- HEADLINES: Chicago chops, above session lows; Crude higher on tightening balance sheet; Brazilian weather stays concerning.
- Paris milling wheat stays weak on reported Chinese cancellation of French purchases. Chicago markets off lows amid rising energy markets, searing heat in Central and Northern Brazil next two weeks. Soyoil stays firmly above 50-day moving average, and tests 100-day moving average, following newer seasonal highs in palm oil overnight.
- Chicago futures are lower, but off session lows, at midday as end user buying absorbs early speculative selling. More attention is being paid to weather pattern stagnation across Brazil’s safrinha corn belt, as well as the coming lengthy period net drying across the US Plains and far W Midwest. Central US fields will be fit to plant much earlier than normal, but the trade is beginning to debate the longer impact of record US winter temperatures, which correlate with summer heat, and net drying across an area encompassing NE, the Dakotas, MN and WI into late month. Weather plays a greater role in price discovery moving forward.
- US ethanol production in the week ending March 8 totalled 301 million gallons, vs. 311 million the previous week but up 1% year on year.
- We believe that the USDA must raise its 2023/24 US ethanol grind forecast 15-25 million bu in its April WASDE, and economics are improving as Midwest ethanol swap prices rise and ethanol’s discount to gasoline is sizeable. Ethanol blend demand rises steadily into late summer.
- Spot WTI crude at midday is up $1.60 at $79.10/barrel as the US’s season of increasing stocks comes to an end. Commercial crude stocks on March 8 were 447 million barrels, down 1.5 million from the prior week and 7% below last year. Unlike 2022, when reserve stocks were being pumped into the marketplace, US crude and gasoline stocks move lower into Aug/Sep. Fair value in crude is seen at $76-82, which on balance lends support to biofuel markets and corn/soyoil. Crude prices tend to peak in May-Jun.
- The major forecasting models are at odds over the placement/intensity of rainfall in Mato Grosso over the next 7-10 days but agree that sweltering heat and complete dryness continue across Mato Grosso do Sul, Parana, and Sao Paulo. High temperatures there on Tuesday were in the mid/upper 90s. Similar readings persist into March 20.
- The midday GFS weather forecast is consistent with morning output. Regionally heavy rainfall impacts E Mato Grosso, Goias and NE Brazil. Soaking totals of 3-4” are forecast in RGDS in southern Brazil. A pattern of below/well below normal rainfall and lingering heat continues in central Brazil throughout the next 10 days, with GFS forecast 11–15-day guidance trending drier. The failure of rain to appear in central/northern Brazil in late March triggers a more robust period of short covering in Chicago corn futures.
- Spot Chicago soy at $11.50, spot corn at $4.00-4.10 and Chicago wheat below $5.80 have fully digested the flood of bearish input thrown at markets in late 2023. It is now a blank canvas, with both the bulls and bears at the mercy of weather forecasts/actual conditions moving forward. Focus stays on Brazil nearby as safrinha corn begins pollinating in April. Excessive rain in RGDS in S Brazil will also be watched as soybean harvesting has yet to begin there.