Weekly Analysis 10.05.2021 - 16.05.2021

Over the previous week, CBOT SRW wheat and corn futures prices have plummeted. Chicago soybean futures prices also decreased notably.

Over the past week, the currency pair EUR/USD fell by 0.0025 to 1.2141. The price of US WTI crude oil rose by 0.47 USD/barrel to 65.37 USD/barrel.

Iron ore prices are further decreasing as China intensifies its efforts to control the jump in prices by introducing more measures to limit the recent growth. Rising commodity prices have led to rising factory prices in the country to their highest level since 2017. Inflation concerns are growing around the world given the broad economic recovery and huge stimulus programs. Shippers and domestic producers will eventually not be able to withstand the increased steel prices, according to an analysis by the China Iron and Steel Association.

CBOT Chicago
SRW Wheat month 07.21 09.21 12.21 03.22
USD/mt 259.87 259.59 260.79 262.35
Corn month 07.21 09.21 12.21 03.22
USD/mt 253.43 221.64 213.67 215.74
Soybeans month 07.21 11.21 01.22 03.22
USD/mt 582.85 514.69 514.32 504.03

 

EURONEXT Paris
Wheat month 09.21 12.21 03.22 05.22
EUR/mt 218.00 217.75 218.75 219.00
Corn month 06.21 11.21 01.22 03.22
EUR/mt 251.00 213.75 214.25 214.75
Rapeseed month 08.21 11.21 02.22 05.22
EUR/mt 547.75 555.00 523.00 521.75

For the past week, CBOT July SRW wheat futures prices decreased by 54 1/2 cents to close at $7.07 1/4 a bushel.

Over the previous week, Chicago July corn futures prices have gone down by 89 1/2 cents to close at $6.43 3/4 a bushel.

Throughout the past week, the prices of July soybean futures in Chicago fell by 3 1/2 cents to close at $15.86 1/4 a bushel.

Chicago fund positions (futures + options) for the week ended May 11:

Managed Money
CBOT positions Long Short    Net
 contracts thsd.  +/- thsd.  +/- thsd.  +/-
SRW Wheat 87.4 -0.9 74.4 -3.2 13.0 2.3
Corn 344.0 -51.7 27.7 4.5 316.3 -56.2
Soybeans 188.1 1.7 10.3 -1.3 177.8 3.0
Soymeal 75.5 9.9 5.9 -5.5 69.6 15.4
Soyoil 104.2 -4.0 18.3 -2.3 85.9 -1.7

*Source: CFTC

Accumulated US Export Sales for the week ended May 06:

Total Export Commitments
US 20/21 19/20 18/19
million tons May 06 May 07 May 09
Wheat 25.528 26.380 25.667
Corn 67.744 38.528 46.898
Soybeans 61.379 40.092 45.237
Soymeal 9.700 9.638 10.523
Soyoil 0.670 1.022 0.697

*Source: USDA

Rainfall in the United States has visibly increased over the past week. It's raining in a lot of places, but not everywhere. There have been no precipitation in Canada so far. There was good rainfall in Western Europe, the Balkans, Ukraine and Russia. In the central regions of Brazil, the drought problems remain. Precipitation fell in places in the southern parts of the country, but not in large volumes. There was no rainfall in Argentina. There will be moderate rainfall in the US Corn Belt over the next 10 days. Rainfall in the US Wheat Belt will also be good. In Canada, precipitation is expected at the end of next week. In Western Europe, cool weather with moderate to good rainfall. Warm weather is expected on the Balkans with almost no precipitation. In Ukraine, warm weather without precipitation in the south. In Russia, cool weather with minimal rainfall in the southern parts of the country. Normal rainfall in Indonesia and Malaysia. In Australia, light rainfall in places. In central Brazil, precipitation is expected at the end of next week. In the southern parts of the country, light rainfall will take place. In Argentina, light rainfall is expected over the whole country. It will rain in many places in the United States. So far, only North and South Dakota would remain dry. Rainfall continues in Europe. Drought problems are expected to remain in central Brazil. So far, drought problems remain in Canada and Brazil and they are being resolved in the United States and Europe.

