• HEADLINES: US soy/grain non-competitive in world trade; GFS midday weather forecast calls for better Argentine rain in week 2; Holidays ahead.

• Chicago ag markets are mixed at midday with soy products lower while corn, soybeans, and wheat post modest recoveries on limited volume.  The early Chicago soy/corn rally failed as S America stays aggressive in offering soybeans/soy products (and even corn) to world end users/importers. US traders understand that from here forward the US export profile for soybeans, meal, soyoil and wheat will be sharply curtailed.

• The US grain market is becoming “domestic” in its focus with fund managers rolling market length forward before first notice day on Tuesday, February 28. March futures are liquidating, but there are still 161,000 contracts of open contracts in March soybeans, 277,000 contracts in March corn, and 67,000 contracts in March Chicago wheat. There is a risk of additional long liquidation. We look for a lower Chicago close due to the newfound competition from S America and the Black Sea. Amid the slowing US export pace, $15.00 spot soybean, $490 spot soymeal, and $6.75 spot corn futures are historically high prices. As S American weather/crop sizes are largely known, the Chicago price risk is to the downside heading into the North American growing season.

• Chicago brokers report that funds were early day buyers but have turned sellers at midday. The managed money has bought 1,100 contracts of wheat and 900 contracts of soybeans, and 1,400 contracts of corn. In the products, funds have bought 1,400 contracts of soymeal while selling 1,900 contracts of soyoil. We would argue that soyoil has formed its seasonal low while soymeal has forged its seasonal high.

• The USDA reported that 120,800 mt of US corn was sold to an unknown buyer. Cash connected exporters point to either Mexico or Japan as being the buyer.

• The Ukraine is offering March corn at $0.10 under Chicago or a price of $6.65 basis the Chicago March price of $6.75 or a price of $261.50/mt. Brazil is back to offering March/April corn at $1.10 over compared to the US Gulf at $0.90 over and Argentina at $0.87 over. There are additional costs involved with Ukraine corn, but most of Africa and the Mideast will secure Ukraine corn. If the corridor is extended, we expect that this offer will be pulled forward to April and May. Our point is that US corn on a landed basis is not the cheapest origin for many SE Asia or N African importers.

• Brazilian 48% hi-pro soymeal offers keep declining with March offered at $10 over vs the US Gulf at $60 over, and April/May offered at a +$3.00 premium. It is forecast that by late February, Brazil will be offering hi-pro meal at a discount to Chicago. Brazilian April/May soybeans are offered at $1.05 under. Brazil is harvesting nearly 2 million mt of soybeans daily with as much as 1 million mt being sold across the scales. Look for an increase in hedge pressure heading into the weekend.

• And Brazil is offering its soyoil at an 11.5 cent discount to Chicago with US Gulf soyoil priced at 4 cents over. The fob-to-fob spread is 15.5 cents. No world importer is going secure US soyoil as renewable diesel is gobbling up domestically produced supply. US soyoil exports will be holding at zero for the remainder of 2023 and for years to come if all else remains unchanged. Due to massive renewable diesel demand, the US has taken itself out of the world soyoil export arena.

• The midday GFS weather forecast is unchanged from the overnight run. Cool/dry weather prevails across Argentine/S Brazilian crop areas through February 23 before the chance of widely scattered showers returns in the week 2 forecast. The cool/sunny weather aids crops where rain has fallen this week with the week 2 forecast calling for near to slightly above normal temperatures. Our point is that with a few good first half of March rains, worry over summer growing weather will be much reduced. A frost/freeze is unlikely across Argentine crop areas this weekend with lows in the upper 30’s to the lower 40’s.

• The holidays loom in the US (President’s Day) and S America (Carnival) which is harming today’s trading volume. As the S American harvest expands, pressure on Chicago prices will increase. Our bias is to the downside. Rumours also have China fighting growing incidence of ASF in its pig herd which could lead to future reduced demand. Few traders are willing to chase March soybeans above $15.30 or March soymeal above $500.00 amid the expanding S American harvest. It will require bullish Argentine weather forecasts next week to sustain the rally. This is no place to chase a rally.

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