Monthly Archives: February 2022

28 February 2022

Posted on February 28, 2022 by simon

• HEADLINES: Corn limit bid with wheat/soy sharply higher as peace effort fails amid an escalation of fighting; GASC passes on wheat tender.

• Chicago grain/oilseed markets are sharply higher at midday with corn futures limit bid up 35 cents with wheat/soy futures sharply higher. The rally has been based on the abrupt closure of SWIFT bank payment system for the Russian Central Bank which has effectively shut down the Russian grain market. Amid the ongoing war in Ukraine, importers/end users are concerned about grain supply availability. Contract defaults are assured with rumours circulating that China is switching some of their Ukraine corn buying to the US. Ukraine has over 15 million mt of corn that is sold, but yet to be shipped. Whether this corn will be executed depends on the duration of the war and ability of infrastructure to recover. European grain sources indicate that even if the war were to end today, it would take 45-60 days for Ukraine exports to resume. It is reported that mined ports and damage are too great for transit/loadout and for exports to restart quickly.

• And even if Russia were to claim defeat and return to barracks, it is unlikely that the Russian Central Bank would be able to return to SWIFT for months without a complete regime change as trust has been lost by NATO members and the remainder of the Western world. This keeps the Russian grain market closed.

• Other than profit taking from the bulls, the Chicago market lacks selling with S America in holiday mode (Carnival) while traders fear an extended war. Russia is damaging Ukraine infrastructure amid heavy rocket campaigns. The war will take its toll on bridges, power plants, diesel supplies and roadways the longer it continues. A peace delegation from Russia/Ukraine was held in Belarus, with both sides returning to their respective capitals for consultations. Amid worsening fighting near Kiev, the chance for a diplomatic solution is remote. Newswires report that the cease fire talks have not produced a breakthrough with Russia demanding that Ukraine surrender. The Ukrainians fight is expected to persist.

• Egypt’s GASC cancelled a wheat tender with French and US wheat offered at extremely high prices due to market uncertainty/volatility. Egypt may have to find new sources of supply should the war continue. Soon, some will see any offer of French wheat as a buying opportunity. Turkey is tendering for over 400,000 mt of wheat tomorrow, but because Russian wheat is already in position, a sale is expected at an elevated price. The Turkish tender is not a good measure of non-Black Sea wheat/grain availability.

• US FGIS exports for the week ending February 24 were 60.8 million bu of corn, 27.0 million bu of soybeans, and 14.9 million bu of wheat. US corn exports are down 121 million bu from last year, soybeans are off 423 million bu with wheat off 98 million bu. Amid S American crop losses, US corn/soybean exports are forecast to make up shortfalls during the March-August timeframe. China is said to have bought old crop US soybeans while switching Ukraine corn for the US Gulf.

• The midday GFS weather forecast is like the overnight run with rain for Argentina and Southern Brazil every 2-3 days while a dry weather trend impacts Central Brazil. As the monsoon flow pulls seasonally northeast across Brazil, we fear that drought will become a new issue for the winter corn crop. S Brazilian/Argentine high temperatures hold in the 80’s/90’s. The dry weather aids the ongoing Brazilian soybean harvest, and the third Argentine corn crop is being aided by recent rains. However, yield reductions on the first and second harvests are unavoidable and sizeable.

• Tomorrow is March 1 and soon the market’s focus will be on the March 9 USDE report, which is expected to show a sizeable drop in S American crop production and increase in US corn/soybean/soyoil export demand. The USDA could easily drop S American soybean production 9-11 million mt and corn by 4-7 million mt. Both combine for a further fall in world exporter stock/use ratios with the Ukraine war cutting out nearly a third of world trade in wheat/sunoil/barley and 20% in corn.  The loss of S America crop and the Ukraine war makes this an unprecedented period of bullishness with extreme volatility on daily headlines. Only a regime change in Russia causes a bearish reaction as no one will bank/trade with Russia or a Russian/captured Ukraine in the months ahead.

25 February 2022

Posted on February 25, 2022 by simon

• HEADLINES: Chicago volatility remains extreme ahead of the weekend.

