China Bought More US Corn; Wheat Price Drops on Firmer New Crop Supply; Deteriorating Chinese Crush Margin Limits Soybean Demand

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Corn

  • Brazil second crop corn is now nearly all planted but 20-30% of it is planted outside of the ideal window.
  • Argentina received widespread rain last week, though they have likely come too late for corn and beans to undo the previous damage. Corn is mostly in filling to maturing stages of development in the high-yielding central areas of Argentina.
  • The biggest weekly Chinese purchase of US corn (3.9 mmt) since January took place last week, coinciding with the US-China summit in Alaska.
  • Chinese corn import margin has declined from January levels with the recent CBOT rally, domestic ASF outbreak and anticipated big corn arrivals. With a diversified source of feed grain suppliers, Chinese imports for US corn remains both economic and policy driven.

China Grains and Soybean Imports by Month

Wheat

  • To fulfill their estimated imports of 10.5 mmt of wheat imports for the crop year (a record since 95/96), We believe China will increasingly resort to US wheat for imports.
  • China and other Far East destinations have been sourcing wheat mor e from Australia and Canada in their prime export season.
  • While ABARES estimates this year’s Australian wheat crop at a record 33 mmt, they expect it to fall back to 25 mmt next year with normalizing yield. Current Australian offers for deferred months at $314 to Southeast Asia are not competitive compared to Black Sea at $280.
  • With benign weather for winter wheat development and weaker Ruble, Russian FOB wheat prices were sharply lower last week. Weekly wheat exports ex Russia were also down sharply again.
  • SovEcon raised Russian wheat crop estimate by 3.1 mmt to 79.3 mmt and Ukraine by 0.8 mmt to 27.8 mmt, compared to the 2020 harvest of 85.9 mmt and 25 mmt in Russia and Ukraine respectively. Overall Black Sea wheat crop is estimated at 107.1 mmt, slightly below the 2020 estimate of 110.9 mmt.

Global Wheat Loadings

Oilseeds

  • Soybean supply remains constrained. While the current Brazil soybean crop being harvested is a record, overall supply is smaller YoY, with lower carry-in stocks.
  • Funds are reluctant to reduce net long positions in a major fashion ahead of the March prospective plantings report next Wednesday.
  • Market consensus is for a big expansion in US bean acres (+6.9 mln acres YoY USDA outlook). US spring planting weather will continue to keep premiums in the soybean price.
  • Chinese meal cash basis remains weak despite a rebound on DCE, indicating expectation of big soybean arrivals from Brazil, once early harvest is caught up to speed and logistics are smoothed out.
  • Mato Grosso has harvested 92% of beans, after being delayed compared to historical averages. Parana beans are 58% harvested while Rio Grande do Sul are just 5% harvested.
  • The delayed harvest window (caused by delayed planting) coincided with excessive rain, leading to slower-than-normal field work and the harvest of wetter-than-normal beans (20-30% moisture content vs. the ideal 13%). The limited drying capacities by the trucks led to further wait times at offloading which increased risks of quality deterioration.