- HEADLINES: Chicago bounces in tepid volume trade; Brazilian soy crop estimates hold in big range; Aprosoja tells members to hold soybeans.
- Chicago grains are higher at midday with soybeans/soymeal pacing the rally. Corn and wheat futures have been pulled from their opening losses on short covering in extremely slow volume. It does not take much volume to push the markets around with S America and SE Asia on holiday. Fresh news is limited with the bears pointing to the USDA Outlook Forum for a late week break on historically large US new crop stocks. However, debate also centres on the wide disparity of CONAB/USDA crop estimates in Brazil. The lack of clarity on S American crops offers talking points to both the bears and the bulls in what we see choppy sideways market. Traders note the near record net short position in corn and Chicago grains in general which opens the potential for a sizeable Chicago rally with a fundamental catalyst. Seasonally, Chicago values tend to form their lows in mid-February, or in the next few weeks.
- Brokers estimate that funds have bought 1,000 contracts of wheat and 3,200 contracts of soybeans, while being flat corn. In the soy products, funds have sold 1,900 contracts of soyoil and bought 2,700 contracts of soymeal. Bull spreading of March-May soymeal reflects strong cash basis bids.
- US weekly grain inspections for the week ending February 8 were 34.6 million bu corn, 48.7 million bu of soybeans, and 15.0 million bu of wheat. Last week’s US soybean export total was revised up by 12 million to 64.3 million bu. For their respective crop years to date, the US has exported 676.6 million bu of corn (up 160 million or 31%), 1,130 million bu of soybeans (down 332 million or 23%), and 430.3 million bu of US wheat (down 95 million or 18%). The US 2023/24 soybean export pace is disappointing with a further cut in the US soybean export estimate expected in March of 15-25 million bu.
- The Brazilian Soybean Farm Association, Aprosoja, is telling their members to withhold cash soybean sales due to a smaller crop and higher prices that are forecast. Aprosoja estimates the 2024 Brazilian soybean crop in a range of 130-135 million mt, by far the lowest of Brazilian private soybean crop forecast. Producer groups always favour declining harvests and higher prices/profit margins, but it is highly unusual for Aprosoja to tell its producers to hold a “seller’s strike”. Parana and Northern Brazilian actual harvest yields are disappointing, but a sub 140 million mt soybean crop is premature. History does show that WASDE does not tend to make a big reduction in their crop forecast until March when harvest data offers an informed trend.
- There are a lot of varied opinions on Brazil’s second corn crop with Mato Grosso cash bids clustered around $2.70/bu for July/August delivery. Ag Rural added 5 million mt to their winter corn production estimate today due to a wider planting window with the Brazilian soybean harvest 23% completed. Others claim that price and profit will limit seedings and crop input use. Mother Nature will have the final voice on supply.
- The midday GFS weather forecast is slightly drier for Argentina and Southern Brazil for the next 2 weeks. The midday model run extracted rain from the forecast and added back some heat in the 6–10-day period with highs back in the upper 80’s to the mid 90’s. Thankfully, the past 6 days has produced needed rains across Argentina ahead of the new period of dryness. Northern and Central Brazilian rainfall will be normal and amid a lack of heat, crop yields should respond favourably. The Brazilian monsoon shows no sign of prematurely ending and no extreme heat is evident.
- The big question that traders are ponding is how much bearishness is worked into current prices with managed money sitting on a near record short corn/soybean position. Brazilian premiums are rising in the paper market and there is a 60-cent positive spread for June/July Brazilian soybeans vs the current spot market. This premium structure suggests that the Brazilian soybean crop is well under the USDA estimate. We continue to maintain that soyoil will outperform soymeal with any break being corrective of last week’s reversal.