• Chicago grain and oilseed markets are in full retreat at midday. The Russians are not, and the invasion of Ukraine continues. This is contributing to intense Chicago price volatility ahead of the weekend. Wheat futures were the most bullish on Thursday; however, March Chicago wheat broke through $9.50 overnight and then turned down. At midday, wheat is off nearly $.77/bu. The break in wheat has pulled the rest of Chicago lower. Corn is down 30-35 cents at midday, and soybeans have been down as much as 67 cents.

• Uncertainty reigns through all aspects of international politics and trade, which is leading to extreme Chicago price volatility. So far today, March wheat has traded a $1.06 wide range, March soybeans have traded a wide 84 cent range, March corn has held a 47-cent range.

• In other US financial markets, crude oil has slipped under Thursday’s low and been close to $2/barrel lower near $91, gold futures are down more than $40/ounce at midday, while the US dollar index has retreated after trading to a 20-month high on Thursday.

• The weekly Export Sales report showed that US exporters booked 41 million bu of old crop corn sales last week, while weekly exports hit a marketing-year high of 74 million bu. Cumulative corn sales are now at 1,873 million bu versus 2,323 million last year.

• Old crop wheat sales were at a 4-week high of 19 million bu, and new crop sales were at a marketing-year high of 6 million bu. Cumulative old crop wheat commitments now total 661 million bu versus 866 million last year. Weekly exports of 20 million bu were the most since last August.

• Soybean export sales somewhat eased to 45 million bu, and weekly exports were at a 3-week high of 46 million bu. Cumulative sales now stand at 1,812 million bu versus 2,195 million last year.

• Soybean meal sales were below average at 255,575 short tons last week, while exports rose to a 9-week high and second largest of the year at 398,565 short tons. Cumulative exports are 104% of last year and the second largest on record, while outstanding sales are 109% of a year ago.

• The midday GFS 10-day weather forecast shows good rainfall amounts for the far southern tip of Brazil and into eastern Argentina. However, limited rains are scheduled for the majority of the Argentine crop-growing region, while Central Brazilian crop regions will remain dry. This will aid the ongoing Brazilian soybean harvest but remains a threat for much of the Argentine growing region.

• Volatility looks to remain extreme as the world grain markets try to determine what the Russian invasion means for world grain flows and price. S American soybean production continues to decline, with the market focus now on the later developing Argentine crop. We maintain a longer-term bullish outlook and we should be prepared for a prolonged period of extreme volatility.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 25 February 2022

24 February 2022

Posted on February 25, 2022 by simon

• HEADLINES: Russian invasion of Ukraine dominates over everything. Market volatility rises dramatically. soybeans give back overnight gains and close lower: Chicago corn doesn’t know whether to follow wheat/soybeans: World wheat markets leap as much as $60-80/mt.

• The US/NATO imposed economic sanctions today which did not include energy or food. The sanctions targeted Russian banks, high profile individuals, and technology, which was something of a surprise. When/if the Russians place their own political leader into the Ukraine presidency/vice presidency, and produce calm across the country, it is possible that Black Sea grain exports could return. We obviously have no way of knowing whether Ukraine grain would be subject to Russian export taxes, but it is the speed with which Ukraine is overrun which would be key. Note that Black Sea wheat exports are in seasonal decline through June, it is July when Black Sea wheat exports return to prominence.

• Soybean futures rallied to strong overnight gains, reaching $17.65 for an intraday high and stopping short of the 2012 high before ending 13 cents lower. Meal closed lower across the board after trading at the highest price since 2014, while spot soybean oil set a new record high of 74.72 cents/lb.

• The USDA Outlook Forum estimated US soybean planted acres at 88 million acres, just 800,000 more than last year but the largest since 2018. In the last 17 years, acreage in the Planting Intentions report was lower than the Outlook Forum by an average of 1.3 million acres. Recently, acres have declined in the last four consecutive years by an average of 1.3 million. We currently look for a 1 million acre increase this year to 89 million acres on rising fertiliser prices (corn more costly to grow). Right now, our long-held price targets have been reached, but the world has changed with the Russian invasion. Our long-term view stays bullish with extreme volatility.

• Old-crop corn futures were as much 7 cents higher while new-crop contracts dropped as much as 7 cents. Fear of a disruption in old-crop Ukraine exports supported the nearby contracts but a sharp drop in soybean futures dragged new-crop corn contracts lower. It is estimated that there remains a total of 19.3 million mt of Ukrainian corn exports left to ship this marketing year (which ends Sep 30).

