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3 Big Things, March 24, 2021

Overnight grain trading moved higher Wednesday.

1. Soybean market adds to Tuesday’s gains

As investors eye multiple market factors, the spring trade is beginning to move higher. 

Aside from weekly export sales, the trade is anticipating a market-moving USDA Planting Intentions Report a week from today, and upcoming spring planting weather.

In overnight trading, the May corn futures moved ¾¢ higher at $5.52. July corn futures traded 1¢ higher at $5.35. New-crop December corn futures moved ¼¢ lower at $4.69¾. 
May soybean futures traded 6¾¢ higher at $14.30. July soybean futures moved 7¼¢ higher at $14.18½. New-crop November soybean futures moved 3¢ higher at $12.26¼.

May wheat futures moved 3½¢ higher at $6.38¼. 

May soymeal futures traded $2.90 short term higher at $401.70.

May soy oil futures traded 0.07¢ lower at 56.95¢ per pound.

In the outside markets, the NYMEX crude oil market is at $59.15. The U.S. dollar is higher, and the Dow Jones Industrials are 92 points higher at 32,398 points. 

Bob Linneman, Kluis Advisors, says that investors will be watching South America’s crop weather updates for price direction.

“The global vegetable oil markets surged yesterday, helping soybean oil and soybean prices rally. Corn prices were higher on rumors of additional corn sales to China. At the close on Tuesday, corn closed 2¢ higher, soybeans closed 6¢ higher, and wheat closed 3¢ to 7¢ higher,” Linneman stated in a daily note to customers.

Linneman added, “Watch the extended forecasts for Brazil. Several of the weather models now indicate hot, dry conditions in late March and early April. This could be a big problem for the double-crop corn that was planted so late this year.”


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2. Brazil Planting, Harvest Progress 

Brazil’s farmers are making progress getting their 2020/2021 soybean crops out of the field. The question becomes what kind of yields will they see and will the weather allow them to plant their second-corn crop.

As of Monday, the state of Parana, one of the country’s top soybean-producing states, had 75% of its soybeans cut vs. 58% a week earlier. Also, Mato Grosso, the largest soybean-producing state in Brazil, reported that its farmers were 92% complete with harvest, as of late last week.

As of Sunday, Brazil had 88% of its second-crop corn (safrinha) planted vs. 72% a week earlier. 

Experts say that because Brazil’s corn was planted nearly two to three weeks later than normal, farmers will have to watch to see if the crop matures before a frost hits at the end of the growing season.

Brazil’s farmers are expected to keep planting the safrinha crop despite weather delays, due to the high price of corn.

In Sao Paulo, the price of corn equates to nearly $8.00 per bushel. In other parts of Brazil, corn prices are equal to $6.50 per bushel, according to experts on Brazilian corn prices.

Looking forward, drier weather is expected across Mato Grosso over the next week, allowing farmers to wrap up the soybean harvest.

3. Spring Market Outlook

Investors have a lot to consider in the next 30 days when it comes to following the market factors.

For instance, next week’s USDA Planting Intentions and Stocks Reports will have the potential for big market influence. Also, crop-weather in Brazil and planting weather in the U.S. will loom large. And, weekly information on corn and soybean demand from China and elsewhere could continue to tighten U.S. ending stocks.

Peter J. Meyer, head of grain and oilseed analytics, S&P Global Platts, says that the market should be able to support corn prices above $4.00 per bushel and soybeans above $11.00 per bushel. “The futures curves in both corn and soybeans remain in backwardation. This suggests that current old-crop prices will not transfer to new crop. A lot will obviously depend on acres and weather between now and early July.”  

“Even with good weather and solid plantings, we would expect that new-crop corn prices will support around the $4.25 level basis December futures. In soybeans, it’s a more difficult call as the very low supply number suggests a two+ year time frame to get back to some sort of normalcy. With current new-crop November futures around $12.50, it seems unlikely that the $11.25 price level for new crop will be broken anytime soon.” 
Meyer added, “In 2013, prices were reflective of the 2012 drought. At the time, they were heading down after peaking a year prior. At that time the market was dealing with supply issues. This time around, both corn and soybeans are demand-driven, which suggests longevity in prices, or at least support.”  

Greg Lumsden, Cargill Elevate Grain Advice, agrees that over the short to medium term it feels like the current market strength has staying power.

“This year is different than other years like 2013 in that we are in a strong demand pull market vs. a production shortfall scenario. We are potentially looking at the tightest carryout coupled with the strongest export demand we have ever seen. What will also support the market is the fact that we have a shorter window to ration demand for this crop year vs. knowing there is a production issue during the previous growing season. While high prices will incent more acres, and large production can make the carryout more comfortable, the growing demand will underpin the market for some time,” Lumsden says.  

Lumsden added, “That said, it is important to stay disciplined at historically high prices. There will be big swings with any change in demand, production, or outside markets. While the funds are piling into commodities and providing a nice tailwind, they can also exaggerate price moves when things change.”

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