Yesterday saw the ZCH23/ZCK23 (March/May Corn) spread work back to a 1 cent inverse, while today’s weekly close puts the spread at even or parity. The ZSH23/ZSK23 (March/May soybeans) tighten to a 5-cent inverse. Both spreads have been weakening of late, reflective of what we are seeing in the delivery markets, both of which look like there should be deliveries in my opinion. Also seeing reports of cash basis for both corn and soybeans relaxing across the country as producer movement has been very good. Will the calendar spreads trade back to a carry? These spreads may offer clues to identify if we are potentially at some near-term top in corn and beans. Let’s consider demand moving forward. This week’s corn sales of 1.02 million metric tons sold last week, Mexico was the #1 destination with 269K, #2 was an unknown destination or China at of 250K, and #3 was China with 130K. US commitments to China lag last year by 7.6 million metric tons but China is not the only laggard. Non-China business which includes Mexico and Japan make up the balance of the lag vs last year which totals a whopping 11.1 million metric tons. Corn needs to see sales of at least 1 million metric tons moving forward or changes to the balance Sheet that increases ending stocks due to a lack of sales, need to be made in my view. For soybeans, sales have exceeded expectations into China. USDA reports this week that the US sold 510K of soybeans last week, down a slight .8 (MMT) from the same week a year ago. China’s soybean sales are declining seasonally but, China has booked nearly 4 million metric tons more soybeans than it did a year ago. This has offset the lack of non-China business vs last year which coincidentally falls short by 3.9 million metric tons (MMT). In my view watch the calendar spreads in corn and beans that may confirm near term tops. The export numbers are key also especially if Corn sales disappoint and if China cancels any soybean purchases for future shipment.
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