- HEADLINES: March soy tests last week’s low; Grain stable ahead of Egyptian tender result; Argentine forecast stays arid next two weeks.
- Chicago values are again mixed at midday with corn and wheat finding bids amid this week’s flood of wheat demand, and the absence of Bulgarian and Romanian offers to Egypt this morning, and as the Brazilian corn market rallies $0.10/bu to $5.85. The soy complex is mostly weaker as funds add to existing shorts as we estimate funds’ short in soy this morning at 35,000 contracts. This the largest since spring 2020, but funds’ soy short was in excess of 50,000 during the height of the US-China trade war. It is actual soy yields in S America that determine fair value, and the need or not for US acreage, in late winter and spring. Where Brazilian production falls within a range of 145-155 million mt is important, as is the duration of coming dryness in Argentina.
- A Canadian-based satellite firm joins the chorus in projecting a Brazilian soy crop below 150 million mt (at 149.2) and pegs yield in Mato Grosso 15% below trend. The midday GFS weather forecast has extended a pattern of dryness and warming temperatures in Argentina into Feb 1, which we doubt the market will pay attention to unless this pattern reaches deeper into February. Late Jan dryness in Argentina is unusual given the current strength of El Niño. The GFS forecast is very likely too hot, but Argentine temperatures reach into the 90s beginning next week.
- Macro guidance leans negative as spot WTI crude oil crude tests chart support at $70.50. The Dow at midday is down 95 points and since Jan 1 has fallen 450 points (1.2%). Yield on the 10-year t-note this morning has climbed to 4.1% the highest since mid-December. The US dollar index has built further upon this week’s recovery after breaking through chart-based resistance Tuesday. Fears of slowed US/global economic growth have again spilled into financial markets, spread across the media landscape today is confirmation of a second year of Chinese population contraction. China’s birth-rate in 2023 was a record low 9.02 million.
- There is not a lot of other fresh news available. EIA’s weekly ethanol/petroleum data is delayed until Friday following Monday’s federal holiday. FAS failed to announce any new export sales following recent days’ corn sales to Mexico. Brazilian fob soy cargo price is offered below US origin for March delivery, while the success of Ukrainian exports in the last month has boosted confidence in executing near-term trade there. War has not had much of an impact on the movement of Ukrainian vessels.
- The midday GFS weather forecast is wetter in Parana and southern Mato Grosso do Sul in Brazil but is otherwise consistent with morning output. The Brazilian outlook leans favourable assuming regular rains return to northern areas beyond Jan 24. Warmth/dryness blankets Central and Northern Brazil into the middle part of next week. There are hints of rain in far western Argentina beyond Feb 1, but the core of the country’s ag belt stays arid over the next two weeks.
- March CBOT soy’s RSI (Relative Strength Index) at 22.6 and March corn’s is at 26.3 are the lowest since May. It remains that a spark is needed to trigger fund short covering in bulk, but supply unknowns are abundant. We would reiterate that a vast majority of S American corn will pollinate between Feb and Apr.