- HEADLINES: Soyoil soars on NOPA reported domestic demand; Turkish presidential elections keep the corridor at 60 days; More US corn to China.
- Chicago ag markets are mixed at midday with corn/soyoil trading higher while soybeans, wheat and soymeal hold in the red. Energy and equity markets have reversed early losses and are recovering as the EU banking worry has not spread beyond Credit Swiss. US bank deposits are backstopped by the US Central Bank, so the dark financial clouds may be starting to part. At least that is the hope of traders heading into next week’s US March FOMC meeting. We look for the US Central Bank to raise its fed funds rate by 0.25% in its war against inflation.
- Yet, traders are loath to take on new risk until after the weekend. They do not want to get caught in any new bank liquidity issues as US and European regulators look through the capital positions of their regional banks. We would note that it was bad risk management at Silicon Valley Bank and Credit Swiss that caused the need for additional capital. The willingness of the US and Swiss Government to backstop the 3 failed banks is psychologically important. We hold a view that this is no place to be selling Chicago breaks, a new Northern Hemisphere growing season is ahead and macro issues should be declining in importance. A pause period is ahead for world Central Banks.
- Chicago brokers estimate that funds have sold 3,700 contracts of wheat and 3,900 contracts of soybeans, while buyers of 9,500 contracts of corn. In soymeal that have sold 4,300 contracts of soymeal, while buying 3,400 contracts of soyoil. May soybeans tested their late February low at $14.7775 this morning.
- The UN is demanding that Russia extend the Ukraine Grain export corridor (as the July Black Sea Corridor Pact that was signed last July indicates) for 120 days. However, Russia is unmoved from its offer of a 60-day extension. Questions abound as to why Russia will only extend the corridor for 60 days, but it appears to be tied to the Turkish Presidential election on May 14. A 60-day pact extension means that the corridor pact expires on May 17, 3 days after the Turkish Presidential election.
- Russia wants to make sure that Turkey’s president is favourable to its position as grain export gatekeeper in Istanbul. In fact, the polls show that current President Erdogan is behind in the polls to Kemal Kilicdaroglu by as much as 10%. In fact, it appears that Turkish President Erdogan is facing his biggest challenge in his 20-year Turkish rule. This worries Russia and it does not want to extend the grain pact if Erdogan is no longer president.
- The USDA/FAS announced another 641,000 mt of US 2022/23 corn sold to China which takes their 3-day purchases over 1.9 million mt. We expect that total China purchases of US old crop corn in this purchase round will be completed at 2.4-2.6 million mt with crop year sales commitments rising to 7.0 million. In total, we look for China to import 8.5-9.0 million mt of US corn in the 2022/23 crop year.
- US weekly export sales for the week ending March 9 were 12.4 million bu of wheat, 48.7 million bu of corn, and 24.4 million bu of soybeans. China purchased another 208,000 mt of soybeans with old crop purchases on a known basis rising to 30.5 million mt with 2.2 million mt held in an unknown destination category. We see China taking 33.0-33.5 million mt of US soybeans in the 2022/23 crop year.
- The GFS weather forecast at midday is consistent in calling for rain across Central Argentina beyond March 21, but a pattern of complete dryness and abnormal warmth continues through the weekend. The drought is ongoing and crop losses are building. The Brazilian forecast is favourable. Needed dryness occurs into late March across Parana, where safrinha seeding is delayed, while there is no sign that the wet season ends prematurely in Mato Grosso and Goias.
- China’s 2.4-2.6 million mt of US corn purchases will raise US 2022/23 corn exports to 1,900 million bu and drop stocks by 50 million bu. Russian/E European wheat offers to GASC are aggressive which will cap US wheat futures rallies. The soyoil renewable bull market is beginning (domestic demand greater than production) while July beans will push to new highs by mid-summer. The key March Stocks and Seeding report is due out on March 31.