- Chicago futures are sharply higher at midday, led by spot contracts. Reasons behind the rally, or justifying it, are many. Logistical issues now plague exporters in S America, the need to restock grocery stores continues to support wheat, and we estimate that funds’ net short in corn was massive as of Wednesday evening. We hear of Chinese interest for 4-6 cargoes of US corn, 3-5 cargoes of HRW wheat and perhaps 1-3 cargoes of beans off the PNW. This corn/wheat buying is likely being done using existing TRQs rather than a concerted government sponsored buying program. FAS sales announcement confirmation is awaited.
- There is also concern that Argentine port activity will slow further in the days ahead, which has lent ample support to Chicago meal futures. Recall Argentina is by far the world’s largest exporter of soy products. We also note that funds last week nearly covered the entirety of their net short position and new longs are being added currently. The recent boost in meal prices has rallied the spot futures-based soybean crush margin to $1.20/bu and an enlarged pace of soybean crushing is anticipated through the balance of March and into April.
- Volatility will persist. Demand issues are rather clear. But now supply is grabbing attention as borders shut and logistical issues will persist during Northern Hemisphere seeding. We also mention that EU wheat futures have been resilient to weakness in financial markets throughout the week, and so ag markets continue to disconnect themselves from broader market negativity.
- We estimate that managed money on Wednesday was short a net 200,000 contracts of corn. This compares to a managed fund position last Tuesday worth just 60,000 contracts, and funds’ current short is the largest since mid-May of 2019. Funds’ short in beans on Wed evening likely reached 65,000 contracts, vs. 26,000 the previous week. Funds were near even in Chicago wheat. Floor brokers estimates that funds today have bought a net 12,000 contracts of corn, 7,500 contracts of soybeans and 7,400 contracts of Chicago wheat.
- Export sales through the week ending March 12 included 36 million bu of corn vs. 58 million the prior week, 23 million bu of soybeans, vs. 11 million the prior week, and 12 million bu of wheat, vs. 17 million the week before. Corn sales were a bit better than expected. US wheat export demand continues to erode, albeit slightly, as the old crop marketing year winds down. Soybean sales continue to disappoint, and work suggests that a major downward revision (100 plus million bu) is warranted without large and immediate Chinese interest. China instead continues to be very active in buying beans from Brazil and reportedly is securing Brazilian origin beans for delivery well into summer.
- For their respective crop years to date, US exporters have sold 1,142 million bu of corn, down 31% from a year ago, 1,286 million bu of soybeans, down 16%, and 881 million bu of wheat, up 1% from this week a year ago.
- The EU and GFS weather models remain in broad agreement with respect to an active pattern of Central US precipitation being sustained into the opening days of April. The Delta/Southeast will be hardest hit. 10-day accumulation of 2-3″ will favour LA, AR, KY, southern IL and southern IN.
- The midday GFS forecast in S America is consistent with prior runs. Parana will be short-changed in the next 10 days, but some 80% of the safrinha corn belt will be generously watered. The GFS forecast maintains the return of rainfall to Southern Brazil in the 11-15 day period, but the EU and Canadian models do not agree.
- Markets have bounced from chart-based support and the question is whether follow-through buying will be found. Work continues to suggest that major adjustments are needed to old crop and implied new crop supply and demand to sustain rallies. Wet Central US weather will be more closely followed in April.