- Informa Economics have today released their latest estimate on 2016 US corn and soybean planting acreages which shows a month on month reduction in corn to 88.869 million acres (from 88.926 in December) and an month on month increase in soybean acres to 85.23 million (from 84.537 in December). For comparison purposes the January USDA figures were corn at 88 million and soybeans at 82.7 million. It should be noted that Informa’s figures are based upon survey data, which (for this latest update) was collected in early January, they will resurvey ahead of the USDA’ March report and update planting prospects at that time.
- Chinese economic growth has been pegged at 6.9%, the slowest since 1990, but generally in line with government expectations. Equity markets in Asia appear to have responded positively adding to a support for commodities in general today.
- It seems that the return to work in Chicago is seeing fund short covering which is triggering something of a rally in prices, much of the buying has been associated with the large fund net short position and some reduction in exposure.
- Currencies remain an issue with US$ strength showing again, the Brazilian Real has traded at 4.05:1 and the Russian Ruble at 78.6:1 and weakness in the “emerging” market currencies continues to limit import demand.
- Argentina is continuing to offer discounted prices for wheat to importers, which is in turn triggering cheaper Ukrainian and Argentine corn offers. Global grain markets are not, at this time, responding to higher Chicago prices, which continue to highlight the US’s lack of competitiveness.
- Soybean crush margins are barely profitable in China – and mostly negative across the remainder of the world. The world appears to be saturated in protein meals with cold weather not causing much of a bounce in the Midwest. The poor soy crush margins will likely cause further slowing of world soybean trade.
- The latest long range forecasts has El Niño holding through the N Hemisphere summer as a warm phase of the Pacific Decadal Oscillation sits in a warm phase. This would reduce the chance of summer drought in the Central US and we see no reason to bet against trendline US corn and soybean yields in 2016.
- World feed wheat prices are struggling looking for demand and Egypt’s GASC is slow to book early February wheat milling needs as traders talk about a dollar shortage in Egypt. Our current view is that the current Chicago rally will end in the next few days with a new bearish trend to unfold heading into late March or April. We would place price objectives for spot Chicago corn to fall to $3.20, spot Chicago soybeans to $8.20 and spot Chicago wheat to $4.40 by spring.