• A Turkish cargo ship in the Black Sea was damaged by a munition (presumably launched from a Russian plane) off the Ukraine port of Odessa. Turkey, who is a member of NATO, has expressed support for Ukraine’s territorial integrity. Ukraine has requested that Turkey bar Russian warships passage through Turkey’s Bosporus to the Black Sea.

• Doubts about Ukraine’s ability to ship old-crop corn could trump S American crop prospects for the next few weeks but then S American weather will return as the market’s primary focus.

• Global wheat futures set new highs today, a day on which the world wheat market saw its most serious geopolitical event since the Soviet Wheat Embargo (1980). CME and KC old-crop contracts were up 40-50 cents, MGE old-crop was up 17-29 cents. Matif wheat jumped $60 mt but closed at the midpoint of the daily range after leaving a huge gap on the chart. Egypt’s GASC’s only bid today was $80 mt above last week.

• As of Feb 28, it is estimated that the combined wheat exports from Russia and Ukraine (from all their ports and barge or rail border points) was 38.1 million mt. That is down 17% from a year ago. Based on USDA’s projections for the entire year, that leaves 18.5 million mt left to ship by June 30. Not all of Ukraine’s and Russia’s exports are shipped from their Black Sea ports, but the huge majority or their exports do originate from the Black Sea. There are two questions regarding this situation: 1) will importers be willing to purchase that much wheat from Ukraine/Russia over the next 4 months; or 2) will Ukraine/Russia be able to ship that much wheat.

• Geopolitics is driving the wheat market.

23 February 2022

Posted on February 23, 2022 by simon

• HEADLINES: US, international markets continue surge; Ukraine calls for emergency declaration; US HRW belt stays arid.

• Chicago ag markets are again sharply higher on the addition of risk premium. Wheat remains the upside leader following Putin’s recognising of territories in eastern Ukraine, followed by a proposed emergency declaration from Ukraine, which along with ongoing threatening Plains weather mandates the need to keep US wheat export demand slowed. This in turn becomes complicated if world importers lose access to Black Sea through the duration of the 2021/2 marketing year. The tone is clearly bullish.

• Exporters sold another 132,000 mt of soybeans to China. Other breaking news is absent.

• However, even corrective breaks have been difficult to sustain in Chicago amid soaring global ag markets. Spot Malaysian palm oil scored a new record high for a fourth consecutive session. It is clear global vegoil supply and demand will stay imbalanced for some time. And competing minor vegoil markets will work to sustain palm/soy demand.

• Cash rapeseed oil in Europe this million is quoted at $0.80 per pound, and with spot palm oil priced at $0.71 there are indication that US soyoil exports won’t continue at a pace well above what is needed to meet the USDA’s forecast. Recall that as of Feb 10 the US has sold 81% of the USDA’s annual forecast.

• Additionally, the Brazilian Real traded below traded (fractionally) below 5:1 for the first time since July 2021. This has pushed spot Brazilian corn to a new record high $8.30/bu. US Gulf corn fob offers, on paper, are now quoted above EU/Black Sea feed wheat, but until new wheat crops are harvested this summer, feed wheat cannot fill the gap in trade left by reduced S American corn crop sizes. As of mid-Feb, corn shipments from the largest exporters total a record 66.7 million mt, up nearly 10% year on year. USDA predicts global corn trade in 2021/22 to rise only 6% from the previous year.

• The spot futures-based soybean crush margin is calculated at $1.40/bu, UP $0.05 from Tuesday and well above year-ago levels. The message is that value is relative, and today there is no sign that Chicago ag markets are overly expensive.

• In the near-term grain futures add premium until there are signs of relative calm in the Black Sea. Soybeans add premium in an effort to maximise new crop seedings, which will be challenging amid rising corn and even cotton prices. Yet, we reiterate that extreme volatility must be expected, particularly as some measure of this week’s advance is based on uncertain geopolitics.

• The midday GFS weather forecast at midday is consistent with the overnight run in projected at least a temporary and favourable pattern shift in S America. Continued regional dryness in Central Argentina and Southern Brazil must be monitored, but the driest areas of NE Argentina and RGDS and Santa Caterina in far Southern Brazil will see 10-day precipitation accumulation upward of 2-4”. Topsoil moisture will be replenished. And soybean harvest accelerates in much of Mato Grosso and Goias beginning this weekend.

