A huge selloff strikes the corn market | Tuesday, May 25, 2021
July soy oil futures settled 1.56¢ higher at 66.69¢ per pound.
In the outside markets, the NYMEX crude oil market is +0.07 higher (+0.11%) at $66.12. The U.S. dollar is lower, and the Dow Jones Industrials are 31 points lower (-0.09%) at 34,362 points.
PJ Quaid, independent broker, says that China’s announcement Monday that it issued a “zero tolerance” warning to commodity speculators on Monday is sending a negative message to asset markets.
"China is trying to reign in commodity prices. Plus, favorable crop weather has really thrown a wet blanket on this market. Trade volume is very very low," Quaid says.
Peter J. Meyer, S&P Global Platts, head of grain and oilseed analytics, says that while the talk about China cracking down on corn speculation again has been making the rounds, crop weather may have more to do with the lower markets.
“We have 90% of the corn crop planted, and while many areas could use some heat, there is very little in the 30-day weather forecast to cause much concern. In soybeans, the sell-off appears to be more meal-based with prompt meal futures the lowest they’ve been since December. Whether it’s DDGs or meal, the feed markets in both North and South America have seen very little buying interest of late according to our sources,” Meyer says.
Meyer added, “It also looks like many of the ethanol plants reduced bids by a sizeable amount for new-crop corn, starting in September. While bids between now and August are generally still +35 cents/bushel over the Chicago futures price, the new crop bids posted this morning are -35 cents per bushel starting in September. It sticks out that August bids are in the high $6.00 range while September bids are $2.00 lower. Could be prompting some cash sales in corn for old crop.”
On Monday, The USDA Crop Progress report showed corn planting at 90% complete, just below trade estimates. Crop emergence was 64%, well ahead of the five-year average. The report showed soybean planting at 75% complete, right at trade estimates, and 21 percentage points ahead of the five-year average. Spring and winter wheat crop conditions came in below trade estimates.
Al Kulis, Kluis Advisors, says that investors are watching improved crop weather pressuring prices.
“Corn basis is starting to pull back much like the soybean basis did three weeks ago. The ideal growing conditions for new-crop corn have the new-crop futures pulling July futures and cash basis bids lower,” Kluis stated in a note to customers.
Kluis added, “I am watching the U.S. Drought Monitor Index, which is likely to show a slight improvement on Thursday. Most of the Corn Belt needs to get another 13 to 15 inches of rain by the end of August to create a trendline or better yield this year. Right now, over 80% of the Corn Belt would have that potential. I will update my projections on the moisture index each week going forward.”