- It has been a widely mixed morning in Chicago with soybeans leading an upwards charge while wheat futures sink following the wake of bearish data from the USDA January report. Long wheat/short soy spread unwinding has been active with funds wanting to be on the long side of the complex via less than perfect S American weather. We look for a mixed close with a firm cash HRW wheat market offering support while the $9.72 area offers resistance to March soybeans on rallies. The market is still looking for a more bullish fundamental catalyst amid funds holding record or near record net short grain positions. Chicago floor brokers estimate that funds have bought 2,800 contracts of soybeans and 3,100 contracts of soymeal, while selling 3,600 contracts of corn and 4,200 contracts of wheat. In soyoil, funds have sold 2,200 contracts with March looking to test key support at 32.50.
- Brazil is considering lifting its duty on US ethanol if the US would lift its objection to the import of Brazilian fresh beef. No one knows for sure whether Brazil or the US will ever reach an agreement, but the stage is favorably set for a positive decision. The US blocked Brazilian beef in 2017 following the Brazilian scandal on food safety concerns. Brazil has already resubmitted all of the material required by the US to restart beef trade. Brazilian cash ethanol prices have been rising sharply and we are sure that the US ethanol will pressure the administration to advance the proposed deal.
- The trade is questioning on how much faith to place in extended US or EU weather forecasts beyond the next 10 days. The reason is that the extended forecast offers rain chances for S Brazil and Argentina beyond the next 12 days. However, the track record of the extended 10-15 day models has been poor, and in some cases, no better than a coin flip. As such, research argues that we place their attention in the 10 day forecast and see of the rain in the extended range is pulled forward.
- Egypt’s GASC secured 295,000 mt of Russian wheat in an overnight snap tender. The average price was $211.92/mt basis CIF, or some $4/mt more than their last tender. The purchase confirmed a rising trend of Russian wheat prices.
- A 50% correction of Kansas March wheat comes in at $4.185 with key support noted below $4.20. Corn prices appear trapped as Friday’s large fund selling could not push prices lower. S American weather will gain in importance, but the extra US 2018 winter wheat seedings will likely curtail 2018 US soy seeding. Don’t turn bearish as values appear to bottom.