• It is difficult to know just how much of this week’s premium addition is due to Black Sea logistical risks or due to tightening US balance sheets and the need to plant every possible acre of arable land this spring. Recall revenue insurance prices will be determined in just four sessions time, which should fundamentally be most supportive to Nov soybeans. Current valuations are aligned with global/exporter supply and demand.

22 February 2022

Posted on February 22, 2022 by simon

• HEADLINES: Markets stay elevated amid Black Sea concerns; S American cash markets firm.

• Chicago ag markets are sharply higher at midday as funds are forced to cover short Chicago wheat positions, with frigid temperatures this week and ongoing dryness across the Plains lending further support. Select states across the Plains are scheduled to release updated winter wheat crop conditions this afternoon, and further deterioration is anticipated. Recall good/excellent crop ratring in TX in late January was just 7%, with KS at just 32%. Black Sea grain flows have been so far unaffected by Russian-Ukrainian tensions, but risks to corn, wheat and minor vegoil trade flows remain massive.

• US exporters this morning sold 120,000 mt of HRW to Nigeria, half of which is reported to be for new crop delivery. Exporters sold another 120,000 mt of soybeans to China for 2022/23 shipment.

• Additionally, we note that the Brazilian Real has fallen to a new 7-month low, which was worked to support domestic corn and soy markets there. Spot corn in Brazil is quoted at $8.15/bu this morning. Brazilian corn for May delivery is quoted at $8.00. That Brazil’s domestic corn market is perched above US Gulf fob offers is important, and we maintain that little/no corn will leave Brazilian ports over the next 4-5 months. Spot Brazilian fob soy basis has ebbed and flowed since this early Feb, but indications today place US Gulf beans below Brazilian origin for Mar-May shipment.

• There is talk that China is selling soybeans from its reserve to cool near-term supply/demand issues, and we must expect importers/end users to be apprehensive at extending coverage at current prices. Reserve sale tonnages are unknown. But in the long run, Chinese reserves must be replaced, and global/exporter grain and oilseed balance sheets will only be solved via trend/above yields in both hemispheres over the next 12 months. Extreme volatility will be a feature of the marketplace well into late 2022.

• US export inspections through the week ending Feb 17 included 62 million bu of corn, vs. 57 million the previous week and a new marketing year high. Soybean inspections totalled 36 million bu, v. 43 million the previous week, with wheat inspections totalling 20 million bu, vs. 17 million the prior week and also a crop year high. Based on the recent relationship between FGIS corn shipments and official Census exports, official US corn exports in Feb are likely to reach 280-300 million bu, a record for the month. Corn export disappearance stays elevated and is not forecast to peak until Apr-May. Rising EU wheat prices will also work to keep US corn competitive against feed wheat until new winter wheat harvests are available in early/mid-summer.

• The midday GFS weather forecast is consistent with the overnight run in offering a pattern reversal to S America over the next 10-12 days. High pressure ridging aloft S Brazil eases to allow needed moisture to flow across Argentina, eastern Paraguay and far Southern Brazil. Welcomed dryness will be established across key areas of Central Brazil into the opening days of March, with soybean harvest there to accelerate. We note that additional soaking rain will be needed in Argentina in the first of half of March to fully stabilise later planted corn yield potential, but the two-week outlook leans favourable relative to Dec-early Feb conditions.

• A long-term bullish outlook is maintained amid the need to reduce global soybean and possibly global corn consumption over the next 10-12 months. But daily price movement in the near-term hinges upon Black Sea military activity and the extent to which grain/vegoil exports are slowed, which is unknowable.

18 February 2022

Posted on February 18, 2022 by simon

• HEADLINES:  Low volume Chicago rally with March option expiration at the close; Brazilian cash soy markets hold firm; What will Russia do?

• Chicago grain futures are higher heading into the midday hour with short covering and moderate new fund demand featured. The market is closed on Monday for the US President’s Day holiday and March options expire at today’s close. The option expiration could produce some additional volume near the close. It does not require much in terms of order size to move the market today. The volume of Chicago trade is extremely slow as few want to be on the sell side of any order amid the geopolitical concern with Russia/Ukraine. The algos have been on the buy side of the market due to charts, headlines, and momentum.

