- HEADLINES: Wheat paces decline as Tuesday’s buyers are Wednesday’s sellers; USDA unlikely to offer bearish new crop balance sheets; Argentine weather forecast stays dry.
- It has been a mixed session in Chicago with corn/soy futures trading both sides of unchanged while wheat has retraced yesterday’s gain. Chicago midday volume has been modest with China and most of S America still out for holidays. For today, the sagging wheat has been a bearish catalyst for the summer row crops, but unease about warming/dry Argentine/S Brazil weather has limited any fresh selling. Most fund managers are likely to wait until Sunday/Monday before embracing a more bullish stance on RGDS/Argentine crops as the key reproductive periods for corn/soybeans lie ahead in March. The sharp falls in Argentine and Southern Brazilian soybean crops would create a new Chicago rally leg based on a more acute need for rationing and a diminished chance of soybean imports into the US by mid-summer.
- Chicago brokers estimate that funds have sold 4,100 contracts of corn, 2,600 contracts of soybeans, and 6,200 contracts of wheat. In the soy products, funds have sold 1,900 contracts of soyoil and bought 1,700 contracts of meal.
- It is Ash Wednesday and the Carnival Parties have ended, and it will take a few days before life returns to normal in S America. Across Mato Grosso, regular/excessive rainfall has limited harvest with short season soy varieties showing disappointing yields. Longer season varieties are hoped to show better yield, but even then, most producers doubt that yields will surpass last year.
- The Parana Rural Development Institute (IDR-Parana) is reporting that 6 weeks of cloudy /wet weather is causing considerable fungal diseases with soybean pod abortion becoming more worrisome with farmers reporting yield losses of up to 100%. IDR claimed that harvest yield results will be disappointing with the hope that RGDS can make up for Parana’s smaller and poor-quality soybean crop
- The USDA will hold its Annual 2021 Outlook Forum starting Thursday. Within the Forum, the USDA will offer its first 2021/22 US major crop seeding/ balance sheets. It should be noted that the 10 year Baseline Report was released today which offers 2021 seeded acres of 90.0 million acres of US corn, 89.0 million acres soybeans and 46.0 million acres of wheat, a combined gain of just under 8 million acres. The Baseline Report indicated trend yield estimates of; 180.5 bushels/acre in corn, 49.1 bushels/acre in wheat, and 50.6 bushels/acre in soybeans. The USDA will also use trend yields in their balance sheets. The question is one of acres/export demand.
- The USDA’s Baseline Report utilised November USDA end stocks for 2020/21 of 290 million bu (170 million bu too large based on Feb USDA) produced 2021/22 end stocks of 255 million bu. If the February 2020/21 USDA end stock total of 120 million bu is used as carrying, 2021/22 US baseline US soybean end stocks would be just 85 million bu (instead of 255 million bu). Such stocks are less than pipeline. It will be difficult for the USDA to come out with a bearish 2021/22 US soy stock total, even with record 2021 seedings and a trend line yield of 50.6 bushels/acre.
- 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 Argentina/S Brazil while it funnels regular rain into Mato Grosso, Goias, and NE Brazil.
- It is a low volume Chicago decline ahead of the USDA Forum tomorrow. We do not expect bearish surprises from the USDA with the 2021/22 US soy balance sheet offering up an acute need for favourable Midwest weather before a market decline can be sustained. 2021/22 corn end stocks should come in around 1,600-1,650 million bu while US 2021/22 wheat end stocks are between 825-850 million bu. Such stocks do not pressure Chicago values.