GAP Observations: Feb. 12, 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.


REMINDER: Markets closed on Monday, 15 February in observance of President’s Day weekend. All USDA reports pushed one day. USDA Ag Outlook forum- – 18 & 19 February (first estimate/look at 2021-222 U.S. balance sheets).

RANGES: CH = 542.25 – up 1.25¢ (540.25 – 546.25). WH = 633.75 – up 1/4¢ (632 – 637.75). WH = 615.75 (612 – 617.25). SH = 1370 – up 2.5¢ (1363.50 – 1377.25). SMH = 427 – down $1.90 (426.20 – 430.10). BOH = 4593 – up 30 (4558 – 4617)

USDA DAILY SALES: Corn to Costa Rica (135.6KMT this year, 59.7KMT next). Guatemala picked up 115.6KMT for this year. U.S. corn demand from both countries is ahead of LY.



Mixed. Soymeal the weak link. Funds are too long and demand too quiet/lacks bids. U.S. FOB and CIF trends lower. Brazil discount to U.S. soy widens. BO on its own.

  1. Open interest: soy +5989. SM +7106. BO +14769.
  2. 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.
  3. Board crush — Mar @ 74.6¢, May @ 68.2¢, July @ 66.2¢.
  4. Oil share — 34.97% (not liking that 35% zone so far)…look for near-record soy oil fund length (and likely record levels for this time of the year).
  5. Soymeal inverse — just about gone in K-H… With solid exports out of the low-cost spoiler (India) + Argentina back online in the weeks/months ahead + Brazil back online solidly by mid-March (clear up harvest logistics – harvest coming all at once so truck availability called limited) + slack/quiet world soymeal demand + animal disease outbreaks, etc –> look for inverse to break down further as see little/no reason for the SM market to be inverted. Fat inverse remains in the SMN21 forward part of the curve.
  6. Discount Brazil vs U.S.  — This has really accelerated its spread (widen) over the past 2 weeks. Once Brazil works thru the front-end logistics (harvest all hitting at once will likely stress truck availability in the short-term before it shakes/sorts itself out). May forward premiums are soft there — with further weakness expected as China largely covered. The day where Brazil soy pencils into the U.S. will be here before we know it.
  7. U.S. NOPA January crush estimated = 183.1 mil bu/4.98MMT (out Tuesday, 16 February). Soy oil stocks = 1763 mil lbs (1699 mil lbs December) vs 2013 mil lbs Jan 2020 (range; 1710 – 1850 mil lbs). This will be out on Tuesday, 16 February.
  8. China Lunar New Year celebrations full-on…thru 17 February. China known U.S. o/s sales = 2.3MMT 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 3-4 weeks more of China-U.S. export loadings…and then it will get v. quiet, v. fast.
  9. Brazil snapshot — focus remains on harvest. Limited 2021 crop selling. However, big crops get bigger. Big truck lines reported at both ports & crush plants — let the great “catch up” begin! Brazil monthly soybean export chart below. Mato Grosso remains quite dry — perfect/welcomed for harvest progress. Private production estimates remain above both USDA (133MMT) and CONAB (133.8MMT). Soybean premiums feel like they have stabilized in the near-term/slightly higher into the week (but remain overall sharply lower over the past +30 days). Soymeal called weaker Apr-May. Demand just not there (India capturing more of the biz…directly taken from any of the 3 principal SM exporters: Argentina, Brazil and U.S.) Soy oil — supported by domestic market/lack of offers. Export line-up: soy = 13.39MMT (786KMT loaded). Soymeal = 797KMT (435KMT loaded).
  10. Brazil new crop (2021-22) plantings (DataGro) — estimates planting +2.9% vs this year (think that % could be actually much higher with the amount of pasture land being converted). First 2021-22 production = 141MMT… um…………. combine that with a long export tail risk………….(again — the last time soy futures were +1400, Brazil expanded production by 40MMT…and the Real-USD was more 2.5:1 vs the 5.4:1 spread today).
  11. Argentina snapshot — crush margins softer into mid-month. Apr-May have slipped back to $23/MT (vs closer to 30MMT). Lack of SM bids/buying interest is a significant weak link. Farmer selling — continues to be quite good as a complete change/outlook for production prospects over the past +30-40 days. As the saying goes: big crops get bigger. Argentina’s government backing away from the cliff known as export taxes (and raising them) also helps sentiment/positivity. Crop ratings for both corn and soy are higher vs LW (soy +4% and corn +2%). Soy premiums called weaker. Soymeal — weaker and now unders (negative) for April forward (a return to normal). Soy oil premiums firmer.
  12. 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.
  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.


Mixed-higher. 550 zone remains a roadblock on the charts. Argentina prems weaker — both bids/offers. No change to outlook: game will quickly shift CZ21 forward.

  1. Open interest +8182…Open interest remains at very frothy levels. Does Friday confirm Tuesday’s key reversal as technicals more negative than not and charts are overbought.
  2. Ocean freight summary (USGC) — Dry-bulk FFA and paper traders got excited during the eight-day Chinese New Year holiday this week. Both markets saw increased trading activity and the bulls came out on top. Some traditional market spreads jumped out of alignment and it’s odd to see the Capesize and Panamax markets moving in different directions. Atlantic routes have also been far stronger than Pacific. Things should quiet down and adjust as the markets return to normal next week. The Handymax and Supramax sectors continue to be the strongest, followed by Panamax vessels and the Capesize market. March Supramax traded in the FFA market at $13,550/day with Panamax vessels at $14,800/day and Capesize vessels getting only $10,750/day. All three were higher in the Q3 period.
  3. World DDG summary (USGC) — U.S. DDGS are steady this week with cold weather in the Midwest and high natural gas prices curtailing production and supplies. Lower soymeal futures and physical prices are offsetting these effects, however, leaving FOB ethanol plant prices steady/slightly higher. The DDGS/cash corn price ratio is up from the prior week at 119% and above the three-year average of 11%. The DDGS/soymeal price ratio stands at 0.52, up from the prior week and above the three-year average of 0.42. Brokers and merchandisers report that spot prices remain elevated – if offers can be obtained – due to logistics issues along the rivers. Demand remains steady and brokers report a solid round of business has been done this week. Barge CIF NOLA offers are up $2/MT for March/April shipment and FOB Gulf offers are $2MT higher for the same time period. U.S. rail rates are slightly lower while 40-foot containers to Southeast Asia are offered $2-3/MT lower than last week. One source noted that the roughly $50 inverse in soymeal futures and an 80-cent inverse in corn futures from March to December is creating a similar inverse in DDGS prices. March FOB Gulf offers average $324/MT while October/November/December prices are near $265/MT.
  4. Brazil export line-up = 331KMT (262KMT loaded).
  5. 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.
  6. 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).


Mixed. A follower. 625-620 zone remains key support for WH21. Inverse breaking down nicely in N-K.

  1. Open interest — Chicago +7815 Kansas +2147.
  2. USD mixed — slightly lower.
  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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