- Today marks something of an change in the world order as President Biden is sworn in as 46th President of the USA. Politics and people are deeply divided and we can only hope that the last four years turbulence and division becomes history. Notably, the Trump years end with a break in tradition as presidential tradition is broken and the departing President declined to usher in the incoming President. Coming weeks and months will be interesting to say the least.
- HEADLINES: Chicago recoups overnight losses on end user pricing and firming non US grain prices; China crush margins improve.
- Chicago futures are mixed to lower at midday with the markets trying to recover from their 3-day correction. Speculative excesses have been curtailed as March corn fell below $5.20 and March soybeans reached near $13.50 as short-term momentum funds sold out a portion of their long holdings. There has also been rumours that Chinese traders piled into too much length following the USDA January crop report (evening spike high) and most of that length has been sold. March corn filled an open chart gap left from the USDA January crop report at $5.17. Soybeans and wheat charts held no such gaps.
- Following a nearly $3.00 rally in soybeans and $1.00 rally in corn, Chicago needed a correction to ease technical overbought conditions. The revival of the world economic outlook due to vaccinations, Brazilian soybean yields and renewed Chinese import demand look to spur the next rally leg.
- March corn/soybean futures are gaining on back months in renewed bull spreading. US, Russian and S American farmers have shut down cash sales on the break and the market will soon have to bid up to secure a new supply. Research looks for a slightly lower to mixed close, doubtful that bullish trends have ended.
- Chicago brokers estimate that managed money has sold 13,100 contracts of soybeans, 18,400 contracts of corn and 6,100 contracts of wheat. In the soy products, funds have sold 7,100 contracts of soymeal while buying 4,400 contracts of soyoil.
- FAS/USDA did not announce any new US daily grain or oilseed sales. However, we hear that China has shown strong interest for US corn off the PNW for April-June and for US Gulf soybeans for February. We hear that 2-3 cargoes of US soybeans have been sold with most cash traders reluctant on corn tonnages. Some speculate that China could step up their purchases with President Biden taking office to get off to the right foot with the new administration.
- Brazilian sources indicate that there are 4.5 million mt of ships waiting to load soybeans at their ports. This total is growing daily as ships get in line for new crop Brazilian soybeans. Yet, Brazilian commercials report that few new crop soybeans will be loaded until the last half of February. We estimate that January Brazilian soybean loadings will be below 500,000 mt with February loadings being no larger than 2.5-3.0 million mt based on the delayed maturation of the Northern Brazilian crop. When Brazilian soybeans start to load in size, there could be more than 8.5 million mt of vessels waiting at port.
- Chinese spot crush margins are calculated at their best levels since August at more than 400 Yuan/mt. The margins have jumped on the Chicago soybean price fall. We expect rising import margins to boost Chinese soybean import buying.
- Chinese cases of Covid are sharply rising and China is expected to roll out a strong vaccination policy/quarantine to limit its spread. Chicago nor world financial markets are paying much attention to China’s Covid infection rate at this time.
- The midday GFS weather forecast is consistent with the overnight forecast. Limited rainfall occurs across Argentina over the next 5 days before showers return to Santa Fe and Corrientes on Tuesday. The southern half of Argentina and a broad area of N and EC Brazil will stay dry for the next 10 days. It is N Brazil where the dryness is having an adverse impact on yield. High temperatures will reach the 90′s to lower 100′s for both S Argentina and Northern Brazil.
- Improved Chinese crush margins combined with Brazilian harvest delays will underpin Chicago soy prices. And Mato Grosso soy yield reports along with ongoing and proposed truckers strikes in Argentina/Brazil will keep bullish soy trends intact. And Russia is still deciding on robust export restrictions while China seeks additional US corn for spring/summer. Corrective lows were scored overnight and end users should be looking at taking advantage and taking/extending forward coverage.