Corn pushes new contract highs across the grain complex

The new week is greeted with new contract highs in all grain contracts as concern continues to grow on the Brazilian corn crop and North American weather. It's weather and the very strong premium basis to futures that lack short interest going in the first notice day this Friday for the May contracts.

The Brazilian weather forecast is arid for the next two weeks as hope fades for winter corn yields. Brazilian corn will enter its reproductive phase starting later this week and continue into late May under a dire flash drought. A sub 100 MMMTs 2021 Brazilian total corn crop is forecast due to drought stress. If Brazil's limited rain profile lasts through May, a 20% fall in the winter corn yield would drop the crop to 68-70 MMTs, with Brazil's total corn harvest to 91-93 MMTs. This would cut Brazilian 2020/21 corn exports by 9-12 MMTs and push that business to the US/Ukraine from August thru next January. Brazil will be importing increasing tonnages of Argentine corn thru July.

Rumors abound that Argentina is again considering raising export taxes to slow domestic inflation and raise revenue amid surging world prices. Argentina has a long history of the government wanting to participate in grain bull markets by raising export taxes. Argentine farmers beat back the last attempt in January, but this go round may be more difficult.

Egypt's GASC is seeking world wheat for mid-August, and traders are watching to see if Russian exporters can accept the risk of a floating export tax that far in the future? It's expected an Eastern European purchase is likely. It's Stats Canada will be out with their 2021 Seeding Intentions on Tuesday. A sizable rise in canola acres is expected amid record-high prices.

A progressive weather pattern is offered for the US over the next 10 days. This pattern produces showers/storms for the Delta and the S & E Midwest but leaves the Plains/NW Midwest/Canadian Prairies in an arid flow. Soil moisture losses will be increasing here, with farmers having to plant the seed in the dust. The need for N Plains/NW Midwest rainfall will be rising after May 10th. The US GFS 11-15 day forecast has a potent Trough producing rain through the Dakotas but leaving Nebraska and Iowa dry. The EU and Canadian models have a high-pressure Ridge across the Central US, enhancing a warm/dry trend. The GFS has been wildly off, and the one that's been more correct is the dry EU/Canadian forecast models.

Cattle futures had a friendly Cattle on Feed report to end the week, but with sharply higher corn prices this morning, an anticipated higher start could get muted. Cash trade last week was mixed. Cattle in the Southern Plains traded steady at $120, while trade in the Northern Plains was $1-2 lower at $121. The early outlook is steady on expanding kill margins, though a seasonal high is likely in place. Beef prices maintained upward momentum and pushed to new rally highs. The choice cutout was $7.72 higher last week at $283.77, and select was $3.03 higher at $272.13.