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April 6th - Morning Market Commentary

04/06/2021
April 6th - Morning Market Commentary

Grains are higher in overnight trading:

Corn + 6 ¾ cents/bu (May @ 5.60)

Soybeans + 14 ½ cents/bu (May @ 14.27 ¼ )

Chi Wheat + 2 cents/bu (May @ 6.20)

Cdn $ -0.00305 (79.545 cents)

WTI Crude Oil +0.88/barrel (59.53)

Corn and soybean futures have spent the majority of time in the overnight session in positive territory, while wheat futures have traded both sides of unchanged.  The realization that the USA needs to produce a very large crop of corn and beans in 2021 in order to ensure that stocks do not run out in the 2021/22 marketing year is supporting values.  While yesterday saw more strength in old crop values than in new crop, today, we are seeing fantastic strength in old crop prices.  The thought process in old crop strength is that rallying prices to stifle further old crop demand is a good way to try to ensure that higher old crop ending stocks provide a bit of a buffer going into the new marketing year, particularly if any production problems arise this spring/summer.  Yesterday December corn futures reached a new all time high for the contract, while November futures traded within 4 cents/bu of it’s all time contract high.

China confirmed another case of African Swine Fever overnight. Rumors of increasing pork production losses in China from a resurgence in ASF have been making headlines, despite government assurances that the disease is under control.  It is telling that another confirmation of an new infection is not having a negative impact on USA bean or corn values this morning.

Last night, the USDA released it’s first Crop Condition Report of the 2021 season.  It showed that 2% of the corn crop is planted, with most of planting activity occurring in Texas (55% complete).  Current progress matches both last year and the 5 year average for this time of year.  USA winter wheat was rated as 53% good/excellent, which is right in line with trade expectations going into the report.  The winter wheat crop has benefitted from rains, particularly in the southern Plains in recent weeks, although ratings in the hard red winter wheat belt are still far below those seen in the eastern soft red winter production zone.  Last year on this date, the USA winter wheat crop was rated as 62% good/excellent versus the 5 year average of 52%.

Weather wise, most of the USA Midwest and Plains are expected to see decent rains over the next 5 days before turning drier next week.  South America saw some scattered rains in northern Argentina and southern Brazil yesterday, but for the most part, major production areas were dry, and look to remain so for the next week, which will add stress to second crop corn in Brazil.

Technically, the May corn contract currently sits at a pivotal price point.  It has failed to close above the 5.60 level since the release of the USDA Quarterly Stocks/Prospective Planting Reports last Wednesday.  A close above 5.60 today should bring further buying into the market, whereas a failure to hold onto current gains could trigger further speculative liquidation.

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