Daily price swings could be big in coming weeks

By Doug Tenney, Leist Mercantile

The March 31 Prospective Plantings Report had the United States planting 91.1 million acres of corn and 87.6 million acres of soybeans. When that report was released, it was pretty common for many analysts to suggest we need a record corn yield and perfect weather to produce enough corn to satisfy global corn demand. While that report is old news, the question remains: how much above those numbers will USDA publish with the upcoming June 30 Acreage Report? The report will provide further insights into the actual number of corn and soybean acres planted this spring. Many are expecting both corn and soybean acres to increase from the March 31 report. Mid-May one private analyst indicated 2021 corn acres would be 96.8 million acres. That number caused numerous sell-offs which lasted into the last week of May.

China was extremely active last month buying U.S. new crop corn. During a 2-week period last month they were buyers nearly every business day. Current totals indicate China has already purchased 420 million bushels.

Look for the U.S. to be extremely active the next two months shipping old crop corn to China. At the end of May, China had purchased near 905 million bushels, shipments to date were 535 million bushels, with 370 million bushels to be shipped by Aug. 31.

China continues to be a huge importer of U.S. old crop corn. For nearly two weeks last month the market was most concerned China would be canceling old crop corn purchases. Even a 4-day halt of traffic moving barges south of Memphis has not deterred China from switching hundreds of millions of corn bushels to new crop delivery. 

In addition, China was an active buyer of Brazil soybeans the last few days of May as they purchased up to 17 cargoes in just one day. While that is indeed a big number, ponder this: they need to buy about 40 boats each week in order to reach the 103 million tons they are expected to import in the coming year.

USDA currently has projected that China would be importing 103 million tons of soybeans during the upcoming marketing year from September 2021 to August 2022. Current projections suggest the U.S. will be shipping 40 million to 44 million tons of soybeans to China during that same period.

Brazil has exported a record amount of soybeans through the end of May. During the month of May, they exported 15.2 million tons of soybeans. The current ship lineup indicates the season peak for Brazil soybean exports has been reached. Monthly shipping totals will now drop in coming months.

The U.S. and China had their first round of trade talks the last week of May. It marks the first time for President Biden’s trade personnel to be engaged in China trade talks. First indications from the phone conference call indicate China came out in an aggressive fashion as they asked for the Trump trade tariffs to be dropped as well as sanctions to be removed.

Demand for ethanol is growing as ethanol stocks have fallen below those of 2019. Margins per bushel of corn have dramatically improved the past six months, erasing many months of negative margins dating near the start of the COVID-19 pandemic.

Beginning last month and into the last week of October, CBOT corn now has a 40-cent daily limit compared to the 25-cent daily limit the previous six months. Tight supplies along with the funds being active buyers and sellers contributed greatly to that 40-cent daily limit already being reached three times last month. Expect volatility to increase even more in coming weeks now that weather and its projections or actual events of weather take place. Note that weather was not a daily contributor to price movement higher and lower during both April and May. 

The next two months daily ranges for corn could easily reach 30 cents and soybeans 50 cents as the weather changes from one extreme to another in only a few days.

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