More market volatility ahead

By Doug Tenney, Leist Mercantile

Planting progress across Ohio during April and into mid-May was extremely varied. In nearly the blink of an eye, dust, not rain showers, were flying across the landscape. It is now full press on to finish planting corn and soybeans as soon as possible. 

Volatility 

Grain producers and traders alike were sharply reminded as volatility was rampant the second week of May. It announced, “It is here to stay.” Already at mid-May, corn had been down the 40-cent daily limit and soybeans down 78 cents. The May 12 Supply and Demand Report was viewed as a neutral report. Traders, however, were disappointed both corn and soybean ending stocks for crop year 2021 were not lower based on strong demand currently seen for both commodities.

USDA estimated corn ending stocks for 2021-2022 would be 1.507 billion bushels and compare to trade estimates of 1.344 billion bushels. Trader disappointment was noted when U.S. corn exports for new crop corn were estimated at 2.45 billion bushels while old crop U.S. corn were projected at 2.675 billion bushels, a decline of 325 million bushels. The lower number was troubling when old crop corn exports are strong and expected to get even larger in the months ahead. Some are projecting new crop corn exports could be as much as 500 million bushels too low.

In mid-May the U.S. had a record 893 million bushels of old corn export sales yet to be shipped during the current marketing year which ends August 31, 2021. The biggest share would be going to China. For the next three months expect the US to be shipping huge amounts of corn on a weekly basis. In addition, don’t be surprised that new records are set for corn shipped in a week.

Dry weather in Brazil continues to push their corn production lower. The May 12 USDA estimated their corn production was 102 million tons, down 7 million tons from April. Reports indicate that much of a change in just one month is a big change for USDA compared to normal. However, we are already seeing private estimates suggest the Brazil corn production could be 90 million tons or even lower. Lower corn production in Brazil should push additional exports to be shipped out of the U.S. No one is surprised the reductions seen in the Brazil corn production. Weather conditions in their corn growing regions during March and April were dry as rains were very infrequent. May marks the beginning of their dry season so even normal rains will do little to improve yields. 

China was a buyer of new crop U.S. corn at least twice a week during the first two weeks of May. It will be important to see corn continuing to move via barge down the Mississippi River towards New Orleans shipping points the next three months. During the second week of May, the closing of a Memphis, Tennessee bridge stalled barge traffic for 3 days. Barges were not moving south or north as government officials wanted to make sure the Hernando de Soto bridge carrying I-40 traffic across the Mississippi River would not collapse into the river.

Domestic basis levels for both corn and soybeans remain steady to firm. Mid-May in the Midwest, basis of 25 to 65 cents over the July for corn and 60 cents to a $1 over the July for soybeans were observed. Processors continue to be very aggressive to secure summer supplies of corn and soybeans when crush margins are so strong. 

A huge USDA report will take place June 30 with the Planted Acres Report. Mid-May ahead of that report, Informa suggested U.S. corn acres for 2021 could be increased 5 million acres compared to last year. It appears the table is set for a volatile report on June 30.

Weather, exports, and exports will be key features into the summer months.

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