GAP Observations: Feb. 10, 2021

GAP Observations

Welcome to GAP Observations – a bi-weekly, no-nonsense analysis of curated market drivers and data for global corn, wheat and soy complex futures, by industry consultant Emily French.


RANGES: CH = 546.50 — down 9.75¢ (543.50 – 556.25). WH = 639.75 — down 9.75¢ (637.50 – 650.50). KWH = 624 — down 9.5¢ (622.50 – 635.25). SH = 1384.25 — down 17.5¢ (1380.25 – 1404.75). SMH = 432 — down $6.70 (430.60 – 440). BOH = 4630 — down 22 (4615 – 4666)


USDA DAILY SALES: Cancellations of 132KMT corn to unknown for this year (2020-21).



  1. Center-west Brazil rain delays resume next week.
  2. Spotty winterkill early next week in central Plains/southern Midwest.
  3. SE Ukraine wheat loses snow cover this week, putting 15% of crop area at risk of winterkill threat early next week.
  4. Stronger cold push in Eastern Europe in the next week puts SE 15% of wheat at risk of winterkill where snow is lacking.
  5. Limited showers in north Africa wheat next two weeks allows dryness to expand to east 1/2 of belt, hampering early growth.



Solidly lower across the complex. Board spreads bear-mode. Soy and soymeal downside leaders. Soy oil treading water (new highs in crude supportive).

  1. Open interest: soy +6979 (trade volume on Tuesday was the largest on record for any February WASDE report). Soymeal +6210 soy oil +3256. Fund length in soy oil expected to be closer to a record than not in Friday’s CoT report.
  2. Board crush — Mar @ 75.45¢. May @ 67.7¢. July @ 66.5¢.
  3. Oil share @ 34.89% — once again: new highs for the move and for CY2021 (recent high = 35.57% on 27 August 2020).
  4. EU soymeal imports — USDA left unchanged its forecast at just over 18MMT or +2.5%. This as EU SM imports are down nearly 10% from 1 July – 7 February. World soymeal exports as a whole — are forecast to decline 576KMT. Viewed as more bearish for Argentina — forecast to account for just over 40% of world trade followed by Brazil (25.2%) and the U.S. (19.4%)/
  5. U.S. ending stocks = 3.25MMT or 3.9% STU — lowest since 2013-14. Reminder: In 2013-14, soy imports were 1MMT higher vs current USDA forecast for this year. Economics work and will dictate. There is little doubt there is going to be an extremely long export tail coming out of Brazil this year — consider this a healthy bearish factor for the start of the U.S. 2021-22 export program.
  6. China U.S. soybean import demand — will end up being closer to 38MMT than not (record = 36.1MMT) vs 16.3MMT LY. So, 21-22MMT more U.S. to China — despite China import demand +1.5MMT vs LY and the rest of the world soy importers have total demand +55KMT (basically one vessel) vs last year. Brazil exports are forecast down 7MMT vs last year’s record…Bottom-line: there are at least 13MMT of soybeans that are “unaccounted” for in this math equation and that “unaccounted” = Brazil long export tail into MY2021-22.
  7. China soy complex snapshot — headed into the New Year holidays. Radio silence in soymeal pricing — SM stocks are +7.5% vs LW and up 39.3% vs LY. Radio silence by crushers. No interest in extending Brazil ownership. Crush rates will slip lower over the next plus-week. In-port soy stocks remain v. comfortable at 8.1MMT. Reminder that China has 34% of the world’s soybeans stocks (as of 31 Aug 2021) — and started this MY (1 Sept 2020), with a record-high 89.6 days or nearly three months. Edible oil firm with positive import margins noted for soy oil (negative for palm oil). Crush margins for Brazil origination now negative (same goes for U.S).
  8. Brazil snapshot — Real-USD: 5.41:1 (slightly weaker vs Tuesday). CONAB out tomorrow. Farmer selling — more focus on 2022. Focus for 2021 — on harvest and rolling thru rain or shine. Soy premiums — down another 5-10¢. Soymeal — mixed/weaker June-July. No buying interest. Soy oil — called unchanged. Export line-up: soybeans = 12.55MMT (196.3KMT) — some of this line-up also includes March loading (~4MMT) — not all bad to bob outside of Brazilian shores. Soymeal = 819KMT (322KMT). Soy oil = 109KMT (19KMT).
  9. Argentina snapshot — steady. Daily farmer sales (fixed) are hitting daily crush rates. Soymeal called weaker for April forward and premiums have now slipped back to under (negative)… that is more normal than not. However — there is v. little buying interest out there. Soy oil — mixed with few offers. Export line-up: soybeans = 45KMT. Soymeal = 1.9MMT. Soy oil = 405KMT.
  10. MPOB January palm oil balance sheet: ending stocks = 1.32MMT (+4.7% vs December) — slight build. The story? Weak production + weak exports = 947KMT (-42%).
  11. Malaysia 1-10 February palm oil exports = 399.5KMT – up 47% vs 1-10 January.
  12. REPEAT: India edible oil demand to contract again in 2021… Adani Wilmar notes that a large section of the Indian population is price cautious. Incomes are not rising because of COVID-19… per capita consumption to decline about 5% (vs what had been an annual growth of 2-3% per year BC — Before Covid). Imports are forecast = 12.5MMT (13.2MMT LY) — and that would be a six-year low with palm oil imports forecast at a nine-year low = 7.2MMT. Likewise, high oil crops (canola/rapeseed) are expected to be higher this year and that would lend itself to higher domestically produced veg oil for its population.
  13. World soy supply cushion = 83.2 days (98.2 days LY – 31 August 2020) — down 15 days. Daily consumption = 1.01MMT vs 971.4KMT/day. China soy imports = 100MMT (+1.5MMT vs LY). ROW imports are forecast to increase 55KMT (-33KMT in January) vs LY.



