- HEADLINES: Market shrugs off corn export demand; Crude falls sharply.
- Chicago ag futures have extended overnight losses on weakness in crude oil, sharply lower global canola prices and as market focuses attention on a paper released from China suggesting feed operations find alternative sources of supply. China’s massive rice stocks have been cited, but otherwise it will be difficult to replace corn and meal with minor feedgrains and meals without massive Northern Hemisphere production this spring and summer. Liquidation is the theme at midday, but we doubt this break can be extended into Friday.
- Crude and gasoline futures are down sharply as US stocks rise and as longer-term energy outlooks are mixed. Demand rises sharply worldwide once vaccine distribution ramps up across Europe and Latin America. But the market is aware there is a price that OPEC begins to boost daily production rates. There is similarly a price that US shale production comes back online. Energy markets needs to see and feel the coming demand boom before newer highs are scored.
- US weekly corn, wheat and meal sales exceeded expectations, while even soybean sales are viewed sales are viewed as positive.
- Through the week ending March 11, exporters sold 39 million bu of corn, vs. 16 million the previous week. Wheat sales totalled 14 million bu, vs. 12 million the previous week. Soybean sales were 7 million bu, vs. 13 million the previous week, with US meal sales a sizeable 235,000 mt. The pace of meal sales is now in much better alignment with the USDA’s forecast.
- For their respective years to date (as of March 11), the US has sold 2,382 million bu of corn, up 109% on Last year and a record 92% of the USDA’s forecast, 2,228 million bu of soybeans, up 74% on last year and just 22 million bu short of the USDA’s annual forecast, and 901 million bu of wheat, up 2% on last year.
- FAS announced another 27 million bu of US corn sales to China for old crop delivery. This brings total Chinese purchases this week to 121 million bu, which in turn puts total US export commitments on a known basis to just over 2,500 million bu. Exporters now must average sales of only 4 million bu/week late March onward. There will remain debate over the full execution of Chinese purchases, but we have little doubt the USDA’s 2020/21 US corn export forecast is 250-300 million bu too low. China last week also secured 11 million bu of US sorghum.
- But crosscurrents abound. The recharging of US soil moisture has weighed on new crop values this week. Additionally, drought has been eliminated from Central KS and Eastern NE. Another round of widespread showers impacts the Southern and Central Plains next Tues-Thurs, which will further relegate drought to far Western HRW producing regions.
- However, NOAA’s updated seasonal climate forecasts maintain warmth and dryness across the Plains during spring. The risk of abnormal warmth in all regions through summer is elevated. The shedding of weather premium is logical, but winter wheat crops are made in Apr-June.
- The midday GFS weather forecast is much wetter in Argentina but consistent with prior output in Brazil. The dominant feature of S American weather into early April is the return of high pressure ridging to Eastern Brazil. This pattern funnels consistent/heavy rainfall into Argentina, with cumulative totals of 3-4″ offered to Cordoba and Santa Fe, while leaving Brazil arid. Brazilian temperatures reach above-normal levels next week. The GFS forecast is overdone with Argentine rainfall, but this broad outlook seems to be correct.
- Choppy trade continues into March 31. Volatility stays elevated into autumn. We continue to caution against chasing breaks and rallies until planting intentions are known but maintains that it is important to boost old crop supply coverage on weakness as US 2020/21 balance sheets tighten further.