GAP Observations: Jan 27, 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 = 542.50 — up 10.25¢ (532 – 543.75). WH = 670 — up 4.75¢ (663.25 – 672.75). KWH = 645 — up 4¢ (639.25 – 648). SH = 1387 — up 16.75¢ (1375 – 1394.75). SMH = 438.70 — up $2.20 (436 – 442.10). BOH = 4523 — up 132 (4406 – 4543)

USDA DAILY SALES: 680KMT corn to China (this year). 132KMT soy to China (new crop). 126.5KMT soy to unknown (this year).



  1. 11-15 day slightly wetter northern Brazil; 1/3 coffee left driest.
  2. Active week of rain starts Thursday, adis Argentina corn/soy.
  3. Europe/Middle East wheat see active storm pattern over the next week, favorably building soil moisture supplies.
  4. Rain/snow benefit Ukraine wheat this week; main cold holds north of belt next two weeks, keeping winterkill risk low.
  5. Showers return to north Africa wheat next week to keep early growth favorable with just spotty dryness in east 1/4.



Doubling gains in the past +hour. Soybean try to get back to 1400. SMH working hard/failing so far vs 20d MA (440.10). Board spreads in bull-mode.

  1. Month-end — on Friday, 29 January.
  2. Open interest: soy +6217 soymeal +1629 soy oil -854.
  3. Board crush — 75.7¢ (72.4¢) March. 58¢ (57.3¢) May. 60.5¢ (59.2¢) July.
  4. Oil share — continues to firm: 34% (it’s been a vertical move since 15 January low = 31.12%). Palm oil up 3.7% = 3388 (holiday on Thursday).
  5. Market attitude — shifts from any SOAM production concerns to now one back to U.S. balance sheet  and logistics. Utter lack of any supply concerns going forward coming out of South America with the latest weather forecasts/precip outlook (esp. Argentina). Cash premiums are trending lower led by weakness in Brazil. U.S. Gulf cheaper. PNW supported by China rumors. Argentina soy oil premiums now unders. Argentina SM trending toward unders.
  6. China soy complex snapshot: steady. USDA flashes two new crop cargoes to China. The 2 vessels to unknown likely China PNW Feb biz. SM pricing saw a slight improvement vs sub-100KMT over the past week to just over 180KMT. Flat price called unchanged. SM stocks stable = 482KMT. Edible oil values firming on back of higher palm oil. In-port soy stocks = 8.26MMT — closer to record levels than not. Crush margins trend towards mid-teens/lows 20 for Mar-May. Single digits Q4. Rumors/talk continues on PNW biz to China for Feb-March. No trades for Brazil.
  7. Brazil snapshot: Real-USD slightly firmer: 5.38:1. Slow start to harvest as January soy loadings are limited. February load delays are also expected. Truck strike possible on 1 February as drivers demand a ‘living wage.’ Big rains in the south/RGDS will also impact the start of harvest. MT harvest called about 2-3 weeks behind normal. Parana crop rated 82% good-excellent. Only 10-15% of the belt is called “stressed”– in the north and those models have now turned wetter (low confidence). Soybean premiums — trend weakerl/lower — down over 10¢ since the start of the week (higher futures + absence of China). SM called steady nearby. Soy oil — nothing trading with bid/offers showing a lot of daylight between the two. Export line-up: 6.98MMT (30KMT loaded). Soymeal = 940KMT (817KMT loaded). Soy oil = 15KMT (no loads).
  8. Argentina snapshot — looks wetter in 16-30 day. Dryness is very slow — if it does occur. Looks v. v. good versus mid-late November and into FH December. This has been v. beneficial for the crops — esp. the double crop soy (after wheat) — with that segment making up about 31% of the total soy planted area. These rains continue to bring farmers’ sales to the table. Farmer selling estimated 70% sold for 19-20 and 6% for new crop. Crush margins hold nicely — call it 30 average for Feb-March and $24-25/MT for new crop (Apr-May). Again — much improved crush margins + increase in farmer selling has been the story for Argentina since the end of December’s strike. Soy oil — premiums here have really buckled and now unders. Like corn — there just is not a lot of demand out there. Soymeal also trends weaker (not to unders quite yet — but it’s headed what way). Soybeans flat/trend weaker –> follow Brazil.
  9. U.S. crush ownership — extend thru at least another +90 days (well thru May) — U.S. farmers should/have and continue to aggressively sell the 2020 crop into this inverse (and that’s why inverse exists!).
  10. REPEAT: Brazil soy production — average estimate for Brazil’s soy crop = 132.2MMT. I remain more comfortable with a 134MMT type number but that’s really splitting hairs at the end of the day. The bottom-line remains: Brazil will produce another record soy crop with record soy prices for this years (what is left to market) and in 2022 with land, land and more land quickly being brought into production.
  11. 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.



Higher; new highs in the last +hour. Inverse steepens. 680KMT corn to China flashed for this year. Ukraine and Argentina trend weaker/lower.

  1. Open interest +12953
  2. U.S. ethanol production + stocks out mid-AM — ethanol market absorbing the 200 mil gallon China-U.S. ethanol purchase for FH CY2021. Definitely helps the record stocks level for this time of the year — in addition to margins for U.S. ethanol plants (this exceeds the previous 198 mil gallon record import program).
  3. China corn imports — over 13MMT for the U.S. with the sales flashed Tuesday and again this a.m. (680KMT). USDA Ag Attache at 22MMT (USDA = 17.5MMT). A portion of unknown — probably takes that ownership closer to 15MMT than not. Ukraine — call that 7-8MMT and COFCO has been active for Brazilian corn. Given MY ends 30 Sept on paper — a 25MMT corn import program is likely more realistic now (vs my previous 20MMT) — would look for USDA to again revise its corn import forecast higher in the Feb WASDE.
  4. Brazil export line-up = 555KMT (2.06MMT loaded).
  5. Argentina farmer selling — for 2019-2020 crop 78.4% sold and new crop at 20.3% (25.3%) — this selling too has picked up since the start of January. Corn premiums/basis levels trend weaker. Not a lot of demand out there. World buyers lack a bid. Domestic demand is also v. quiet at these prices.
  6. 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).



Following the upward trajectory of the grains/oilseeds in general. CME wheat inverse widens. KW spreads more/less flat.

  1. Open interest — Chicago +6659  Kansas +1691.
  2. Algeria tender — French W likely to garner this tender given freight advantage.
  3. Russian logistics — the big push continues to shove everything out before the export tax kicks in on 15 Feb and again the higher export tax on 1 March.
  4. REPEAT: 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.
  5. 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%.
  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 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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