• Early strength in the soybean market faded ahead of the monthly crush data, and the soybean trade turned negative as the monthly NOPA crush data fell short of expectations. Soy product prices were sharply mixed with meal prices around unchanged, while soybean oil gave back overnight gains and closed down. NOPA reported February soybean meal exports at 738,825 short tons, down 17% from January and 8% larger than a year ago. NOPA meal exports have proven to be a rather poor predictive tool for total US meal exports, but have often been a helpful gauge as to whether export trends are up or down, but note that in January, NOPA indicated a slower meal export trend, while the Census Bureau reported total meal exports at a 24 month high. Our view is downside risk ahead of the end of month USDA reports is somewhat limited from current levels.

• Chicago corn futures remain stable amid tech-based support and as ethanol production data this week exceeded expectations rather substantially. Production margins have been increasing while corn futures have been falling, and plants responded quickly to the up-tick in revenue. Funds were net buyers of 2,500 contracts. Through week ending March 10th, US ethanol production totaled 307 million gallons, up 7 million on the previous week and up 14 million from the same week in 2016. Using EIA weekly data, we peg Feb corn used for ethanol at 425 million gallons, a record for the month, and estimates March demand at 467 million, a record for the month. Total Sep-Mar ethanol demand is then calculated at 3,185 million, up 4.5% from last year, which suggests the USDA’s forecast still may be a bit too low. However, this is only a marginal boost in total consumption, and S American weather remains conducive to additional yield hikes. Brazilian production changes await April weather, but increasingly Argentine yields appear a bit understated. The primary driver of price into early summer will be changes in export demand, and new export sales look to be capped at 20-30 million bu, vs. 50-60 million in autumn. Bounces likely lie ahead!

• US wheat futures rallied 5-8 cents on a weak US dollar (and negative reaction to the Fed’s raising of US interest rates) and as both Algeria and Egypt filled another tranche of spring import needs. This is possibly the last round of N African/Mid-East wheat purchases, but world cash market are well supported as the details of these tenders are worked out. Egypt’s GASC secured 420,000 mt of wheat from Russia, Ukraine and France (mostly from Russia) at an average fob price of $197/mt, $2/mt below its last tender in early March. Egypt ignored cheaper US wheat on its freight disadvantage, and with Algeria also seeking a large tonnage (details on Algeria are unavailable), EU cash prices ended slightly higher. Note also that crude ended $1.10/barrel higher, which supported the Ruble, thus raising interior Russian wheat prices. Outside the US, above normal temps and moderate rainfall in Europe and the Black Sea will support vegetative health into early April. There’s little compelling evidence to support a major change in price trends, with fair value still pegged at $4.20-4.50, basis spot Chicago futures, near term. Longer term, new crop Russian offers suggest US wheat can only compete for summer demand below $4.30.

• It has been another mixed morning in Chicago, with corn finding support on export demand and with soybeans still languishing amid rapid harvest progress in S America and the lack of any new export sales announcements. China has reportedly secured three cargoes of US corn off the PNW, with talk that they may be in the market for 500,000 mt. This is unconfirmed and sources cite poor quality of domestic feed supplies, but moving forward if more corn is needed by China, S American origin will be thrown into the mix. We doubt that China will embark on a major US buying spree, and a few cargoes are unlikely to affect US annual exports or the world trade matrix. Exporters also sold two cargoes of US corn to Mexico for 2017/18 arrival.

• Spot Chinese soybean crush margins are calculated at a negative 175 yuan/mt, the weakest since last summer. We can find very little correlation between spot crush margins and monthly/quarterly Chinese soybean imports, but ongoing weakness in crush margins there is being talked about more and more.

• Three cases of bird flu have been found in Alabama this week.  So far only one case of highly pathogenic bird flu has been found in the US (two weeks ago in TN), but this underpins a larger problem for domestic feed use, steep competition and limited demand growth.

• Fresh news this week has been mostly negative. US Gulf wheat is again highly competitive in the world market, ethanol margins are improving, and NASS’s planting intentions report is due in two weeks.

• Markets in Chicago opened mixed with little change although wheat has faltered and turned lower as the session progressed. Wheat, the driver of lower levels, eased on calls for more extended precipitation across the W Plains later in March and also on falling global cash prices. Matif and London wheat markets looks to be closing lower, as would be expected, and cash values are lower as Russian farmers are becoming ever more aggressive following Rouble weakness. The EU market has displayed weakness despite improved export demand and now focus is shifting to new crop production potential, which is looking solid across Europe and Black Sea regions.

• Informa Economics has updated its new crop US acreage estimates with corn at 90.8 million acres, compared with 90.5 in January and vs. the USDA Outlook Forum figure of 90.2. Soybeans are forecast at 88.7 million acres, fractionally higher than the January figure and compares with the USDA Forum’s 88 million. The all wheat area is forecast at 45.6 million acres vs. 45.8 in January and the Forum’s 46 million. Normal planting weather could see the total seeded acreage a touch higher, particularly given the boost in crop insurance prices.

• Managed funds need a bullish input if they are to continue buying commodities or raw materials, and may await NASS’s planting intentions report or any hint of adverse weather in the spring or summer before doing so. Meanwhile focus will switch to S American crop size and how much, and how soon, major importer demand shifts to the S Hemisphere between now and late summer.

• The USDA’s March WASDE, ongoing favourable S American weather and broken down chart patterns all continue to weigh on prices in Chicago. On the week, May corn is down 17 cents, Chicago wheat is down 11 and beans are down 33. May beans’ failure to find support at its 200-day moving average is cited, though we do not advise chasing breaks amid better than expected Chinese soybean imports (from all origins), and as NASS’s planting intentions report is just week away. There is talk that a cargo of Argentine corn has been sold into Vera Cruz, Mexico for July arrival. No price has been offered, nor is there any confirmation but the rumour is pretty widespread in the cash market. Changes in Mexican corn trade will be a hot issue through 2017, particularly as S American cash prices drop during/after harvest. Otherwise, relative to recent days, there’s real dearth of fresh news.

• Russian cash wheat prices this week are down for the only the second time since December. Spot offers rest at $190/mt, down $3/mt on the week. New crop Russian offers are pegged at roughly $177/mt, which is comparable to $4.30, basis July Kansas futures. Recall the seasonal trend in Russia’s cash wheat market tends to be weak in Mar/Apr.

• Fundamental input has turned bearish this week amid confirmation of rising crop sizes in S America, a slight boost in monthly Malaysian palm oil stocks/use, and the lack of any evidence of dryness in Center-West Brazil in the weeks ahead. Our outlook remains neutral until new crop US crop conditions are known, but this year’s S American harvest will weigh heavy on rallies.

Our weekly fund position charts can be downloaded by clicking on the link below:

Fund positions