• Eastern Ukraine is seeing ethnic Russians causing provocation with a car bomb detonated in their early evening. Tensions are high and it is likely local infighting will develop over the weekend. The E Russian infighting has caused crude oil prices to recover while the US stock market has weakened. E Ukraine tensions are likely to grow during the long US weekend. Some suggest that Putin will defend ethnic Russians living in E Ukraine, which could be a trigger point for troop movement. This has the attention of grain traders with rumours swirling about what could occur next.

• We look for a higher Chicago close today with the bears unwilling to add to positions ahead of the long weekend. The risk of a Ukraine invasion is something that cannot be ignored, but with high level Russian/EU/US diplomatic meetings planned, one would think that the odds of an invasion are diminished.

• Following the US holiday, it will be Russian/Ukraine geopolitics, S American crop sizes and the WASDE S&D release next Friday that drives Chicago valuations. WASDE is expected to release updated new crop balance sheets on Friday morning, rather than the normal 12 Noon release. WASDE is likely to release neutral to slightly bearish 2022/23 US corn/soy end stocks.

• Chicago brokers estimate that funds have bought 2,400 contracts of wheat, 4,100 contracts of corn, and 3,600 contracts of soybeans. In soy products, funds have bought 2,600 contracts of soyoil while being flat in soymeal. The soymeal market is having difficulty in finding new cash demand above $450/mt.

• Brazilian soybean/soy product basis continues to hold firm/rally. We hear that China has booked another 3-6 cargoes of US new crop soybeans off the PNW this morning. The USDA announced the sale of 198,000 mt of US soybeans that were sold to an unknown destination. We believe that the 66,000 mt old crop cargo was Egypt adding to their forward coverage while the new crop sales of 132,000 mt were to China. The Chinese are building a massive book of US new crop sales as Brazilian soybean exports are forecast to slow/end in late summer. US soybeans are competitive in the world market from April onward.

• The midday GFS weather forecast is wetter across Argentina and drier across Southern Brazil than the overnight run. The 10-day forecast has soaking rains covering a large share of Argentina from the middle of next week forward with 0.5-2.50”. The extended range 11-15 day forecast also went wetter for Argentina. Whether this wetter forecast is right will be proven over the weekend, but the EU model has also gone wetter in recent days.

• What is concerning is the lack of rain for the Southern third of Brazil over the next 10 days as their winter corn crop is being seeded. The Southern Brazilian winter corn crop requires rain for proper seed germination.

• The Plains weather forecast is cold with sub-zero temperatures in the 6-10 day period. This cold catches HRW wheat in a drought-stricken state. The US HRW wheat crop continues to suffer.

• Soyoil futures have posted new rally highs with March soybeans struggling to hold above $16.00. The soymeal market lacks aggressive cash buyers this morning. The US farmer has been a huge seller of cash grain this week which is pressuring cash basis bids. China is hoping for a reserve release to help in old crop soybean supplies. Falling S American crop sizes supports breaks. A choppy market is expected into March.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 18 February 2022

17 February 2022

Posted on February 17, 2022 by simon

• HEADLINES: Chicago rests following Wednesday’s rally; Egypt’s GASC books Romanian and Algeria books optional origin wheat for April; Argentine forecast drier.

• The volume of Chicago trade has been exceptionally light this morning with few traders wanting to expand their risk ahead of March option expiration on Friday, and the long 3-day US holiday weekend amid Russian/Ukraine geopolitical uncertainty. There seems to be a growing consensus that if Russia does not invade Ukraine in the coming weeks, President Putin could just leave troops along the Ukraine border to cause angst for western world political leaders and prop up the price of energy heading into summer.

• The rise in crude oil values more than pays for Putin’s foray against Ukraine and his hope of preventing Ukraine from being ever becoming a NATO member. Putin has the world’s attention and appears to be willing to wait for the right diplomatic deal amid supply chain breakages and shortfalls. Russia’s global position has been bolstered by the new commodity rally as the rising Ruble reflects. Commodity currencies have had a few good weeks.

• This leaves Chicago grain futures to drift with energy/equity prices lower on the likely coming push by the US and world central banks to combat inflation. The coming rate increases will slow US/world GDP rates in 2023.

