- HEADLINES: Markets higher at midday, but off the opening rally; Soyoil tests prior bottom while US soymeal rallies on an export sale.
- Chicago grain markets are higher at midday. Corn, soybean, and wheat futures are bouncing from an oversold technical condition while soyoil is seeing pressure from oil share spread unwinding and a new US daily soymeal export sale. Chicago values have fallen sharply in recent months with prices sitting at multi-year lows with funds/managed money holding a near record short position. The Chicago mood is bearish, but traders are loath to sell a break with the short side historically crowded. Chicago will have to form a base before any sustained rally can be launched when key moving averages would come into play. The timing for a low is seasonally right, but the time for a sustained rally is later in the spring. Chicago values should be range bound and choppy in the weeks ahead. Sustained downside price risk demands large Northern Hemisphere crops.
- The USDA reported that 155,000 mt of US corn was sold to Mexico for 2024/25 and 228,000 mt of soymeal that was sold to the Philippines in the 2023/24 crop year. It is interesting that Mexico is starting to see that new crop US corn has value and booking coverage. We note that the soymeal sale was to a Philippine importer/end user that cannot take pelleted soymeal from S America. Argentine soybean meal is offered $23-35 below the US Gulf in the same timeframe.
- Chicago brokers report that managed money has bought 3,200 contracts of wheat, a net 400 contracts of corn, and 2,400 contracts of soybeans. In the products, funds have sold 2,300 contracts of soyoil while buying 1,900 contracts of soymeal.
- US weekly export inspections for the week ending February 15 were 14.0 million bu of wheat, 36.2 million bu of corn, and 43.6 million bu of soybeans. The export pace was greater than expected for soybeans, less than expected in wheat and in line in corn.
- For their respective crop years to date, the US has shipped out 713 million bu of corn (up 173 million or 32%), 1,174 million bu of soybeans (down 346 million or 22%), and 444.3 million bu of wheat (down 94 million or 22%). The US soybean export pace continues to lag the pace needed to achieve the USDA annual export forecast. Future US soybean export cuts are ahead from WASDE.
- Brazilian premiums are holding firm with truckers across Mato Grosso looking to transit soybeans to Northern arc ports at cheap rates. The paper premium rally is different from last year due to the smaller soybean harvest and unwillingness of farmers to sell the new crop off the combine. Producers are estimating that Mato Grosso will be 76-78% completed with their soybean harvest by Friday with 74-76% of the winter corn crop planted. The soybean harvest focus is shifting to MGDS and Parana in the weeks ahead. Basis bids in the soybean paper market have rallied 50-56 cents in the past 2 weeks. China has booked 10-12 cargoes of Brazilian soybeans in the past 24 hours for April/May. China has considerable coverage to book from LH May onwards.
- The midday GFS weather forecast is like the overnight run with below normal rainfall blanketing most of Argentina with showers occurring in the week 2 timeframe. The drying Argentine weather should not be a problem for crops amid a lack of heat, assuming the forecast is correct with showers restarting March. High temperatures will hold in the 80’s to the lower 90’s, a few degrees warmer than normal for late February.
- Near to below normal rain will persist across Brazil with most crop areas enjoying some needed rain throughout the 10-day forecast. The driest area will be Southern MGDS where soil moisture levels are reported to be short. Otherwise, the forecast leans neutral to slightly negative to S American crop production for the next 10 days.
- Chicago is a bear market, but it is reaching a mature phase. However, this does not mean that lows have been formed or that rallies can last longer than a few days. Choppy base building is ahead as traders/producers assess new crop weather and supply opportunities. Chinese soymeal and soybean supplies are tight, so tight that China may have to release some reserve stocks. Look for China to be a more aggressive Brazilian soybean buyer on breaks. Traders that follow charts are looking to gauge if soyoil is forming a double bottom. More back and forth trade is what to look for into late week.