Lower as CH slips thru 550. Board spreads in bear-mode. Argentina premiums jump 10-15¢. No reason for inverse CZ-CU. Watch for China discharge port capacity — will be maxed!!

  1. Open interest +6076…trade volume on Tuesday was the largest ever for a February WASDE report day.
  2. U.S. ethanol production + stocks — out mid-AM. Stocks remain at/near record levels.
  3. Brazil export line-up = 338KMT (196KMT loaded).
  4. Argentina export line-up = 903KMT… Farmer selling continues to pick up as more comfort/confidence in production prospects.
  5. China corn balance sheet — using USDA numbers. Corn supply cushion = 247.8 days (263.3 days LY) — down 15.5 days. China consumes 791.8KMT/day (FSI = 227KMT/day or 28.7% of that daily consumption). USDA corn imports = 24MMT — that translates to 30.3 days of corn use. China holds 68.5% of the world corn stocks — hence its removal when looking at the world dynamics.
  6. China now larger corn import than EU (the world’s largest) — USDA did cut EU corn imports by 2.5MMT from 18MMT to 15.5MMT vs 18.6MMT LY — this is now 16.7% vs LY (1 July – 7 Feb corn imports are down 27.3%) — need to keep an eye on this one as well for Europe (as well as the dismal pace of SM imports vs projections).
  7. World corn imports are forecast to increase 13.7MMT in total. This as China corn imports are forecast +16.4MMT. Ergo — China accounts for 120% of the world’s corn increase. Said another way — no growth if China was not in the grid.
  8. REPEAT: U.S. corn export outlook — market is all excited about taking U.S. corn export forecast higher. Slow your roll. Let’s start with some context… Firstly – to even hit this year’s current export forecast (and this was before the +50 mil bu/1.27MMT higher number yesterday), Feb-August exports need to = 44.91MMT/1.77 bil bu! That would mean that exports need to be 20% greater than the Feb-Aug 2017 period that set the record! #perspective. I’ll re-think my perspective when we actually see weekly exports hit that need level for multiple weeks in a row (it has hit the “need” rate twice now MYTD). Until then…. REMINDER: In 2013/14 – China had 5MMT on the books in November and ended up only taking 2.7MMT – canceled the rest by the time 31 Aug rolled around).
  9. World supply cushion = 38.3 days — loses 5.5 days vs LY – lowest level since 2010-11 (38.9 days). World consumption = 2.36MMT/day World feed demand cut again -basically flat or a “mere” 200KMT. FSI demand is forecast to increase 1.4% or 4.65MMT — this is a major risk given ethanol economics and potential off-ramp by China with its own domestic ethanol industry/use of corn as a fuel (vs food security).



Lower. Spreads leak bear-mode. Inverse WN-WK sticks out like a sore thumb. Cold temp risk for the U.S. into this weekend/next week. Black Sea/Europe looks good.

  1. Open interest — Chicago -+2549 Kansas +2145.
  2. USD mixed/weaker into Wednesday. YTD +0.51%.
  3. REPEAT: the month of March is typically the weakest seasonally for wheat (although February has not been kind month-to-date).
  4. World import trade — reminder that it is CHINA that accounts for 110% of the increase in world wheat import trade vs LY. China imports are +4.622MMT higher vs LY. While world wheat imports are +4.22MMT higher vs LY. Ergo – no China, no growth.
  5. China wheat snapshot — imports were revised to a record 10MMT (+4.6MMT vs LY). China feed wheat demand surges — up another 5MMT from January estimate and +11MMT vs last year. More wheat fed = more protein from wheat vs corn = less soymeal needed in feed formulations. China wheat supply cushion = 404 days (439.4 days LY) — down a very healthy 35.5 days on surging feed wheat demand + aggressively bid weekly wheat auction numbers.
  6. World wheat supply cushion = 87.3 days (88.1 days LY) — down 1/2 day. More upside to Australian production (market in that 32-33MMT vs USDA = 30MMT) and exports. Daily wheat consumption (w/out China) = 1.71MMT/day. U.S. will store 15.2% of the world (w/out China) wheat reserves and its own STU at 39%.
  7. Bottom-line: U.S .will continue to do what it does best –> act as a transparent backstop for a majority of world importers for various classes of wheat. So, no change there vs previous years. Certainly, no bullish theme on its own. Biggest question for 2020-21 is the demand side of the equation and the price relationship between corn-wheat in forthcoming weeks + months.


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