- Friday was a mixed, back forth day, with profit taking ahead of the long weekend pulling spot soybeans off an eight month high and meal off a 2 year high. The spot soybean crush spread finished at $1.47/bu, or the highest weekly close in four years, now up 62% from the start of the crop year. Spot meal is now up 28% from the start of the year, and soybeans end the week at a new high for the year and up 8%. Soyoil has been the big disapointment and now down 11% from Sep 1.
- The afternoon EU weather forecast showed light rains across the Argentine soybean belt in the 1-5 day outlook and virtually no rain in the 6-10 forecast. Temperatures look to hold near normal, though day time highs are expected in the upper 80’s to mid 90’s. Conditions remain far from favorable as 76% of the crop is reported blooming and 46% setting pods.
- Corn futures ended fractionally lower, and ahead of the a three-day weekend speculators were loathe to take new positions amid potential changes in the US and Argentine weather patterns. It remains that US corn is by the world’s cheapest feedgrain, and ethanol margins are back testing $.55/gallon, vs. $.30 in late January, on recovering energy prices. Fundamentally, breaks are buying opportunities until there are signs of weakness in world feedgrain markets. Managed funds on Tuesday were short just 11,000 contracts, much smaller than expected. Some pause in short covering is possible next week, but we do note this position compares to a net long of 85,000 a year ago, when S American weather was largely favourable. Argentine drought this year has deepened further than expected, and increasingly crop size looks to be no larger than 33-34 million mt, down 8-9 from last year, and which suggests there’s still 120-130 million bu of export demand that needs to be shifted elsewhere.
- Wheat futures in Chicago and in Minneapolis fell slightly amid a decent recovery in the US$, while Kansas ended unchanged. The Kansas-Chicago spread this week has a hit a new rally high $.21/bu, and note that interior HRW basis continues to strengthen. Seasonally, HRW basis tends to be rather neutral during the spring months, but in 2018 elevators may have to work a bit harder to pry remaining supplies from the producer amid drought concerns. Funds in Chicago as of Tuesday were short a net 57,000 contracts, down 27,000 from the prior week and a bit smaller than expected. Funds in Kansas were long a net 15,000 contracts, unchanged on the week. Speculators have worked to pare short exposure, which is noteworthy, but it’s unlikely to have much of an impact on price. Rather, much better rainfall is needed across the Plains before any sizeable amount of weather premium can be extracted, and though long term climate guidance is trending wetter across the HRW Belt, we await even a hint of a rain the 12-14 day outlook, which is not available at present. Additional premium will be added if Monday night’s forecast remain arid into the first week of March. Note also that the Black Sea cash market is firm.