- HEADLINES: Chicago rallies in pre report positioning; Argentine weather forecast unchanged.
- Chicago ag futures are higher at midday on positioning ahead of Thursday’s USDA January Crop Report. The report is expected to cut Argentine corn and soybean crops by 3 million mt (each) and offer final US corn/soybean yield data and the first glimpse of 2023 US winter wheat seeding.
- Historically, Chicago endures extensive market volatility post the report due to its importance to longer term price direction. The report finalises 2022 US summer row crop yields, but also offers a crop year Q1 indication of US corn feeding. Traders are cutting their position size while understanding that fund managers are holding sizeable net long corn, soybean, and soymeal net long positions. The report holds market risk that is always difficult to assess. We look for a mixed to higher close on positioning for the report.
- Chicago brokers estimate that funds have bought 1,600 contracts of wheat, 5,400 contracts of corn, and 5,500 contracts of soybeans. In the products, funds have bought 3,900 contracts of soymeal while being flat in soyoil.
- Private Brazilian firms are preparing to start crop tours to assess yield potential throughout N and C Brazil. The early harvest is underway, and a record crop appears likely. Most crop watchers peg the Brazilian soybean crop at 151-154.4 million mt with yield to at least reach trendline. Coming rains for RGDS will be key in discussing a Brazilian soybean crop of more than 155 million mt. The 2023 Brazilian soybean harvest will be record large at least 24 million mt larger than last year. This will help ease pressure on world soybean supply tightness.
- Brazilian soybean offers are 50 cents cheaper than the US Gulf for February and 70 cents cheaper in March/April. World demand is completely shifting away from the US due to price and new crop availability. And Brazilian and Paraguayan soybeans are being booked by Argentina to crush amid their drought losses. This will help to ease further losses in premiums relative to the US Gulf. We also note that Brazilian soymeal for February is offered $28/mt below the US Gulf with March/April $38/mt cheaper. US soymeal demand is going to be difficult to uncover amid the cheapness of Brazil. The export outlook for both US soybeans and soymeal is in retreat.
- Ukraine 2023 wheat/corn production is forecast to be down 20-40% amid a shortage of seed/fertilizer and financing. It is mid-sized Ukraine farmers that are struggling to find financing. All the above will have an adverse impact on Ukraine 2023 grain production due to the war. Thus, the outlook for world wheat supply is cloudy until Black Sea crops can be better assessed in spring.
- The midday GFS weather forecast is like the overnight forecast with showers reported in N and NW Argentina at midday. Rains are still expected across Southern Brazil late Thursday and Friday. A second system is noted for Argentina in the last half of next week with near normal rainfall in the 11–15-day period. Temperatures hold in the 80’s to the mid 90’s with extreme heat in retreat.
- Brazilian rain will delay the harvest of early planted beans, but yield threats are lacking. Soil moisture will be abundant for safrinha corn seeding in February/early March with favourable rain for the remainder of Brazil. A record soy crop is expected which will boost world soybean supplies to a record.
- Demand for US corn, soy and wheat remains concerning, but markets worldwide must contend with uncertain late Jan weather in Argentina and uncertainty over Sep-Nov residual corn and soy disappearance. Soybeans above $15.00 are richly priced while March corn will struggle above $6.70.