- Early strength in the soybean market faded ahead of the monthly crush data, and the soybean trade turned negative as the monthly NOPA crush data fell short of expectations. Soy product prices were sharply mixed with meal prices around unchanged, while soybean oil gave back overnight gains and closed down. NOPA reported February soybean meal exports at 738,825 short tons, down 17% from January and 8% larger than a year ago. NOPA meal exports have proven to be a rather poor predictive tool for total US meal exports, but have often been a helpful gauge as to whether export trends are up or down, but note that in January, NOPA indicated a slower meal export trend, while the Census Bureau reported total meal exports at a 24 month high. Our view is downside risk ahead of the end of month USDA reports is somewhat limited from current levels.
- Chicago corn futures remain stable amid tech-based support and as ethanol production data this week exceeded expectations rather substantially. Production margins have been increasing while corn futures have been falling, and plants responded quickly to the up-tick in revenue. Funds were net buyers of 2,500 contracts. Through week ending March 10th, US ethanol production totaled 307 million gallons, up 7 million on the previous week and up 14 million from the same week in 2016. Using EIA weekly data, we peg Feb corn used for ethanol at 425 million gallons, a record for the month, and estimates March demand at 467 million, a record for the month. Total Sep-Mar ethanol demand is then calculated at 3,185 million, up 4.5% from last year, which suggests the USDA’s forecast still may be a bit too low. However, this is only a marginal boost in total consumption, and S American weather remains conducive to additional yield hikes. Brazilian production changes await April weather, but increasingly Argentine yields appear a bit understated. The primary driver of price into early summer will be changes in export demand, and new export sales look to be capped at 20-30 million bu, vs. 50-60 million in autumn. Bounces likely lie ahead!
- US wheat futures rallied 5-8 cents on a weak US dollar (and negative reaction to the Fed’s raising of US interest rates) and as both Algeria and Egypt filled another tranche of spring import needs. This is possibly the last round of N African/Mid-East wheat purchases, but world cash market are well supported as the details of these tenders are worked out. Egypt’s GASC secured 420,000 mt of wheat from Russia, Ukraine and France (mostly from Russia) at an average fob price of $197/mt, $2/mt below its last tender in early March. Egypt ignored cheaper US wheat on its freight disadvantage, and with Algeria also seeking a large tonnage (details on Algeria are unavailable), EU cash prices ended slightly higher. Note also that crude ended $1.10/barrel higher, which supported the Ruble, thus raising interior Russian wheat prices. Outside the US, above normal temps and moderate rainfall in Europe and the Black Sea will support vegetative health into early April. There’s little compelling evidence to support a major change in price trends, with fair value still pegged at $4.20-4.50, basis spot Chicago futures, near term. Longer term, new crop Russian offers suggest US wheat can only compete for summer demand below $4.30.