GRAIN EXPORTS:

US Week Accumulated
thds. tons ended 06.05 20/21 19/20
Wheat 523.1 23,006 22,795
Corn* 1,544 45,048 25,345
Soybeans 285.2 56,614 34,390
EU Week Accumulated
thds. tons ended 09.05 20/21 19/20
Wheat 419.884 23,520 31,518
Corn* 16.604 2,195 4,674
Barley 79.612 6,827 6,750
Russia Week Accumulated
thds. tons ended 06.05 20/21 19/20
Grain 500.0 45,600 38,002
Wheat 200.0 36,300 31,158
Corn* 100.0 3,100 3,168
Barley 200.0 5,900 3,407
Ukraine Week Accumulated
thds. tons ended 14.05 20/21 19/20
Grain 778.0 40,016 52,456
Wheat 238.0 15,381 19,681
Corn* 463.0 19,821 27,309
Barley 13.0 4,131 4,784

* US (September - August)
* Russia, Ukraine and EU (July - June)

Corn exports from the United States remain above 1.5 million tons, but they must go up to around 2 million tons in order to reach a total of 70 million tons for the season. Wheat and soybean exports are considered as relatively good. Russia and Ukraine maintain relatively good export levels at the end of the season.

Last week, the USDA published its May report on the state of the world's grain balance with the first forecast for the new 2021/22 season. Key changes:

USDA  -  May 2021

Wheat
WorldMMT May 21/22 +/- 20/21 +/-  19/20
Production 789 +12.88 +24.82
Trade 203 +6.09 +8.45
Consumption 789 +7.81 +39.88
Ending Stocks 295 +0.30 -4.48

 

Coarse Grains
World, MMT May 21/22 +/- 20/21 +/-  19/20
Production 1,496 +58.50 +83.550
Trade 245 +15.20 +29.97
Consumption 1,489 +31.84 +59.79
Ending Stocks 321 +6.59 -13.48

 

Corn
WorldMMT May 21/22 +/- 20/21 +/-  19/20
Production 1,190 +61.39 +72.69
Trade 196 +12.39 +20.52
Consumption 1,181 +31.68 +46.27
Ending Stocks 292 +8.77 -12.18

 

Soybeans
WorldMMT May 21/22 +/- 20/21 +/-  19/20
Production 383 +22.58 +46.11
Trade 173 +1.54 +7.77
Consumption 381 +11.45 +23.41
Ending Stocks 91 +3.55 -5.42

 

Overall, the May USDA report was optimistic for corn and wheat. It should be noted that high prices do not reduce consumption so far. As for soybeans, the balance is tighter and this worries the markets. We will also see an excellent sunseed production - especially in the Black Sea region. Consumption and stocks are visibly increasing without a significant change in ending stocks, ie. stock/consumption ratio is decreasing.

On Friday, corn futures prices in Chicago fell again to even lower levels. In the new week, China is expected to buy 3.8 million tons of corn from the new crop from the United States. Estimates of corn production losses in Brazil are increasing, but this could not outweight the optimistic report of the USDA and markets collapsed. Much lower values ​​were expected for the corn production in Brazil in the May USDA report. Corn prices are now expected to rise at the first signal that corn areas in the United States will remain at the level of the current USDA forecast and yields will not reach the expected level. The supply of corn in the world will be close to the current record achievements, the demand will be at an all-time high. IHS Markit Agribusiness forecasts 96.8 million acres of corn in the United States, which is above the March forecast of 94.294 million acres and well above the current USDA estimate of 91.1 million acres. These areas at a yield of 179.5 bushels / acre will provide a corn production of 403.8 million tons. In case the yield drops due to low rainfall to 170 bushels/acre, the production will be 382.5 million tons. Both figures are large enough to stabilize the market throughout the season.

According to AgorBravo, in areas affected by drought in Brazil, corn yields will fall by up to 40%. The potential of the second corn crop was 90 million tons, but due to drought it dropped to 75 million tons. Other analysts predict a second corn crop of 68 million tons, which is quite a low estiamte. With a second corn crop of 75 million tons, corn exports from Brazil will still be about 35 million tons. Opinions about rainfall, crop condition, crops, exports are very contradictory. China is now buying corn from the new crop from the Black Sea region in exchange for lost quantities from Brazil.

In France, Ukraine and Russia sowing campaigns of corn are going at a very fast pace. Crops are in good condition due to the sufficient rainfall and favourable weather conditions.

On Friday, China bought 1.36 million tons of corn from the new crop from the United States. Most likely, China will no longer buy corn from the old crop from the United States given the declining stocks. For the past week, the Chinese bought 3.74 million tons of corn from the new crop from the United States and canceled purchases for the old corn crop of 0.28 million tons. The Chinese do not buy corn from the old crop due to high prices. They prefer to purchase corn from the new crop at lower prices. This is not a coincidence, but a well-established strategy of China. Therefore, we can see more canceled purchases of the old corn crop and new purchases of the new corn crop. China's hunger for corn from the new crop is a positive signal for demand in 2021/22. The Chinese find it difficult to meet their purchasing commitments, but it turns out that the United States does not have much to offer.

