- HEADLINES: Fund demand chases soymeal to new contract highs, soybeans follow; Additional 48 hours of Argentine rain, they cool/dry; US corn exports disappoint.
- Chicago corn, soybean and wheat futures are higher at midday. The market has been able to cast aside the better Argentine rain totals that occurred overnight. And the US dollar has weakened, and the Russian’s are positioning for corridor negotiations that will start later this month. The flow of capital is on the buy side of the ledger and the bull has been able to endure the Argentine rainfall “gut punch” to start the week.
- Soymeal has been the upside price leader with March futures trading into resistance at $505-520/ton. Soyoil has been sold on oil share spreading. Cash traders argue that the soymeal rally is not sustainable, but a top will not occur until the inflow of new money slows. Corn open interest rose 23,429 contracts with wheat up 2,651 contracts and soybeans up 12,289 contracts on Friday. After a battering in 2022, fund managers are back to buying equities, energy, and raw material markets. The big unknown is when does the investment slow or stop as seasonal price highs will be formed.
- Chicago brokers estimate that funds have bought 3,500 contracts of wheat, 5,600 contracts of corn, and 4,000 contracts of soybeans. In the products, funds have booked 4,500 contracts of soyoil while selling 2,300 contracts of soymeal. Managed money has been Chicago buyers from the opening bell.
- US export inspections for the week ending February 9 were 20.1 million bu of corn, 17.35 million bu of wheat, and 57.1 million bu of soybeans. The wheat export pace was as expected, while corn was less, and soybeans were more.
- For their respective crop years to date, the US has shipped out 514 million bu of corn (down 276 million or 35%), 524 million bu of wheat (down 9 million or 1%), and 1,452 million bu of soybeans (up 22 million or 1.5%). US corn exports lag in a position where the US was expected to be a dominant seller as Brazil switches over to exporting exclusively soybeans as their new crop harvest advances.
- Russia indicated that sanctions placed on its ag exports must be lifted for the Black Sea Grain Pact to be renewed. Russia says that economic sanctions that block payments, logistics and insurance are barriers. Russia made such claims back in October before the November renewal with the US/EU/UN arguing that there are no sanctions on Russian ag exports as they reach record levels.
- World exporters see Russia as posturing/positioning for the coming corridor negotiations. Russia needs the hard currency provided by grain exports to finance its economy. Russian crude oil exports will be cut 500,000 barrels in March further cutting the flow of hard currency into its economy.
- The midday GFS weather forecast is like the overnight run which is not offering much additional rain for Argentina/S Brazil over the next 10 days. The GFS model continues to perform poorly in forecasting nearby rains with showers projected for another 36-48 hours with accumulations of 0.4-1.50” before dry weather returns by midday Wednesday. The dry Argentine weather pattern lingers into February 23 with heat expected after Feb 21. Until then, near to below normal temperatures prevail which, following this recent rain, will aid crops. Another couple of good rains are needed.
- The Brazilian forecast calls for near to below normal rainfall this week with near to above normal next week. Some slowing of harvest is possible, but next week’s rain will keep soil moisture at an elevated level for winter corn.
- Soybeans are all about soymeal and the inflow of new investment by money managers. We hope that the CFTC will resolve delayed CoT data and reporting this week to allow for an understanding of fund length. March Chicago wheat came close to our upside price target at $8.00 while March corn is back testing resistance at $6.85-6.95. We hold a cautiously bearish view of March soybeans above $15.50 and March meal above $500/ton. Don’t chase this rally would be the best advice we can offer at this time.