• The lack of leadership from the financial markets (energy/equity) leaves Chicago without direction today. Short covering heading into the weekend is expected on Friday with the USDA Annual Outlook meeting causing price gyrations next week. It is back to better defining S American crop sizes and the demand rationing that is needed with spot Chicago soybeans at $16.00 and spot Chicago corn at $6.50. If S American crop totals decline, higher prices will be required. We cannot overstate enough the importance to the world of the 2022 Brazilian winter corn crop. Not a single tonne of Brazilian corn can be lost.

• Chicago brokers estimate that managed money has bought 4,200 contracts of wheat and 1,200 contracts of corn, while selling 2,100 contracts of soybeans, 1,000 soymeal and 2,100 contracts of soyoil. End user pricing is below the corn/ soybean/soyoil markets, while there are few resting sell orders in wheat.

• Egypt’s GASC bought 180,000 mt of Romanian wheat while Algeria has booked 700,000 mt of optional origin wheat. We hear that Black Sea/French wheat are permitted as origins in April to Algeria. The purchase of wheat via an optional origin basis has been popular due to the geopolitical uncertainty of the Black Sea.

• For the week ending Feb 10 the US sold 4.3 million bu of wheat, 32.3 million bu of corn, and 50.0 million bu of soybeans. For their respective crop years to date, the US has sold 642 million bu of wheat (down 218 million or 25%), 1,768 million bu of soybeans (down 423 million or 19%), and 1,832 million bu of corn (down 473 million or 20%. US wheat export sales continue to be disappointing.

• Brazilian cash soybean/corn and soyoil basis bids are steady to firm this morning. Not much has changed in Brazilian basis levels since Wednesday. The strong cash basis bids push demand to the US. We understand that China has added another 3-5 cargoes of US new crop soybean purchases this morning. Brazilian soyoil export capacity is nearly sold out for March and half of April.

• The midday GFS weather forecast is drier than the overnight run with rains further south into La Pampa and S Cordoba. Less rain is also forecast for S Brazil and Paraguay, while above to much above normal rain falls across Northern Brazil. The wet weather pattern must seasonally end for there to seed the intended winter corn acres in Mato Grosso. Excessive wetness has slowed the soy harvest and the winter corn crop seeding. /S Brazilian temperatures will be warm to hot with highs in the 90’s/lower 100’s.

• It is a day of rest following Wednesday’s big rally. Chicago values are holding in a narrow range awaiting information on S American crop sizes and the required demand rationing. Tensions are elevated regarding Russian aggression against Ukraine while March Chicago option expiration should boost prices/volume on Friday. Bull markets always let you in – buy breaks would remain our advice.

16 February 2022

Posted on February 16, 2022 by simon

• HEADLINES: LDC crush plant in Claypool IN endures fire; Soyoil/soybean fob premiums rise in Brazil; US weather coming into focus.

• Summer row crop futures are rallying while wheat sags in reduced Chicago trade volume. The war of disinformation between Russia/western world has left traders in a difficult position to assess the geopolitical risks of Russia invading Ukraine ahead of a 3-day US holiday weekend. Chicago will be closed on Monday for observance of the US President Day holiday. Any Russian invasion of Ukraine would cause a sharp rise in Chicago values with traders suggesting that wheat, soyoil and corn would pace the rally with near limit gains. Russia/Ukraine account for +30% of the world’s wheat, sunoil and barley trade. And the Ukraine is the world’s third largest corn exporter.

• Amid deepening bullish fundamentals, the bears will choose to close out short positions due to the extended weekend. And the USDA will hold its Annual Outlook Forum next week with WASDE new crop balance sheets to be released on Friday morning. The uncertainty over Russia and the prospect for tightening new crop end stocks has caused end users to buy the dip. We note that WASDE does a relatively good job in pegging new crop US seeded acres, but end stock totals are more dependent on summer weather/yield.

• Chicago brokers estimate that managed money has secured 3,400 contracts of corn and 5,600 contracts of soybeans, while selling a net 900 contracts of wheat. In the products, funds have bought 2,500 soyoil and 3,400 contracts of soymeal.

• An LDC soy crush plant in Claypool Indiana endured a fire last evening. Damage is still being assessed. The plant is the largest US producer of glycerine and started operation in 2007. The plant had the ability to crush more than 50 million bu of soybeans annually and was a biodiesel producer. The LDC Claypool plant is closed today for soybean delivery and traders will be closely watching damage assessments to gauge the impact on coming US soymeal and soyoil supplies going forward.

