GAP Observations: February 17, 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: CK = 549.75 — down 2.5¢ (549 – 554.75). WK = 648.25 — down 9.25¢ (647 -661.25). KWK = 630.25 — down 7.25¢ (629 – 640). SK = 1381 — down 4.75¢ (1379.75 – 1391). SMK = 427.80 — down $1.10 (427 – 430.90).



  1. Northern Brazil rains continue; wetter 11–15-day trend in Argentina
  2. Snow likely to protect Russia wheat from cold next week
  3. Cold surge in middle of next week in Russia wheat strong enough for winterkill, but snow prior favored to protect crop
  4. China wheat / rapeseed benefit from showers in 6-15 day, kicking off early growth as mild temperatures dominate
  5. Showers gradually expand across North Africa wheat next week; aids growth but soil moisture remains low in east 1/2
  6. USDA Ag Outlook forum – kicks off tomorrow at 8AM EST
  7. March options – expire on Friday.



Mixed — lower. China on holiday. Palm oil @ 3632 – up 285 so far this week. SOAM back from holiday. It’s quiet. Soy oil remains the leader. New highs in oil share.

  1. USD higher — up 0.55% on Wednesday. Bitcoin over 51,000. VIX jumps 24.3%.
  2. Open interest — Soy -16299. SM -3281. BO -724.
  3. Key question remains — does the market trade the U.S. soybean balance sheet OR a record Brazil soy crop + bigger production prospects in Argentina + no change to Argentina export tax + truck strike now resolved + China weak crush margins + weakish demand ex-China for Brazil soy + widening discount Brazil to U.S. + weaker SM premiums in Argentina (now back to unders and still slipping despite lower futures) + India back in decent volume in the world SM grid? Fund length remains v. large/at record levels for this time of the year in both soy oil and soybeans.
  4. RJO soy oil tech update: completing 5th wave of April low (tech structure identical to canola). Initial support = 4551 followed by 19 November = 4105. Needs to fail at this level (4105) to negate bull-trend. Bullish consensus is at 81% (highest since June 2008). RJO bullish sentiment index @ 91%.
  5. REPEAT: Brazil soybean discount to the U.S. — continues to widen. SOAM SM premiums continue to work lower — led by Argentina and lack of any buying interest. India is back in the world SM with decent volume MYTD. Europe SM imports down 7%. China soy stocks — v. comfortable and can handle any load delays ex-Brazil. Sino reserves releases are also “highly likely” to be released in the weeks ahead to take advantage of the current inverse.
  6. Brazil line-up — over 14MMT (with +4MMT of that for March) – Feb soybean exports estimated 4-5MMT.
  7. Argentina rains — Continue to come in better than expected. More rains thru February will keep any dryness stress v. limited. In the home stretch.
  8. Board crush — Mar @ 79.8¢. May @ 71.8¢. July @ 67.2%.
  9. Oil share — May oil share over 35.22% and new highs for CY2021 (vs CY2020 high = 36.71%).
  10. REPEAT: BOZ21-BON21 — goes into Wednesday’s full session at new lows = -368. Closing on levels that haven’t been seen save for “one-offs” flash crashes in 2008 (-460 on 25 March 2008…went from -180 on 20 March to -460 on 25 March before going off the board @ +81¢ carry in early July 2009)… In Sept 2012, the BOZ13-BON13 spread went from -389 on 17 September 2012 to +39¢ carry by mid-November 2012 before expiring at a -34 inverse). Past is prologue. In 2008-09, world soy oil stocks = 3.6MMT vs 4.58MMT forecast for this year (2020-21). Looking at the king of the edible oils — palm oil stocks = 6.18MMT in 2008-09 vs a projected ~11MMT for this year (2020-21). IN SHORT — THIS SPREAD STICKS OUT LIKE A SORE THUMB.
  11. Bloomberg U.S. 2021 planting = 89.8 mil acres (83.1 mil acres). Production = 4520 mil bu (4135 mil bu 2020-21). Ending stocks = 179 mil (120 mil).
  12. China Lunar New Year celebrations full on, thru 17 February… China known U.S. o/s sales = 1.9MMT with estimated unknown = 2.25MMT (75% of unknown). Some of that is for Aug shipment (last month of the MY). Based on this volume — suggests you’ve got about three weeks more of China-U.S. export loadings… and then it will get v. quiet, v. fast.
  13. Brazil export tail going forward: 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.
  14. 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. Spreads mixed. no change to views — game has quickly shifted to 2021-22 (1 Sept) given delay in Brazil safrinha (Jul-Aug) and U.S. balance sheet.

  1. USD higher — up 0.55% on Wednesday.
  2. Open interest — down 20519.
  3. Brazil — slow goes thru weekend thru center-West… then gets a bit dry and an open window to rock-n-roll for both soy harvest & safrinha plantings (Parana @ 8% vs 38% LY).
  4. U.S. ethanol production + stocks — out tomorrow mid-a.m. Margins remain problematic as do U.S. temps and nat gas supplies (reflected in next week(s) report). Nat gas supplies are also being sold off to take advantage of the price spike.
  5. Bloomberg U.S. 2021-22 planting estimate = 92.9 mil acres (90.8 mil acres). Production = 15243 mil bu (14182 mil bu). Ending stocks = 1725 mil (1502).
  6. 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.
  7. 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).


Giving back some of Tuesday’s U.S. freeze-winter kill gains. Algeria buys French W for LH Mar. Russia W -7$/MT discount to French W (confusion persists on tax issue).

  1. Open interest — wheat +7990. KW +1767.
  2. USD higher — up 0.55% on Wednesday.
  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. 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%.
  6. 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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