- HEADLINES: Low volume correction as market volatility ramps up; China said to secure USD soybeans on morning break; Funds are sellers.
- Chicago futures are in retreat on chart-based considerations and light profit taking. The volume of Chicago trade is down from recent days (Super Bowl hangover maybe) with importer and end user pricing noted on the morning break. China is a sizeable short and using any breaks to extend their forward coverage in US soybeans. We continue to hear that China did secure US corn last week for 3-4 million mt, but when the purchase will be announced is unknown. COFCO as a domestic merchant of US grain can secure the Central US cash corn, and not announce the sale until it is destined for export. Thus, a corn sale announcement to China could be several days or several weeks away. The point is that cash basis levels remain strong and neither US or S American farmers have any interest in selling a break.
- Corn and soyoil has held better than soybeans, wheat, or soymeal this morning with the unwinding of spreads and strengthening cash basis. Soyoil basis in S American has been ripping to the upside and is trading at a 3-3.5 cent premium to Chicago. The rally in soyoil basis in S America will underpin breaks in Chicago. Cash soymeal in Brazil has also rallied strongly to $20/mt over.
- Also supportive is the need of the market to secure all Central US acres. The soybean market needs to assure at least 90 million acres of new crop soybeans or risk having tight stocks for another crop year. And crop size worry persists for Argentina/Southern Brazil amid arid weather forecasts for the next 10 days. Breaks will be supported, but rallies will depend on how aggressive a buyer that China wants to be and S American weather. Note that soybean futures have already rallied over $4.00/bu so a modest pause is anticipated.
- Chicago brokers estimate that funds have sold 3,000 contracts of wheat, 2,000 contracts of corn, and 5,100 contracts of soybeans. In soy products, funds have sold 2,500 contracts of soymeal and 2,100 contracts of soyoil. Funds have been sellers in each of the Chicago primary grain and oilseed markets.
- For the week ending February 10, the US exported 57.8 million bu of corn, 42.4 million bu of soybeans, and 16.0 million bu of wheat. For their respective crop years to date, the US has exported 790 million bu of corn (down 112 million or 12%), 1,426 million bu of soybeans (down 422 million or 22%), and 532 million bu of wheat (down 110 million or 17%).
- Brazilian President Bolsonaro headed off to Russia today to plead with Putin regarding its fertiliser supplies/availability. Brazilian farmers are extremely worried about nitrogen/potash supplies to seed their crops starting in September. The Brazilian push for fertiliser seems poorly timed as Putin amasses troops along the Ukraine border, and pushback has been widespread.
- The Russian Duma will meet Wednesday to discuss the Minsk Agreement that was signed in 2014 which was related to ongoing fighting E Ukraine and Russia’s hope for peace. However, the expectation is that the Duma will vote to void the agreement as additional pressure for Putin’s demand for Ukraine never to become a NATO member. The ending of the Minsk agreement could cause additional “invasion angst” heading into the weekend.
- The midday GFS weather forecast is like the overnight run, with meaningful precipitation in S America isolated to the 9th/10th day of the model run. The EU/GFS models have not been aligned in their rainfall forecast in the week 2 timeframe. Clarification is needed, but the forecasts show no massive change in the overall pattern. A high-pressure ridge holds across the region but weakens into Feb 24. Near to above normal rainfall will persist across N Brazil with totals of 3.5-6.50”. Above normal temperatures are forecast.
- Market volatility is going to be ramping up into late March and the USDA Seeding/Stocks report. A consolidation of recent gains is expected with corn/soyoil expected to score new rally highs. The low volume break should produce a Turnaround Tuesday. S American crop sizes continue to decline with Argentina at risk. China is said to have bought 4-6 cargoes of US soybeans on the morning break.