GAP Observations: Jan. 20, 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 = 515 – down 11¢ (512.75 – 525.25). WH = 657.75 – down 14.5¢ (656.50 – 676). KWH = 634 – down 10¢ (633.75 – 647.75). SH = 1353.50 – down 32.25¢ (1352 – 1384.50). SMH = 439.60 – down $10.90 (438.60 – 450.80). BOH = 4147 – down 23 (4103 – 4178)



  1. Up to 1/4 Brazil soy left driest; wettest 11-15 day risk
  2. Widespread showers active over Europe wheat this week & expand into Turkey next week, improving moisture
  3. Cold surge tonight in Southern Russia poses winterkill threat <10% of winter wheat (where snow cover is limited)
  4. South Africa wheat in week 2 ease corn pollination stress for drier 10-15% of belt; rest crop in very good condition

SOY COMPLEX — solidly lower (escalator up/elevator down?). Ongoing pressure thru e-session. February rain outlook looks v. good for Brazil & northern Argentina. 

  1. Open interest: soy -6737, soymeal -4509, soy oil -820
  2. Board crush — Mar @ 69.8¢ (down 31-32% vs end CY2020). May @ 59.7¢. July @ 59.6¢ — modest recovery off contract lows
  3. Malaysia 1-20 January palm oil exports = 572.9KMT — down 43.3% vs. 1-20 December. Down nearly 100 points on the week. Sentiment growing more bearish for the edible oils. Do keep an eye on Indonesia however — labor challenges remain under the COVID pandemic and now flooding/rains have hit some of the largest palm oil-producing areas. However — demand is demand and right now, there’s just not a whole lot of that. Re: CY2020 Malaysia palm oil imports = 142.7KMT (ex-Indonesia) — up 56.6% and a new record with the majority in Nov-Dec.
  4. India December protein meal exports = 513KMT (215KMT soymeal) with another nearly 100KMT soymeal for January
  5. China soy complex snapshot — Dalian S down 44. SM down 15 (-23 on the week). Oil down 67 (-100 on the week). Soymeal sales were steady (but remain “light”) at just over 200KMT on Tuesday with the majority of that deferred. SM and edible oil price are lower-defensive. Question of how much SM might be displaced with the uptick in feed wheat use will need to be answered. In-port soy stocks — another new record at nearly 8.4MMT. Crush margins are taking a hit here (6-month lows) with contract low board crush, weak product demand. Quiet start on the physical cargoes being traded after about 35 cargoes traded last week with half of that going for U.S. new crop (Q4) & Sino the principle buyer there. Weekly crush showed some moderate recovery off recent lows in FH January = 1.98MMT (1.69MMT LW). MYTD crush +12%. Reminder: if China replaces its weekly crush of 2MMT every week — that is the equivalent of 31-36 vessels (depending on weight). That always helps to keep the sheer buying demand/bid size of China in perspective for me.
  6. Brazil soy production (Datagro) = 135.6MMT (135MMT previous)
  7. Brazil snapshot: Real-USD again weaker — as it trends back to 5.4:1 (looks to open lower vs USD again on Wednesday). Will help offset some of the future losses with respect to farmer selling of the 2022 crop. Farmer selling for the nearby (this year’s crop) is quiet. Focus is on harvest as the majority are already well-sold vs this time last year or even of the averages. IMEA estimates MT farmers are 68.5% sold in this year’s soy and 16% for 2022. Both estimates look on the low side. Parana crop rated 83% good-excellent. Spot crush margins are less than glamorous — showing low double-digit negative. China has been absent this week. Soy basis under pressure despite weaker board. SM steady. Soy oil weaker (follows Argentine weakness). Export line-up: soybeans = 4.31MMT (30KMT loaded). Soymeal = 723KMT (533KMT loaded). Soy oil = 65KMT (nothing).
  8. Argentina snapshot: farmer continues to pick up the sales pace as January “miracle” rains seem to be the trend for the remainder of the month (good to have the Pope on your side I suppose…jajajaja). More rains on tap to start over the weekend and into next week (central & north Argentina with rains limited for southern Argentina) and will stretch out thru month-end. One key month down. One more to go — and February early rains look super solid (graph at bottom of this note). Private estimates backing away from the cliff everyone seemed to want to throw themselves off. Back to a more rational 48-49MMT type number into month-end. Crush margins the real story for Argentina aside from the political drama/theater: these have recovered v. nicely and now show +33 March and +22 Apr-May. New crop had hovered between $5-10/MT for seemingly much of Nov and Dec. Truck strike continues — has slowed arrivals but so far a “nothing burger.” Soybean premiums were weaker — follows Brazil. Soymeal — defensive tone with bids largely absent/on the sidelines. Soy oil — down sharply with no bids in sight. Big SM export line-up = 3.3MMT and soy oil = 591KMT with biodiesel = 59KMT
  9. REPEAT: Soybean charts — 1410 was the 61.8% retracement back to the all-time high. Check the box on the retracement measures. As for that 61.8% retracement — it is very strongly noted that when 61.8% is hit to upside, there is likely a fill/re-test of that 61.8% retracement over time. That would = 1030. Before this — is the 38.2% retracement = 1190 (that is also the LT swing point), and the 23.6% point = 1280
  10. REPEAT: Soy oil charts — continue to breakdown. Palm oil again lower with 1-20 Jan Malaysia palm oil exports down 43%. No change to view on soy oil. Not only is it the leading technical indicator for the soy complex and it’s also v. anticipatory in nature. BOH still remains well away from any of its major moving averages. In the cash markets — SOAM premiums are feeling a bit sloppy/soft/weaker and China is the story on the demand side (more of a bearish nature). FH January Malaysia palm oil exports were down 42%.
  11. REPEAT: Can the grains/oilseeds continue to go it alone? Clearly, these markets have outperformed. That is a significant understatement. It set a new record vs its performance vs energy in 2020. And continues to widen its premium to other commodity asset sectors (notably energy). But it’s not just that — it’s also livestock futures. This market has taken a complete & utter bath to start CY2021 – not only live cattle and hogs, but Dalian’s recently launched live hog contract found itself with multiple days of limit down movements. #awareness of what is going on around you.
  12. 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 contract –33KMT vs LY

