Reversal Lower in Beans Signals Caution to Bulls

MORNING AG OUTLOOK

Corn: 

Corn gave up its early gains yesterday late in the session when crude oil pulled back and the close was disappointing. The blockade of the Strait did not result in any aggressive buying, likely due to the fact significant rain is headed into the lower Midwest and eastern belt over the next week and additional chances are showing for week 2. Furthermore, Dr Cordonnier raised his safrinha crop estimate 2 million tonnes to 134, compared to USDA at 132, citing better rain coverage. Early safrinha harvest will begin in late May. Rabobank says Brazil fertilizer use in 2026 will drop to 47.2 million tonnes, down 49.1 in 2025. Historically, lower fertilizer use translates to lower yield and that is likely to be a longer-term supportive factor for the market as Brazil won’t be the only country reducing fertilizer use this year. Midwest and Gulf basis is firm as farmers are focused on planting and are typically slow sellers of cash grain in spring. Brazil is expected to increase their ethanol blend from 30% to 32% in the coming days and up to 35% blend by the end of this year. Without a major weather story in the Midwest or Brazil, there is little if any weather premium built into the market and it’s too soon to expect buyers to focus on potential reduced acreage in the US and global yield pressure. But those factors will be important down the road. Reminder – December corn futures has not made its yearly high in March in the last 20 years. 

Soybeans: 

Limited volatility in beans overnight following yesterday’s failure to extend to the upside and subsequent reversal lower. July beans hit a one-month high but fell back as bean oil lost upside support when crude faded off its early session highs yesterday. The bean oil chart continues to be a concern for the bulls as last week’s gap was tested yesterday morning but was not filled and the market overnight took out last week’s low. The important question is if bean oil begins a significant correction, can meal be strong enough to hold beans up? So far, the answer has been yes but there are still significant questions regarding bean demand and whether China will make additional purchases before the mid-May Beijing summit. Reduced competition from Argentina has been a supportive factor for meal as bean harvest is ongoing but farmer selling to crushers has been slow. A headline announcing another Argentina tax holiday could provide a wave of selling in meal as it would give the crushers much-needed supplies to ramp up processing, resulting in more aggressive soy product export competition with the US. March NOPA crush will be released tomorrow morning and is expected to be another record high for the month of March and the 1st report to include the new Gibson City, Illinois processing plant that recently joined NOPA. Bean oil stocks are expected at a new 13-year high and up 10.8% from February. The 1st US bean planting report came in higher than expected at 6% done, up from 2% average and Arkansas, Mississippi and Tennessee are the furthest along. The southeast US remains in the grip of drought but over the next week significant rain totals are expected in the central and lower Midwest, and especially around the Great Lakes region. The bulk of the Plains will remain mostly dry. Beans closed with a reversal lower yesterday despite the blockade of the Strait and higher energy prices, which is a warning sign to the bulls.        

Wheat: 

Strong action in wheat yesterday morning but prices closed midrange. Daily trading volume was above average. Overall wheat conditions dropped 1% last week to 34%, down from 47% at this time last year. Both HRW and SRW G/E dropped 3%. Kansas in particular was down 6% and there are slim chances of any precipitation in western Kansas over the next week. This was part of the reason for yesterday’s rally and gap higher on July KC. India is expecting a record 120 million tonne wheat crop but expected El Nino conditions can reduce precipitation in the country. APK – Inform projects Ukraine’s 2026 crop at 19.9 million tonnes, well below USDA at 24 million. This comes on the heels of Argus lowering their Ukraine estimate yesterday. Even so, global supplies remain plentiful. Algeria tendered again for wheat overnight and bought nearly 700,000 tonnes in their previous tender early last week. The Southwest Plains dryness is bringing back some weather buying, but high global supplies will likely limit the extent of a rally.

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