- HEADLINES: Russia to ban grain exports through June 30; Brazilian corn at new record high; US weekly export totals lack inspiration.
- Chicago values are broadly mixed at midday with corn/soy futures trading lower while wheat futures rally on the news that Russia is planning to ban all grain exports from March 15 to June 30. The Russian headline sparked a US and world wheat rally as exporters that sold wheat from Russia on an optional origin basis, scramble to cover the sale from other world exporters such as the EU, Australia (if they can find loadout capacity) and the US.
- No mention was made of Russian banning sunseed/sunoil exports, but based on record high domestic prices, it is expected to be included in the grain ban to be officially announced in the next few days.
- The Russian grain ban will push other exporters such as Argentina to consider like bans or higher export taxes. Rumours abound at midday that Argentina is considering raising export taxes on grain to help pay off IMF loans amid the windfall that has befallen Argentine farmers/exporters.
- We expect a higher close in US wheat futures with corn/soybeans forming bottom as March contracts expire. We doubt that July corn can push too far below $7.00/bu amid rising cash basis bids. Today’s corn/soy decline is about selling tied to the inability to forge new rally highs, and the lack of a confirmation of rumoured corn demand by Spain.
- Chicago brokers estimate that funds have sold 12,500 contracts of corn and 4,000 contracts of soyoil. Fund managers have bought 1,800 contracts of soybeans and 2,000 contracts of wheat. In the products, funds have sold 4,200 of soyoil while buying 1,900 contracts of soymeal.
- The USDA reported the sale of 159,000 mt of US corn that was sold to Mexico for 2021/22. No sales of US soybeans or corn was reported to China. China booked 5-6 million mt of Ukraine corn late last year which will not be executed. Due to China not having phytosanitary certificates worked out with Brazil or Argentina, the US is the only origin that can supply this corn. We expect that China will use a Chicago corn break to switch their corn purchase.
- Sources indicate that Russia will place a ban on grain exports due to the sharp rise in domestic food prices and the economic sanctions that are already severely limiting trade. The Russian invasion of Ukraine knifed Black Sea wheat exports by 9-11 million mt. We were estimating that Russia could export 3.0 million mt of wheat through June 30. The announced ban today would end the export of 3.0 million mt of Russian wheat that was going to leak into the world market. With Ukraine/Russia no longer exporting grain, stress is coming on key importers like Egypt that may have 600-700,000 mt of wheat purchased from the Black Sea that will have to be sourced from others. Importers/sellers will initially turn to European wheat, but with Australian export loadout capacity taken through August, it is the EU, Canada, or the US as probable sellers. Indian wheat exports will be below 1.0 million mt monthly. This is a big deal for wheat, do not underestimate its importance!
- Brazilian corn prices reached record highs today with talk building that Brazil will be dropping its import levy to 0% on April-June corn imports. The dropping of its import levy could allow US corn to be imported (on paper).
- US export inspections for the week ending March 10 were 45.0 million bu of corn, 28.4 million bu of soybeans, and 10.3 million bu of wheat. For their respective crop years to date, the US has shipped out 1,020 million bu of corn (down 168 million or 14%), 1,548 million bu of soybeans (down 411 million or 21%) with wheat exports at 595 million bu (down 117 million or 16%). We would reiterate that US corn Sept-January Census exports are 172 million bu larger than FGIS, so that annual crop year exports to date are actually above last year.
- Breaks in Chicago corn, soy and wheat futures offer new buying opportunities. Some cite slower than expected US corn export loadings for the Chicago corn decline, but the total loss of Black Sea exports will push US corn/wheat demand back to the US. And world feed wheat prices are too high for world livestock feeders. Crude oil falling below $100.00 is based on long liquidation, not a change in fundamentals. Bull markets lie ahead for Chicago, but choppiness is probable ahead of the NASS Stocks/ Seeding reports on March 31. Stay bullish is our motto.