CHICAGO, April 24 (Xinhua) -- Chicago Board of Trade (CBOT) agricultural futures rose in the past week as the U.S. dollar closed lower for the third consecutive week.
Chicago-based research company AgResource stays bullish, as the falling U.S. dollar and shift in capital flows will underpin the grain/soybean markets.
Spot CBOT corn rallied 70 cents, the biggest weekly gain since July 2012. First major chart-based resistance at 6.25 U.S. dollars was breached easily and the stage is set for additional gains unless Midwest weather is near-perfect between now and August. Yet, drought envelops the entirety of the western half of the United States. A modest expansion eastward is forecast as a high-pressure ridge sets up across the dry soils of the western United States. AgResource holds that weather will determine the speed and size of future corn rallies, but breaks will be brief and shallow.
The 2021-2022 crop year is unique as demand growth has collided with tight exporter stocks. Ethanol production is profitable as spot prices have soared to 2.20 dollars per gallon. The need for enlarged food production as world economies recover from the pandemic bodes well for U.S. corn exports.
U.S. wheat futures rallied to eight-year highs on rising global corn prices and a lack of rain across the northern United States and Canada. It is expected that global wheat feed use will be elevated this summer amid South American corn production shortfalls and soaring cash corn values across the U.S. Plains. Even a modest Northern Hemisphere yield loss may trigger the need to cap feed use amid record global trade.
The wheat outlook stays bullish on breaks, AgResource holds, mostly due to an increasingly bullish corn outlook. Confirmation that dryness continues into mid-May across Central Brazil propels July CBOT corn to a range of 6.75 and 7.00 dollars.
Wheat's longer term bull run will continue without exceptionally favorable weather for every exporting country this spring and summer.
Soybean futures soared to an 8.5-year high at 15.50 dollars. Strong U.S. Midwest cash soybean basis drove spot May soybeans higher into first notice day. The United States needs to import soybeans by late summer to prevent localized shortages.
Brazilian soybean stocks are quickly tightening as harvest winds down and exporters ship out record tonnages. The U.S. market cannot afford any additional exports, which underpin cash markets. Brazil and Argentina need to fill world demand into September.
Tightening old crop stocks places acute emphasis on U.S. new crop acreage and yield. Even with a trend yield, U.S. 2020-2021 soybean end stocks will be 140 million bushels or less. AgResource stresses the importance of Central U.S. weather and its impact on new crop soy futures. Soybean market volatility will be rising.