- HEADLINES: January NOPA crush at 184.6 million bu is record large; Midday GFS weather forecast dry for Argentina/S Brazil.
- Chicago values are higher at midday on weather and the fear of supply loss of US HRW wheat production and S America in the coming dry/warm weather forecasts.
- The volume of trade has been reduced as China and S America are on holiday. We look for Chicago volume to expand next week as Asia fully returns to work while the Brazilian’s will become more active in their harvest. We anticipate a higher Chicago close, but without much volume or vigour. The world’s largest soy buyer needs to return for the soy complex to have bull support.
- Chicago soyoil futures have pushed to new rally highs, but soymeal has been a reluctant follower on crush margin. This has capped the soybean rally at $13:86 March. Also, March/May soybean spreads are moving to a discount while March/ May corn holds at a 2-cent premium. The record large Brazilian soybean harvest along with slowing US export demand has capped the Chicago rally. Traders will be watching the premiums in the Parnagua paper trade for signs of a seasonal low. Scattered Brazilian soybean yield data from Mato Grosso and Parana are disappointing. The Brazilian soybean harvest is the slowest in a decade and the weather forecast promises a good chance of daily showers through the next 10 days.
- Chicago brokers estimate that funds have bought 4,200 contracts of corn, 3,900 contracts of soybeans, and 5,400 contracts of wheat. In the soy products, funds have sold 3,900 contracts of meal and bought 4,900 contracts of soyoil.
- Multinational exporters and local cash traders continue to have discussions with the Russian Government over its proposed floating export tax that starts on June 2. The groups are making progress informing the Russian Government as to how unworkable the proposed tax is. Research maintains that the Russian Government will substantially alter or end the tax before its implementation. The adverse impact on the Russian farmer is severe. In addition, no Russian exporter will be able to sell wheat/grain ahead with the tax set on the week of shipment by the Moscow Grain Exchange. Spring weather and the coming size of the 2021 Russian wheat harvest will determine whether Russia goes ahead with a floating tax.
- Weekly US Grain Export Inspections were better than expected in corn, but less than hoped for in soybeans/wheat. For the week ending Feb 12, the US exported 52.0 million bu of corn, 29.7 million bu of soybeans, and 14.4 million bu of wheat. Last week’s soybean export estimate was revised up by 3.9 million bu. Based on vessel counts, we expects that this week’s soy exports will be revised up 3.5 million bu
- For their respective crop years to date, the US has shipped 640 million bu of wheat (down 11 million or 2%), 897 million bu of corn (up 410 million or 84%), and 1,840 million bu of soybeans (up 802 million or 77%). US wheat exports are falling behind expectations and we will adjust down our 2020/21 export estimate.
- NOPA’s January soybean crush rate jumped to a record large 184.6 million mt, a record for January and the second largest on record for any month. This the fifth consecutive month of record large US soybean crush rates with their being no evidence that US demand rationing is occurring. NOPA member soyoil stocks grew by a 100 million pounds to 1,799 million pounds, below last year’s 2,013 million pounds.
- The midday GFS weather forecast is consistent with the overnight model (and prior day runs) in that a trend of well below normal rainfall will continue across the southern third of Brazil and the entirety of Argentina. The S America’s upper air flow blocks meaningful rain from flowing across Argentina and S Brazil and funnels regular rain into Mato Grosso, Goias, and NE Brazil. High temperatures will range from the 80′s to the lower 90′s in Argentina/Southern Brazil.
- Record large US crush rates have provided adequate soymeal supply to exporters/domestic end users. But such crush cannot continue, or the US will simply run out of soybeans amid Brazil’s slow start of harvest. Yet our new concern is an Argentine/S Brazilian drought which will adversely impact corn/soy yields. Low volume Chicago breaks in meal/soybeans are buying opportunities into the weekend. Chinese buyers will return early next week, and they will have future import needs to cover.