Yesterday morning, USDA announced the sale of: 676,000 mts of old crop corn to China 408,000 mts of new crop corn to China We were surprised to see December corn trade above $7.00 Monday. Yes, it was just a half cent above $7.00, but it would be reasonable to think there were 1 to 2 billion bushels of December corn offered for sale at $7.00, which means it would take more than 1 to 2 billion bushels of buying at $7.00 to get the market to move above $7, even a fraction. Maybe farmers have sold all the new crop they want to sell until they get the new crop planted or maybe there is a much larger demand for $7.00 than we expected. In any case, trading above $7.00 the first day in 9½ years the market touched $7.00 is bullish, very bullish. On the other hand, it was announced yesterday that over a million mts of corn were sold to China. We have sold more than a million mts of corn in one day maybe 15 times the past 50 years. It is a huge amount of corn. The big sale was announced two days after the most bullish corn acreage report you will probably ever see in your lifetime. Throw in the very dry Western Corn Belt, the 14 million mts of corn hung-up in Ukraine and an inflation mad-dog chasing these markets… What bullish news could possibly top what we just saw the past two business days? I agree, if it does not rain at all in July in Iowa, corn will go higher, but normally it rains in Iowa in July. What could make this market go significantly higher? Inflation, yes, possible, but $7 is pretty inflated already. Corn will not break hard until we get corn planters rolling in warm soil and that is at least three weeks away. That half cent is very significant. For example, after the “psychological” resistance of $7 was broken, why didn’t technical and panic buying kick-in and run this market another 10 cents higher? Note: we are not calling a top yet in this corn market, but maybe we are a lot closer than we think. USDA issued its first Crop Progress Report of the 2022 season last evening. USDA reports US corn planting is 2% complete vs. 2% expected and 2% average.
Winter wheat was rated 30% good or excellent vs. 40% expected. Spring wheat is 3% planted vs. 2% expected and 2% average. Kansas winter wheat was rated at 32% good/excellent, Oklahoma was 22% good/excellent, and Texas at 7% good/excellent with 57% rated not just poor, but very poor. Winter wheat is 4% headed vs. 3% average.
Safras and Mercado out of Brazil estimated the country’s corn production at 118.15 million mt vs. 115.7 million mt previously and 114 million by the USDA. The weather has been great for second crop corn, but dry weather is coming next week. Gulf basis for corn was down 7 cents for first half April and 4 cents lower for last half April. Bean basis was steady out to July, where is was 1 cent weaker.
Dr. Michael Cordonnier left his Brazil soybean production estimate unchanged at 123 million mt. He said Brazil’s beans were 80.4% harvested as of Friday vs. 76.4% average. The USDA is at 127 million mt.
The truckers of Argentina have gone on strike primarily due to a shortage of diesel fuel, but also issues related to security, infrastructure and regulations to ensure the agreed freight rate is paid. Unlike most South American strikes, this one is on for an indefinite period of time. Argentina’s Biofuels Association, Carbio, said that an increase of the country's mandatory biodiesel blend would help offset fuel shortages. Carbio is pushing for the mandate to be increased 15% to 20%. Argentina is the world leader in the exportation of soymeal and soy oil.
Export Inspections Update
Yesterday Weekly Inspections for Export were good for corn, neutral for beans and not so good for wheat. Take a look at the tracker:
This morning: Crude oil is at $104.08, up $0.80 The dollar index is at 98.89, down 0.11 July palm oil is at 5,621 MYR, up 168. The contract high was made March, 9th at 6,531 MYR. Palm oil owns 36% and soybean oil owns 28% world market share. December cotton is at $114.24, up $0.48 per cwt. The contract high was made today at $114.30 per cwt. Cotton competes with soybeans and corn for acres. July natural gas is at $5.988, up 0.130 The contract high was made today at $6.017. Natural gas is the primary cost to manufacture nitrogen fertilizer. July ULSD is at $3.2289 per gallon, up 0.0221. The contract high was made March, 9th at $3.7675. ULSD stands for Ultra Low Sulfur Diesel.
Rain Days Update
The Western Corn Belt has 4 more rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 4 more rain days than yesterday.