Nick Paumen

Jun 1, 2021

 Highlights

  • Agricultural producers who have coverage under most crop insurance policies are eligible for a premium benefit from the USDA if they planted cover crops during this crop year under the Pandemic Cover Crop Program.
  • The Organization for Economic Cooperation and Development increased its estimate of world GDP growth from 5.6% to 5.8% in 2021, citing help from vaccine distribution.
  • Reuters reported over the weekend that Brazil’s government agencies warned of droughts this week as the country faces the worst drought in 91 years, raising fears of energy rationing due to low hydroelectric power generation.
  • This afternoon we will get the first glimpse at crop condition ratings for corn and soybeans, be ready for any market-moving numbers prior to the evening open.
  • Some concern over the weekend of frost damaging crops in areas of the midwest but how much damage was done is difficult to estimate at this point.
  • Dr. Cordonnier kept his Brazil corn production steady at 95 MMT and soybeans at 134 MMT. He also kept Argentina steady at 45 MMT for corn and 46.5 MMT for soybeans.
  • As of 6:00 AM: Crude oil up $1.85 $68.17, Dow futures up 212 at 34,725, S&P 500 futures up 20.50 at 4,223, and the U.S$ index down 133 ticks at 89.660.                          

Corn

  • Double digit gains across the board this morning as the technical market supports things this morning, fundamentals remain steady right now.
  • Weather for the next weeks looks favorable for crop development across much of the midwest.
  • Brazil’s forecasts this week are similar to last week with moderate rains expected in the southern crop regions while central Brazil remains dry, and a case continues to be made that the USDA should reduce corn production in the June 10th WASDE report.
  • Fridays’ FOB values continue to show U.S. values at a premium to Argentina, but cheaper than Brazil. Today’s inspections report should also continue to show strong export numbers.
  • Open interest is down only 940 contracts with July down 10,400 and Sept up 4,100
  • Spreads: N/U 79’4 inverse, U/Z 26’0 inverse, N/Z 105’6 inverse, Z/H 6’4 carry.

 Outlook: Stronger start to the day likely continues as futures rebound from last week lows.

Oilseeds      

  • An overall stronger soybean complex this morning, except for crush futures as they remain under pressure.
  • Soybean processors are estimated to have crush 171.1 million bushels of soybean in April according to Reuters, this would be a retreat from 188.2 million in March and 183.4 million in April 2020 (the strongest crush on record).
  • Brazil continues to export soybeans at a rapid pace as Chinese Dalian markets show no signs that their demand needs have been satisfied.
  • U.S. Gulf soymeal values trade at a premium to Argentine soymeal pellets, also U.S. Gulf soybean FOB values are a premium to Brazil until our new crop season.
  • Open interest is down 530 contracts with only seeing major activity being down 2,200.
  • Spreads: N/Q 47’6 inverse, Q/X 106’4 inverse, N/X 154’0 inverse, X/F even money.

 Outlook: Late night session markets are stronger, but it will be interesting to see if trends change as traders come back to the market after the long weekend.

Wheat

  • Higher markets across the three classes of wheat with Mpls leading the way with 30+ cent gains.
  • Forecasts for the next 7 days indicate the majority of the soft white wheat and spring wheat areas will remain dry and hot as a heat wave sets in.
  • Winter wheat areas received excess rains over the last three days as harvest slowly progresses in the far southern regions.
  • Crop conditions continue to look good in the Black Sea region as they received rains over the weekend. Ag Consultancy agency in Russia updated their wheat crop estimate at 79.5 MMT, a 500k MT increase from their previous forecast.
  • Spreads: Mpls N/U 5 ½ carry, Kansas City N/U 5 ½ carry, Chicago N/U ½ inverse.

 Outlook: Higher markets as we see a mixture of following corn and soybean markets higher, and also drought conditions across northern/western wheat growing regions.