The trend of overnight contract highs continues.
Another round of new contract highs overnight in row crops for both old and new crops, before profit-taking rolled in again on the futures market. The premium of spot Midwest cash corn, soybean and soyoil markets is spurring short-covering in May futures heading into 1st notice day on April 30. Processors would be better off standing for delivery (against May futures) instead of paying historic cash basis pushes. The premium basis has the shorts on the run and is causing CBT bull spreads and flat prices to rise. There will be setbacks, but it is unlikely a sustained correction can occur. Any correction will be smaller and shorter in time duration compared to what the grains in January, February and March experienced.
The US new crop soybean/corn ratio sits at 2.46:1, which is average for May. The economic incentive of soybeans to steal US corn seeding intentions is lacking. And amid the high price and lack of availability of nitrogen and some herbicides, it's unlikely there will be a sizable gain in 2021 US corn seeding compared to the March intentions report. The NASS March Seeding Intentions are increasingly realistic, and it's statistically difficult to argue against the March report.
China's Ag Ministry issued guidelines that ease the amount of corn/soymeal fed to hogs/poultry and switch over to cheaper alternatives such as wheat, rice bran, DDGs, and cassava. The feeding of wheat has already been pushed by 25 MMTs of weekly reserve auction sales, which has caused a correction in domestic corn valuations. China's Ag Ministry would only be making the feed guideline changes for lack of domestic corn/soybean supply. China's Dalian corn and soymeal futures markets rallied on the feed guideline announcement.
Nothing has changed in Brazil as dry weather is still forecasted for the winter corn areas over the next 10-14 days. There are clear signs that the monsoonal flow is ending across N Brazil in early May which means that much of the Brazilian winter corn crop will have to rely on subsoil moisture for their reproduction and fill development phases. Unfortunately, soil moisture has been depleted by six weeks of below normal rainfall. The USDA's optimistic total Brazilian 109 MMT corn crop is extremely suspect, with the potential now well below 100 MMTs if forecasts do not shift in the next two weeks.
The US Central weather forecast has the 6 to 10 day period warming from yesterday's forecast, with just another 4-6 days of below normal temps indicated. Rainfall for the next week will be centered across the Gulf States with a system due for the NW Midwest and the E Northern Plains next week Wednesday. The forecast maintains a drier trend for the N Plains and NW Midwest into May 6. Dryness will continue to plague the S Canadian Prairies.
Cattle futures closed higher yesterday for the first time in 9 trading days, and morning indications are for steady to better. Cash cattle markets were untraded through Tuesday while the beef market rallied. The choice cutout jumped $2.09 to $278.26, and the select value was $1.34 higher at $270.47. Both are record price quotes in the month of April. June cattle have major resistance at 122.00-123.00 on a recovery rally.
The April Cattle on Feed report will be released on Friday. Ahead of the report, the average trade estimate calls for a March placement rate at 134% of last year, a marketing rate of 101%, and an April 1 feedlot inventory of 106%. If confirmed, the placement total will be the largest in 5 years. On a percentage basis, it will be a record large increase as placements fell sharply last March due to the US's Covid response. The April 1st feedlot inventory looks to be record large.