CORN — lower. Board spreads in bear-mode. Argentina feels weaker-heavier as rains confirmed and no bids/interest. Lot of corn to be sold there if February weather holds neutral. 

  1. Open interest -8474
  2. CH fills another gap = 517.25 (13 January). Volume is half of what it was when it gapped higher but nonetheless, a box checked, is just that — a box checked.
  3. Brazil corn export line-up = 929KMT (1.8MMT loaded)
  4. Brazil corn production (Datagro) = 109.9MMT (114MMT previous)
  5. Argentina corn export line-up = 2.17MMT
  6. REPEAT: Indian corn exports — only forecast at 600KMT this year (1.34MMT in 2019-2020). Keep an eye on this as there is discussion the government may give/grant an export subsidy to get some of this corn moving off its shores (brings more currency back home). The largest Indian corn export programs were in that “peak” price period of 2007 — 2013 with a high = 4.71MMT in 2012-13. India’s role in the export grid when it comes to wheat, corn or soymeal — it plays a bearish “spoiler” on the physical supply side.
  7. World supply cushion = 39.2 days — loses 4.8 days vs LY — lowest level since 2010-11 (38.9 days). World consumption = 2.37MMT/day World feed demand cut again — now up less than 1% or a “mere” 3.2MMT. FSI demand is forecast to increase 1.5% or 4.9MMT — 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)

WHEAT — and lower she goes with Chicago the double-digit leader to the downside. Australia low-cost origin for April forward. Algeria tender results expected today. 

  1. Open interest — Chicago +6540 Kansas -2867
  2. Russia wheat exports — IKAR= 37.5MMT (USDA = 39MMT). Plenty of debate on the export tax and what the actual impact will be or not be when it comes to “curing/helping” with domestic food price inflation
  3. World import trade — reminder that it is CHINA that accounts for 90.3% of the increase in world wheat import trade vs LY. Said another way — if China did not increase their imports from 9MMT to 5.4MMT LY — world import trade would “only” be up 400KMT or 8 panamaxes. #perspective
  4. World wheat supply cushion = 90.8 days (88.1 days LY) — up 2.7 days. More upside to Australian production and exports. Daily wheat consumption (w/out China) = 1.69MMT/day. U.S. will store 14.9% of the world (w/out China) wheat reserves and its own STU at 39%
  5. 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. The biggest question for 2020-21 is the demand side of the equation and the price relationship between corn-wheat in forthcoming weeks + months.

Figure 1: First week of February: rains, glorious rains for Brazil and N. Argentina.

Figure 2: Rains, moisture on the way to Southern Plains.


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