- HEADLINES: Chicago trying to recover at midday after morning profit taking: China buys US summer soybeans; Midday weather late.
- Rounds of profit-taking is the Chicago theme this morning with corn/soy and wheat futures under pressure at midday. The bulls have scored massive profits since the December WASDE report and wanted to “nail down” a modest portion of those gains amid the uncertainty of the final January Crop/December Stocks reports. That selling has pressure Chicago futures following the higher overnight trade with end user pricing from commercials noted on the morning break.
- The January USDA crop report requires “seat belts & air bags” amid the likely sizeable market swings that will occur following its release. And world traders will keep the volatility going on Wednesday as Asia and Europe get their chance to trade the USDA data for the first time. The report won’t change the outlook for building global demand for US corn, soybeans and wheat, but it will determine the amount/duration of demand rationing that is needed.
- Brokers report that managed money has sold 3,000 contracts of wheat, 5,500 contracts of corn, and 10,500 contracts of soybeans. In soy products, funds have sold 4,400 contracts of soyoil and 3,900 contracts of soymeal. The soybean selling was large, but Friday’s low was not exceeded.
- The USDA announced the sale of 132,000 mt US soybeans for the 2020/21 crop year to China (which followed the sale of 204,000 mt on Friday). China is said to be bidding for additional July/August US soybeans, and will be buying Chicago futures if the USDA report comes out bearish on Tuesday. China in the international crop year to date (October-September) has shipped 4.1 million mt more soybeans than last year, a 17% increase. We note that the USDA is forecasting that China will take just 1.4 million mt more than the entire 2019/20 crop year. The USDA’s 2020/21 China soybean import estimate is too low by 4-5 million mt in our view!
- The US exported 44.5 million bu of corn, 65.4 million bu of soybeans, and 10.3 million bu of wheat in the week ending January 7. The corn and soybean export estimates were above trade expectations. And USDA raised last week’s US soybean export estimate to 64.7 million bu (from 48 million, a 20.7 million bu increase or 43%). Based on vessel counts, Research expects that next week’s FGIS US soybean export total will be revised up 10-15 million bu. China exported 30 million bu of US soybeans in the week ending January 7 or 60.5% of the total.
- For their respective crop years to date, the US has shipped a record 1,416 million bu of soybeans (up 614 million or 76%), 587 million bu of corn (up 248 million or 73%), and 546 million bu of wheat (unchanged from last year). The US soybean export estimate is remarkable since it already accounts for 85% of last year’s entire soybean export estimate, with 8 months remaining in the crop year. To achieve the USDA annual export forecast of 2,200 million bu requires an average export pace of 24 million bu/week. We expect a weekly average closer to 29 million.
- Argentine farmers are highly disappointed with the Ag Ministry’s offer of 30,000 mt of new corn export sales registrations per day. They call the offer paltry and are said to be planning the continuance of their sales strike. They are trying to return to talks to inform the Argentine Ag Minister of their disappointment. However, calculations suggests that the Argentine cash longs will be let out of their position with the new 30,000 mt sale total.
- The midday S American GFS weather forecast has been delayed due to computer issues. The forecast run is out to 120 hours (5 days) and shows no change from the overnight solution. The big question is one of how long the Argentine dryness will last beyond January 21.
- Historically, the worst of Argentine/S Brazilian droughts occur after the middle of January as they seasonally persist into March or April. The recent rains are a help to crop condition stabilisation, but there is no evidence of a pattern change. A second round of rain occurs across N Brazil on Thursday/Friday.
- The USDA report looms, but there is no sign of needed demand rationing for US soybeans or corn. Demand led bull markets often peak with a panic rally that evokes fear. The demand bull market is likely to persist.