In general, the corn market is cooling and the very long net position in Chicago has room to fall. Once the sales are over, we may see some price increases, but then a new assessment of the productions in Brazil and the Northern Hemisphere will be made.

Soybeans were not affected by the general decline in the markets during the week. Low ending stocks worried everyone and sales were not so much. Low ending soybean stocks in the United States have been confirmed for the old crop and the estimates for the ending soybean stocks of the new crop are also low, although there is a long time until they are realized. We expect soybean areas in the United States to be 87.6 million acres in 2021, which will leave a tight balance in 2021/22. Brazil is about to sell the largest amount of soybeans to the United States since 2014. 208,000 tons of soybeans have already been shipped or are being prepared for export .

Soybeans remain in a neutral position. Few things have changed since the report. We certainly need larger soybean areas in the United States and good rainfall. IHS Markit Agribusiness predicts that the soybean areas in the United States will reach 88.485 million acres in 2021 compared to the March estimate of 89.730 million acres and 87.6 million acres in the USDA forecast. This soybean areas level would lead to a soybean production of 119.7 million tons at a yield of 50 bushels/acre.

Private analysts have predicted that the world's sunseed production will reach 57 million tons in 2021/22, which is 7 million tons more than 2020/21 and almost 2.5 million tons higher than the estimate from the May USDA report.

Rainfall in the US Wheat Belt has led to the drop in wheat prices during the previous week. Wet weather is returning to the central United States. Good rainfall is expected in Kansas and Oklahoma. It would remain dry in North and South Dakota. The rapid sowing of spring wheat has a stabilizing effect on the markets. There are no worrying signals from the Black Sea region so far. After the rains in Russia, temperatures will get significantly higher, but this will end in 5-6 days. In the new season, the USDA expects record high consumption of wheat for feed. This will happen against the background of a large corn supply, which will obviously not be enough - 159 million tons for 2021/22 (158 million tons for 2020/21 and 139 million tons for 2019/20), including China with 35 million tons (40 and 19). The USDA attaché in Russia estimates the wheat production in Russia at 77 million tons in 2021, wheat exports at 40 million tons and ending wheat stocks at only 5 million tons (15 million tons in the USDA report). At the end of the week, SovEcon raised its forecast for the Russian wheat production from 80.7 million tons to 81.7 million tons, which is entirely due to larger wheat.

Over the period of March - April, the herd of sows in China increased by 1.1% to a level that is 23% higher than a year ago. The level reached seems to be good according to the Chinese.

Changes in FOB Prices of key exporters:

USD/mt US Argentina
week ended 07.05 14.05 +/- 07.05 14.05 +/-
Wheat 326 302 -24 298 295 -3
Corn 328 308 -20 279 257 -22
Soybeans 620 601 -19 567 563 -4

 

USD/mt Ukraine France
week ended 07.05 14.05 +/- 07.05 14.05 +/-
Wheat 272 279 +7 289 278 -11
Corn 291 297 +6 323 314 -9
Sunseed 854 862 +8 662 666 +4

After huge increases in recent weeks, a strong decrease in prices followed. We will find out whether it was just a price correction in the coming weeks.

Wheat - The FOB price of Australian wheat with June delivery decreased by 1 USD/ton for the week to 294 USD/ton. Wheat from Ukraine and France are now the cheapest. Wheat price in the United States and Argentina are still well above them.

Corn - The cheapest on the market is currently Argentinian corn but the price will probably not stay so low. FOB corn prices of other exporters are relatively similar. The FOB price of Brazilian corn with delivery in August, ie. new crop, fell sharply by 31 USD/ton to 298 USD/ton .

Soybeans - During the past week, FOB soybean prices fell the most in the United States. The FOB price of Brazilian soybeans fell by only 8 USD/ton to 569 USD/ton.

Black Sea crop prices (compared to the previous week):

Russia
months 05-06 07-09 09-11
Wheat 12.5% 282(+24) 275(+11) 273(-2)
Wheat 11.5% 276(+10) 269(-3) 266(-17)
Feed Wheat 272(+9) 265(-4) 262(-18)

 

Ukraine
months 05-06 07-09 09-11
Barley 235(+5) 258(+3) 256(-10)
Corn 297(+8) 298(+1) 274(+6)
Sunseed oil 1560(+3) 1541(+8) 1283(+90)