- HEADLINES: Chicago sinks to fresh lows in corn/soybeans ahead of USDA outlook forum; Corn fund short near or exceeds record; US weekly ethanol production gains.
- Chicago corn, soybean and wheat futures are lower at midday. Corn futures slid to new lows with March futures faltering to $4.2215/bu while December corn has dropped to $4.63. Soybeans posted an early rally, but the weakness in the grains pulled the complex lower. March Chicago wheat fell to $5.775 and tested its mid-January low before recovering. The Chicago oil share spread is slipping.
- Managed money selling has been the most pronounced in the grains. The tone of Chicago stays bearish ahead of the USDA Outlook Forum which is expected to show growing new crop supplies and stocks. And Thursday’s USDA/FAS weekly export sales report is expected to reflect sluggish US demand due to cheaper Russian wheat and Brazilian soybean offers. US corn is competitive against S American offers, but Ukraine remains the world’s lowest cost origin due to rising freight costs through the Black and Red Sea’s. A lower Chicago grain close is expected today. Any short covering will have to wait until after the USDA 100th Annual Outlook Meeting that starts early tomorrow. By our calculations, the net fund short position in corn has likely exceeded the prior record at 317,000 contracts today.
- Chicago brokers estimate that funds have sold 9,500 contracts of corn, 4,300 contracts of wheat, and 4,300 contracts of soybeans. In the products, funds have sold a net 3,200 contracts of soyoil while being flat in soymeal.
- The weekly US ethanol grind reached a record for the middle of February at 318 million gallons, up 14 million gallons from last week, and up 7% from last year. US ethanol stocks grew by 43 million gallons to 1,084 million gallons, 2% above last year. The US ethanol industry remains profitable across variable costs and is pushing to secure additional feedstock supplies. The recovery in US ethanol production since the arctic onslaught of mid-January has been dramatic.
- The midday GFS weather run is dry for Argentina for the next 9 days with showers returning in the 10–15-day period. Northern Brazil will have open harvest weather through Sunday when better rainfall returning next week. The 2-4.00” of Northern Brazilian rainfall will slow the harvest. No extreme heat is forecast. The lack of Argentine rain is not a concern as long as the 10–15-day forecast is correct via the return of rain.
- Traders are betting that WASDE will use a 2024 US corn yield of 181 bushels/acre plus and a soybean yield of 52.0 bushels/acre plus to produce growing 2024/25 supplies and end stocks. The funds are piling into a record or near record net short corn/soy position heading into a new Northern Hemisphere growing season. The timing of a record short does not make a lot of sense. Like last year, USDA is expected to release their new crop balance sheets when chief economist Seth Meyers offers the economic outlook for the US farm economy in 2024. Today’s sharp break is positioning for the USDA Outlook Conference with new lows in corn/soybeans.