

The BAGE put Argentina’s soybean harvest at 16.2 percent complete vs. 42 percent. They dropped soybean production by 2.5 mmt to 22.5 mmt. The USDA is at 27 mmt. Argentina’s growers have been slow to respond to the soy dollar exchange rate. In the first four days of the program, as of April 17, they have sold an estimated 442,000 metric tons vs. 1.1 mmt being sold in the same time slot of the previous program.

The March National Oilseed Processors Association report was better than expected with 185.8 million bushels crushed compared to estimates for 183.4 million bushels. This was the highest crush on record for March and the highest in five months. Soyoil stocks were 1.85 billion pounds compared to the 1.867 billion pounds estimated.

Outlook: U.S. soybeans are not competitive on the world stage and prices are a reflection of that situation. There are expectations Brazilian soybean imports into the United States will continue to be attractive.

The weather may slow planting, but with today’s equipment it’s too early to be trading late planting.

Funds were net sellers this week, but they are still holding a modest net long position. The July and November soybean contracts made fresh lows for the month with a poor ending to the week.

For the week, May soybeans tumbled 17 cents to $14.83.5, July fell 18.25 cents to $14.49, and November declined 16.25 cents to $12.85.25 per bushel. May meal was down $14 at $445.70 and May soyoil was 26 ticks lower at 53.40.

Weekly price changes in May wheat for the week ended April 21:  Chicago wheat was 20.75 cents lower at $6.61.75, Kansas City plunged 38 cents to $8.40.75, and Minneapolis crumbled 29.25 cents to $8.47 per bushel.  

Phyllis Nystrom is a market analyst with CHS Hedging in St. Paul.