Today’s Prices
Grain markets finished mixed today as wheat corrected for the first time following 6 days of limit up gains.
Grain Market News
South American 2022 Production
This table shows the trade estimates as they believe USDA will say in tomorrows report. The trade is looking for corn losses in Brazil to be down 1.1 million metric tons from last month with Argentina corn production down 2 mmt from last month. Keep in mind this is just a 1 month decline. There were losses in previous reports and likely will be additional losses in future reports. Brazil’s soybean production is expected to decline by 5.8 mmt from last month with Argentina beans down 2.1 mmt.
Sport Corn Futures
A chart showing corn futures with US corn in blue is very cheap compared to Brazilian or European corn. Keep in mind Ukraine corn is not available to the world market place due to the ongoing war. There are some rail shipments we are hearing that are still moving through Ukraine into western Europe but a good share of Ukraine’s production is not available to the world market place at this time. What this means is in addition to South American crop losses and lack of availability out of the Black Sea region US corn is very cheap and that will allow US exports to increase over time.
Global Spot Oilseed Prices
Turning to US soybean prices, again shown in blue, they are much cheaper than rapeseed in the Europe which is shown in green and much cheaper than canola in Canada. The spread between other oilseeds to US soybeans is wide meaning US soybeans are very cheap on the global market. Its also worth noting US soybeans are now even cheaper than Brazilian soybeans which is very unusual during the peak of Brazil’s harvest. This means the soybean scenario is very similar to corn in that not only has there been a loss of global supply but US prices remain cheap meaning world buyers will be coming to the US for larger than expected volumes the next 4-6 months.
US Ending Stocks: 2021-22 Crop year
As a result of expected increases in exports the average trade guess for ending stocks in the US have been declining, the trade expects USDA come in with corn stocks at 1.476, that is 64 million bu smaller than last months estimate. Soybean stocks are estimated to come in at 270 mmt down 55 million bu from last months estimate with wheat ending stocks at 633 down 15 million bu from last month. Most of the reduction in ending stocks is due to the market place expecting exports will increase. Keep in mind exports are likely to continue to increase the next 4-6 months and US ending stocks are likely to work smaller that is why we’ve seen commodity prices either at or approaching all-time record highs.
Similar scenario with world ending stocks with loss of South American production is allowing the trade to expect USDA to lower world ending stocks. The trade expects USDA to come in at 299.6 for global corn stocks, down 2.6 mmt from a month ago. Bean stocks at 88.9 million would be down 3.9 million from last month, and wheat stocks at 278 down just fractionally from last months estimate.
Corn Stocks Comparison
This is the US corn supply and demand balance sheet looking not only at what the market expects but comparing it to what we’ve seen that past 7-8 years. The trade is expecting ending stocks at 1476 down from last month since USDA will not be changing US production from last month exports could be increased by 64 mb. When we look at this balance sheet to see what the trade might be expecting ending stocks would be at 9.9% stocks to use ratio that may not be as tight at least not yet as last year but still the 2nd tightest over the past 7-8 years.
Soybean Stocks Comparison
The average trade guess is for ending stocks at 270mb. Given the fact USDA will not be changing last years production it implies the trade is likely expecting exports to increase by that same 55mb. 270mb leaves a stock to use ration of 6.1% not as tight as last year but keep in mind this 270 could very well slip lower if more global buyers come to the US due to SA production losses.
Wheat Stocks Comparison
The trade is expecting ending stocks at 633 as we mentioned with corn and beans USDA will not be chancing wheat production and this implies the trade is likely expecting exports to increase slightly by 15mb in tomorrows report and that is likely due to the fact large exports will not be available out of Russia or Ukraine transferring some of the business to the US. One difference with wheat is US wheat is not competitive on the global market but that could change.
Grain Market News
May Corn Chart
Corn prices have fallen sharply from the highs posted Friday at $7.82. Today was not a big down day in fact nearby corn is just slightly higher but the corn market has fallen 54 cents from Friday’s high to todays low. 54 cents is a big move in 2 ½ days. Overhead resistance is sitting at $7.82, with chart support at the $7.15-20 level. That is a spike high that failed about a week and a half ago and that twill provide chart support. Technical and chart signals will not be the primary driver to prices as you can see we had a very sharp top that was posted about a week and a half ago. Technical indicators turned down but as the war in Ukraine escalated technical indicators turned quickly as well. Even though technical indicators turned lower today, its developments regarding Russia’s war against Ukraine and tomorrows crop report that will determine price direction in days and weeks to come.
May Soybean Chart
Soybean prices have also seen extreme volatility. We had a spike high in February that turned technical lower but quickly turned up as SA crop losses expanded. We had another sharp down move a week and half ago turning technical indicators down again but it has quickly rebounded turning technical indicators into the neutral range. Our point in soybeans is similar to corn. The chart and technical signals wont be holding a lot of value with the market is turning sharply when a war of Russia against Ukraine is affecting most of the world. Chart and technical indicators will be at a high posted at $17.59 with chart support last weeks close at $15.79 even though that is the range over the last week and a half that is $1.80 and anything in that range is fair game in the near term.
May Wheat Chart
Wheat prices exploded to new highs yesterday hitting $12.99 in KC todays low at $11.21 is down $1.88 in just one day. Keep in mind Chicago wheat had a daily range today of $2. We mentioned when wheat was up 5-6 limit days in a row volatility would be extreme and we would have huge moves up and down and we believe that will continue. Current chart resistance is at $12.99 with initial chart support at todays low of $11.21 but we cant rule it out falling into the $10 range. Wheat will be volatile on developments on the war of Russia against Ukraine.
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