Afternoon Comments; Monday, April 12th, 2021

Soybeans were heavily pressured during today’s session as funds opted to trim their long position to start the week. A continued reaction to the monthly WASDE report also weighed on soybeans as even though the numbers were friendly, there was not the bullish surprise that some traders were expecting. This caused the weak longs to exit the complex. We did see flash sales on soybeans though, with China booking 132,000 metric tons for new crop and Bangladesh splitting a 110,000 metric tons purchase between old and new crop. The grains were also under pressure today, mainly from a lack of buying interest and building global production numbers. Grain losses were held in check by drought concerns in the US and Canada and technical support.

Now that the April WASDE data has been released, trade will already start to our next big data release, which will be the May supply and demand numbers. These are closely watched as they contain our first official look at new crop balance sheets. Some traders are looking beyond these numbers and instead focusing on what will be released in the June quarterly stocks and acreage revisions report. This report tends to be one of the most watched on the year, and also one of the most influential on futures.

This year is expected to be no different when it comes to the market reaction. Both corn and soybeans posted limit moves following the March acreage and stocks as prospective plantings were considerably less than expected. Some traders immediately disagreed with these estimates though and claimed overall acreage was too low. The question now is if we will see any of these added to current projections, and in turn, larger crop estimates.

We continue to hear debate over this year’s projected plantings in the US and why the total of corn and soybean acres was so much lower than expectations. The immediate response is that the USDA was too low in its figures, but we are now seeing a different opinion. Last year farmers were encouraged to plant as many acres as possible to receive subsidy payments to compensate for the loss of trade from the US/Chinese trade war. We are not seeing that scenario this year which is likely reducing a desire to plant as many acres, especially those that do not yield well.

Weather remains a top factor in current price discovery. While conditions have improved in several regions of the United States, other remain dry. The question is what these conditions mean for planting and crop development. Dry conditions are seen as favorable but timely rains will have to develop soon or the threat of production loss will build. The region being monitored the most right now is the Upper US Plains as dry conditions are currently extending from the Dakotas into Canada. The same situation is developing in South America and impacting Safrinha estimates.

We are also seeing concerns over temperatures as a good portion of the US remains cool. While most temperatures are still seasonal, others are colder than usual, and this is generating worries over germination of crops that are already planted. While it is doubtful this will impact production, anything that may hamper yields is receiving a reaction from the market. There are also thoughts that if current conditions persist, they may lead to elevated soybean plantings.

The Brazilian government announced today that they would be adjusting their bio-diesel blend rates for May and June. The current blend rate is for 13% biodiesel, but this is going to be lowered to 10% for the next two months. Tight oilseed supplies and high values are the leading causes for this action. The question now is if other countries will follow, including the United States.

Export inspections for the week ending April 8th were released today and totals were all down from the previous week. Corn inspections totaled 62.4 million bu (mbu), soybeans came in at 12 mbu, and wheat totaled 16.8 mbu. Of these, only corn was above the volume needed to reach the yearly USDA projected total.

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Market Commentary provided by:

Karl Setzer Grain Commentary