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April 9th - Closing Market Commentary

04/09/2021
April 9th - Closing Market Commentary

Grains closed mixed on Friday:

Corn – 2 ½ cents/bu (May @ 5.77 ¼ )

Soybeans – 12 ¼ cents/bu (May @ 14.03)

Chi Wheat + 10 cents/bu (May @ 6.38 ¾ )

Cdn $ +0.00250 (70.835 cents)

WTI Crude Oil -0.28/barrel (59.32)

The USDA released their April Supply and Demand Reports on Friday, and those reports did elicit a market response, in terms of their impact on grain values in the 2 hours of active trading following the report’s release.  The USDA lowered USA 2020/21 corn ending stocks by 150 million bushels (feed up 50 million bushels, exports up 75 million bushels, and ethanol up 25 million bushels), while they left USA soybean ending stocks unchanged and they raised USA wheat ending stocks by 16 million bushels.  The USA ending stocks for all grains were well within the ranges of expectations of traders (see tables below).  Where the USDA really surprised the trade was by their increase in world ending soybean stocks by a little more than 3 million tonnes from their March estimate, and by their surprising 5 ½ million tonne decrease to world wheat ending stocks.


Prior to the noon ET release of the USDA April Supply and Demand reports, corn and wheat futures were firm, while soybean futures were trading slightly lower on the day.  Initially, wheat futures continued to be supported by extreme dryness in the USA Northern Plains, and corn was higher on the expectations for cuts to USA corn ending stocks.  Soybean pressure was felt due to the massive volume of soybeans enroute to China from Brazil, and concerns that soymeal demand could soften amid reports of increasing incidences of African Swine Fever in the Chinese hog herd.

Immediately following the release of the SnD Reports, old crop corn futures traded as much as 15 cents/bu higher, Chicago wheat traded as much as 16 cents/bu higher, and soybeans traded another nickel per bushel lower.  The initial euphoria over the cut to corn ending stocks was short lived however, as the market recognized that a 1.352 billion bushel corn carryout is not wildly bullish – more cuts to ending stocks will need to be seen, or 2021 production issues will need to arise, in order for values to really take off.  One should not ignore the fact that May corn futures had rallied 20 cents per bushel in the 4 trading days preceding Friday. 

The USDA kept old crop soybean stocks unchanged by lowering crush by 10 million bushels, increasing exports by 30 million bushels, and lowering residual losses by 17 million bushels.  Increases to exports were anticipated, but reductions to crush are a bit of a concern for the market.  On the world stage, the USDA increased Brazil’s bean crop by 2 million tonnes, but left Argentina unchanged.  That is a bearish surprise, particularly since various sources have been cutting back their estimates of Argentine soybean production due to dryness. 

Wheat futures were independently strong on Friday, supported by the aforementioned dryness concerns in the USA Northern Plains.  In the USDA reports, the government lowered USA feed wheat usage by 25 million bushels while decreasing USA wheat imports by 10 million bushels, resulting in higher overall 2020/21 ending stocks.  The USDA did show China feeding an additional 5 million tonnes of wheat, thereby lowering their projected world wheat carryout significantly.  World wheat values did not track higher with the higher USA prices on Friday.  Russian wheat remains at deep discount to USA wheat in export circles ($10 per tonne discount before freight).  Looking forward, the trade expects to see USDA good/excellent crop ratings actually improve for winter wheat in Monday’s Crop Condition Report.

After the close of trading on Friday, the CFTCV released their weekly report on fund positions in commodities as of Tuesday, April 6th.  Friday’s data showed that funds were less long corn and beans than expected, as they held 29,000 fewer corn contracts than expected, and 24,000 fewer soybean contracts than expected.  Funds were shorter Chicago wheat than the trade expected by 6,000 contracts.  On the day, funds were thought to have been neutral in corn futures trade (now long 418,000 contracts), while selling an estimated 5,000 soybean contracts (now long 136,000), and buying an estimated 8,000 Chicago wheat contracts (now long 7,000 overall). 

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