- Chicago ag futures are lower at midday. Corn, soybeans and wheat futures are lower amid the ongoing rise in the value of the US$ and fund profit taking in wheat. Corn/soybean futures are following wheat’s loss in sympathy. No trader wants to press grain futures too hard ahead of the Outlook Forum that starts Thursday morning. Look for the early break to be supported.
- Chicago brokers estimate that funds have sold 4,200 contracts of wheat, 5,100 contracts of corn and 1,800 contracts of soybeans. In soy products, funds have sold 3,500 contracts of soyoil and bought 700 contracts of soymeal. March corn futures have been hanging a few cents either side of $3.80 and traders are hoping for a breakout one way or the other to fuel a trend.
- The Brazilian Real scored a record low against the US$ at 4.38:1. The Brazilian Government shows limited willingness to intervene to support the Real. The Argentine Peso is trading just under 62:1 and is also likely to score a new low also. The US$ is resting just below 100.00 on the index with a close about this resistance level projecting a further rally to 104.00.
- China is reported to be showing new interest in US sorghum, DDGs, Hi Pro wheat, ethanol and US meat. We can not confirm any new sales, but it appears that “tyre kicking” is starting with China to take tariff exemption license applications on Monday March 2. Chinese importers are willing to get ahead of the Government issuance and start purchasing US ag goods with the expectation that a duty-free import license will be issued in March. US new crop soybeans are competitive against S American fob offers beginning in the LH of July.
- Brazilian vessel loading wait times are normal for late February. We see no evidence that the wait to berth a vessel is any different from last year. We are not aware of any Brazilian soybean sales that are being transferred to the US. Rumours of such transfers are unfounded.
- Brazilian farmers are making sales on 2021 crops amid the fat margins on soybean/corn production produced by the weak Real. Economists argue that the Real could drop to 4.50-4.60 before a final low is established. Brazilian corn/soybean production is likely to rise further in 2021, weather permitting.
- The midday GFS weather forecast is wetter for much of NC Brazil while being dry for Argentina for the next 10 days. The forecast has virtually no rain for Argentina while totals for NC Brazil will reach 4-7.00″ The Brazilian rains could produce harvest/winter corn seeding delays. The midday forecast is more concerning for a smooth Brazilian harvest with cutting in full swing. Our bet is that the midday GFS is too wet for NC Brazil.
- Funds are too short of soybeans with China potentially to start securing new crop US soybeans in March. The headline that China is booking US ag commodities opens the shorts to upside Chicago price risk. We maintain a market stance that the world is oversupplied with grain, but a China purchase would create a short-term bounce. Amid strong US cash basis bids, look for a modest recovery into March.