- HEADLINES: Chicago markets are slow and mixed at midday; Wheat rallies on Black Sea dryness and fund short covering; Brazilian Real weakens.
- Chicago values are mixed at midday with corn/wheat higher while soybeans sag on the rise in Brazilian cash soybean sales due to the faltering Real. The Brazilian Real has been recently edging lower vs the US dollar with the rate being 5.035:1$ which has helped boost Brazilian cash soybean harvest sales. The Real had risen to 4.9:1$ in early March. The Real vs USD weekly chart reflects a building triangle formation with resistance at 5.08:1 USD. Brazilian farmers are sensitive not only to Chicago prices, but the value of their currency since world soybeans are traded in dollar terms.
- Corn and wheat futures are higher on managed money short covering and the rally in Paris wheat futures. Traders argue that old crop fundamentals are largely known and digested below €195/mt May Paris and $5.25 May Chicago. Chicago futures held a key monthly chart uptrend line late last week when China announced that it was cancelling US SRW wheat purchases. The new Northern Hemisphere growing season ahead and developing soil moisture shortages across the Black Sea are gaining attention. Moreover, Russian wheat exports are forecast to rise to a record 3.1-3.2 million mt in March. A new Northern Hemisphere growing season will bring supply uncertainty.
- Chicago brokers estimate that managed money bought 2,600 contracts of wheat and 4,200 contracts of corn, while being flat of soybeans. In the soy products, funds have sold 1,400 contracts of soymeal and bought a net 900 contracts of soyoil. Fund managers are trying to reduce their net short position heading into the NASS/USDA crop report on March 28.
- Egypt continues to honour wheat purchase contracts despite the IMF imposed currency float on its currency, the Pound. There had been rumours that Egypt may want to renegotiate existing Russian wheat sales, but that does not appear to be the case. The expanded $8 billion dollar loan to Egypt should allow their budget to run effectively into mid-2025. And a deal with the Emirati Sovereign Wealth Fund suggests new Egyptian investments of $35 billion could be made by the end of April. It appears that Egypt is in a vastly improved financial condition with a war raging across Gaza amid new loans/investments.
- One debate that will not die is the 8.2 million mt supply difference between the March CONAB and USDA soybean crop reports. Such a March supply difference is record large and the bulls and the bears keep looking for whom to trust. The 8 million mt difference has a sizeable impact on 2023/24 US soybean exports as the CONAB crop forecast would shorten the tail on the 2023/24 Brazilian export season. One fundamental that appears to be missed is that Brazil’s expanded diesel blend of 14% soyoil will require additional Brazilian soybean crush. We believe the Brazilian 2023/24 soybean crush rate at 58 million mt due to the need to produce soyoil to blend with diesel.
- The forecast is wetter across Northern and Central Brazil than the overnight GFS run with some areas seeing 10-day accumulations of more than 5.00”. The near to above normal Northern Brazilian rainfall will help restore soil moisture ahead of the April pollination. The Argentine forecast is drier with any heavy rainfall pushed southward into Uruguay. Extreme heat will be lacking outside of Paraguay and MGDS in SW Brazil. As a sidenote, the GFS weather forecast followed the EU model’s lead and curtailed Plains and W Midwest precipitation totals and shifted heavy snows to MN/WI and N MI.
- It is another quiet Chicago trading session with few traders wanting to enter fresh risk ahead of the March 28 Stocks/Seedings report. We see the late March NASS report as providing price fireworks amid the wide range of estimates of US corn/soy and spring wheat seeding. And quarterly stocks reports are always fraught with risk. The 20-day moving average crosses at $5.55 basis May Chicago wheat futures, a level that would also produce a double bottom on the charts. Arctic cold across the Canadian Prairies keeps wheat traders alert to determine the southward push of sub-20-degree readings that could damage S Plains jointing wheat. Otherwise, Chicago is about short covering that occurs on breaks.