- HEADLINES: Chicago rests following Wednesday’s rally; Egypt’s GASC books Romanian and Algeria books optional origin wheat for April; Argentine forecast drier.
- The volume of Chicago trade has been exceptionally light this morning with few traders wanting to expand their risk ahead of March option expiration on Friday, and the long 3-day US holiday weekend amid Russian/Ukraine geopolitical uncertainty. There seems to be a growing consensus that if Russia does not invade Ukraine in the coming weeks, President Putin could just leave troops along the Ukraine border to cause angst for western world political leaders and prop up the price of energy heading into summer.
- The rise in crude oil values more than pays for Putin’s foray against Ukraine and his hope of preventing Ukraine from being ever becoming a NATO member. Putin has the world’s attention and appears to be willing to wait for the right diplomatic deal amid supply chain breakages and shortfalls. Russia’s global position has been bolstered by the new commodity rally as the rising Ruble reflects. Commodity currencies have had a few good weeks.
- This leaves Chicago grain futures to drift with energy/equity prices lower on the likely coming push by the US and world central banks to combat inflation. The coming rate increases will slow US/world GDP rates in 2023.
- The lack of leadership from the financial markets (energy/equity) leaves Chicago without direction today. Short covering heading into the weekend is expected on Friday with the USDA Annual Outlook meeting causing price gyrations next week. It is back to better defining S American crop sizes and the demand rationing that is needed with spot Chicago soybeans at $16.00 and spot Chicago corn at $6.50. If S American crop totals decline, higher prices will be required. We cannot overstate enough the importance to the world of the 2022 Brazilian winter corn crop. Not a single tonne of Brazilian corn can be lost.
- Chicago brokers estimate that managed money has bought 4,200 contracts of wheat and 1,200 contracts of corn, while selling 2,100 contracts of soybeans, 1,000 soymeal and 2,100 contracts of soyoil. End user pricing is below the corn/ soybean/soyoil markets, while there are few resting sell orders in wheat.
- Egypt’s GASC bought 180,000 mt of Romanian wheat while Algeria has booked 700,000 mt of optional origin wheat. We hear that Black Sea/French wheat are permitted as origins in April to Algeria. The purchase of wheat via an optional origin basis has been popular due to the geopolitical uncertainty of the Black Sea.
- For the week ending Feb 10 the US sold 4.3 million bu of wheat, 32.3 million bu of corn, and 50.0 million bu of soybeans. For their respective crop years to date, the US has sold 642 million bu of wheat (down 218 million or 25%), 1,768 million bu of soybeans (down 423 million or 19%), and 1,832 million bu of corn (down 473 million or 20%. US wheat export sales continue to be disappointing.
- Brazilian cash soybean/corn and soyoil basis bids are steady to firm this morning. Not much has changed in Brazilian basis levels since Wednesday. The strong cash basis bids push demand to the US. We understand that China has added another 3-5 cargoes of US new crop soybean purchases this morning. Brazilian soyoil export capacity is nearly sold out for March and half of April.
- The midday GFS weather forecast is drier than the overnight run with rains further south into La Pampa and S Cordoba. Less rain is also forecast for S Brazil and Paraguay, while above to much above normal rain falls across Northern Brazil. The wet weather pattern must seasonally end for there to seed the intended winter corn acres in Mato Grosso. Excessive wetness has slowed the soy harvest and the winter corn crop seeding. /S Brazilian temperatures will be warm to hot with highs in the 90’s/lower 100’s.
- It is a day of rest following Wednesday’s big rally. Chicago values are holding in a narrow range awaiting information on S American crop sizes and the required demand rationing. Tensions are elevated regarding Russian aggression against Ukraine while March Chicago option expiration should boost prices/volume on Friday. Bull markets always let you in – buy breaks would remain our advice.