• HEADLINES: Option related selling presses Chicago corn/wheat; USDA Forum suggest that China will import 25-35 million mt of world corn for years to come.

• March option expiration today produces grain futures selling.

• Chicago grain futures are lower at midday which is tugging soybeans off their early opening highs as short March put holders sell futures to cover their risk. There was a flurry of buying on the opening, but as that new demand faded, grain futures fell on option related selling. Corn and wheat futures are lower at midday with March futures enduring much of the selling pressure.

• The option related selling could carry forward into Monday, but we doubt that March corn or March Chicago wheat can decline much more. The chore of the market is to rationing tightening domestic supplies, and there is no statistical evidence of such rationing starting.

• Soybean futures are holding independently strong on rumours that China has booked 4-6 cargoes of Brazilian soybeans for June-July as their crush margins sit at multiyear highs. Post-holiday vegoil demand started out strongly in China, but it is next week’s cash meal trade that will be important to monitor. China entered the New Year with limited forward meal coverage and the restocking of China’s pig herd should spark fresh buying.

• Chicago brokers estimate that funds have sold 8,400 contracts of corn and 5,100 contracts of wheat, while buying 3,900 contracts of soybeans. In soy products, funds have sold 2,200 contracts of soymeal while buying 3,900 contracts of soyoil. Once again, the soyoil market has scored new contract highs with the next upside price target being $0.50/lb.

• The USDA Outlook Forum painted a longer-term bullish outlook for US corn with speakers expressing confidence that China could secure 25-35 million mt of corn for years to come. What was not discussed was that if China is shifting to a more of a westernised (feed) diet for pigs, it also implies more soymeal as food waste is disposed of rather than being fed. Brian Lohmar of the US Grains Council estimated that China will import 30 million mt of world corn for years to come as 30 million mt of food waste is disposed of due to the risk of ASF. Such massive corn imports are a new demand driver that will limit growth in US corn/soybean end stocks in the crop years ahead.

• FAS weekly export sales for the week ending February 11 were; 14.7 million bu of wheat, 39.3 million bu of corn and 16.8 million bu of soybeans. US corn/wheat sales were at trade expectations while soybeans were better. The US has now sold 2,200 million bu of soybeans or 98% of the annual USDA export forecast, while corn sales stand at 2,305 million bu or 87%. US crop year to date wheat sales are 860 million bu or 43 million more than last year. Research argues that US 2020/21 corn sales are 200-250 million bu and US 2020/21 soybean sales are 100-150 million bu too low. Demand rationing or imports are needed to prevent soybean shortfalls.

• There is no supply cushion that will buffer any N Hemisphere weather adversity. Market volatility will stay raised. And if S American corn or soy crops are reduced due to adverse weather, the Chicago impact is sizeable.

• The latest GFS weather forecast is consistent with the overnight model with limited rain across the southern third of Brazil and the entirety of Argentina. Above to much above normal rain will cause crop quality issues and harvest slowdowns for N Brazil. The models show no sign of change into March 2. The extended range forecast offers no real change in the overall weather pattern. A concern for S American crop yields/production.

• The USDA Outlook Forum produced longer term bullish 2021/22 balance sheets for corn, soybeans, and wheat. Next week, S American crop size becomes highly important. Brazilian soybean yields are down from last year with seed moisture a growing problem across Mato Grosso. And Argentine/S Brazilian soil moisture is in fast retreat while seeding the Brazilian winter corn crop is well behind normal. S American weather Sunday night will be the big price driver into March.

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