Commentary
One of the reasons corn was higher in my view was that news from private exporters this AM reporting to the U.S. Department of Agriculture export sales of 1,156,000 metric tons of corn for delivery to China during the 2020/2021 marketing year. The old crop demand news comes a day after export inspections beat expectations at 2.203 million metric tons while the week higher was revised higher at 1.672 million metric tons. The numbers are giving some thought to China perhaps not cancelling a high percentage of sizable old crop corn purchases made in late January. Also of note in my view, is that export sales or sales for future shipment have reached 90 percent of the USDA export forecast versus a 5 year average of 69 percent. This leaves the possibility for tightening old crop stocks vs new crop ahead of planting intentions and on farm stocks report on 3/31/21. The trade is also concerned that 25 percent of Brazils secondary corn crop is not in the ground at all yet coupled with the 40- percent that is planted is planted late leaving it vulnerable to dry conditions after April 1st or susceptible, to freeze losses.
One spread we have been looking at is July21/Dec21 corn. It just missed the fifty percent retracement from last years low to this year’s high at 40 cents July over, trading down to 42 cents July over last week. The spread now has rallied twenty cents the last three sessions on good demand and weather. End user buying has also been seen here as coverage has been taken in front of month end reports. The spread settled today at 64 cents July 21 over. I see it potentially moving approximately to 74 over here, about ten cents higher, should old crop contracts continue to outperform new crop. However, should this rally fade, it would turn bearish in my view if the spread settled below 52 cents July over. Demand and weather in South America will most likely be the drivers here until we get to the month end USDA reports.
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