White-hot CBOT, farmer sales drive Argentina cash corn to discount

The supercharged global corn complex has heaped pressure on physical premiums in Argentina’s Up River hub and turned them negative as high global prices tempt farmer selling to bring fresh supply to the market, trade sources have told Agricensus Tuesday.

Physical indications for July loading handysized corn cargoes were heard offered at minus five cents to the CBOT July contract with offers heard at minus 2 cents amid a fresh surge in the global Chicago benchmark contract price.

“The market is terrible; premiums collapsed following the crazy Board,” one Argentina-based trade source told Agricensus.

“It’s mostly CBOT and also good origination,” a second source said with a third highlighting that the “farmer is selling in decent style.”

July cash premiums have come under pressure in the South American hub in the face of rampant corn futures on the Chicago Board of Trade in recent days, with the front two contracts, May and July, posting 25 cent gains on both Friday and Monday to hit the maximum daily limit.

Under exchange rules, those daily limits were relaxed for the May contract in Tuesday trading allowing it to jump by up to 40 cents – an allowance that investors then duly fully exploited, sending the contract to hit its limits once again as May raced past the $7/bu level.

As the US came online, however, bouts of profit-taking reined in those huge gains, although May continued to report gains of over $0.20/bu at the time of publication, keeping it close to $7/bu.

That strength in contracts has come as Argentina’s corn harvest gets underway and has tempted the country’s farmers to step up their selling in recent weeks.

Government data shows farmers sold over 1 million tonnes of current crop corn in the week to April 14.

Exporters have also been cashing in, with a staggering 1.3 million mt of export licenses booked on April 26 as corn prices began to spike.

For the Up River complex, basis premiums have traded at a discount to the Chicago corn contract in the recent past, with Agricensus data showing premiums turned briefly negative in May and June of 2019 before spending a longer period at a discount in October of the same year.

Back then, premiums sank as low as minus nine cents to the December futures contract as Argentina and Brazil got caught in fierce competition as both countries processed some of their largest ever corn harvests.