• Mato Grosso’s IMEA reported a record January soybean crush of 842,100 mt. This was a 7% increase from last year due to strong margins as the new crop harvest started. Currently, IMEA estimates that 60.5% of the soy crop has been cut as of Friday. December’s crush was also a record amid strong local demand. Brazilian crushers are outbidding exporters for supply as Brazilian soy crop size projections decline. Private estimates for the 2022 Brazilian soy harvest have fallen to 122 million mt, put out by Patria Agronegocios following their tour.

• Chicago March soyoil futures are testing contract highs at $66.60-66.92. A close above $66.90 sets a new upside price objective of $73-74. Brazilian cash soyoil is tight with reports that export availability is limited through March. The fall of 20 million mt of Brazilian soy crop has caused the loss of nearly 4.0 million mt of soyoil supply, a massive tonnage. And this estimate does not include Paraguay/Argentina crop losses where the drought is deepening. The world cannot endure such massive soyoil losses amid expanding US renewable diesel demand and the shortage of other vegoils. Soyoil should score new highs in 2022.

• The midday GFS weather forecast is like the overnight run with rains across Buenos Aires of 0.4-1.50” with totals of 0.1-0.6” across the remainder of Argentina during the middle of next week. S Brazil is forecast to see 0.3-1.25” late next week before a new round of drying. Temperatures will be warm to hot ahead of the rains with highs in the 90’s/lower 100’s. Too much rain continues to fall across N Brazil which is slowing the harvest.

• Soyoil basis is soaring in Brazil with reported trades at 5-6 cents over amid tight supplies for March. The Paranagua soybean paper market traded $1.35 over, a new high for the harvest season as export demand is growing. Crude oil values look to keep rising with new upside targets of $110-115/barrel. The risk for Chicago bio crops is to the upside heading into the 3-day US holiday weekend.

15 February 2022

Posted on February 15, 2022 by simon

• HEADLINES: Markets continue shedding of risk premium; NOPA crush falls short of expectations.

• Chicago futures are sharply lower in thin volume at midday as grain and energy market shed geopolitical risk premium. Russia’s decision to reduced troop numbers in Belarus has eased concerns over regional grain flows, and amid tight wheat, corn and crude balance sheets any small change in market perception will have an outsized impact on price. This will be a feature of markets well into late 2022. Wheat futures have fallen to major chart-based support, which is expected to hold amid threatening S American weather and as the US climate likely stagnates into spring. Spot WTI crude is down $3.40/barrel at $92.00.

• The soy complex has been the best relative performer today following a massive trimming of yield in Rio Grande do Sul. The government there now pegs RGDS’s soybean harvest at 11 million mt, which compares to CONAB’s mid-February estimate of 13.8 million. This downward revision more than offsets IMEA’s hike in Mato Grosso’s yield in early Feb, and assuming all else equal reduces S American’s soybean harvest 123 million mt.

• More yield data is needed, but it is suspected that CONAB’s Feb number will not be the lowest of the season. Further soybean and summer corn crop reductions in the south of Brazil are anticipated.

• NOPA member soybean crush in January totalled 182.2 million bu, down 2.4 million from Jan 2021 and 4.5 million short of the trade’s estimate. US soyoil stocks on Jan 31 totalled 2.03 billion lbs, slightly below expectations. Jan soyoil stocks data suggests total consumption is not being slowed by elevated prices, and soyoil production in January fell 5 million lbs short of total disappearance. The spot futures-based crush margin is calculated this morning at $1.35/bu, vs. $0.80 a year ago in mid-Feb.

• US exporters sold 101,000 mt of soybeans to Mexico, with 53,500 mt executed in an old crop position.

• Other fresh input is lacking, but we are beginning to pay closer attention to the US Plains short, and long-term climate outlooks. Moderate rain/snow will reach into portions of KS, OK and TX in the next 10 days, but frigid air is forecast to blanket the Southern and Central Plains Feb 22-25, with minimum lows pegged in the single digits in CO, KS and NE. Freeze damage is impossible to quantify but adverse conditions remain probable across the primary HRW Belt into at least early spring.

• The midday GFS weather forecast operational model is wetter in Argentina Feb 24-28 as high-pressure ridging moves briefly northward late next week. There is general model agreement that moderate showers will impact southern and western Argentine crop areas in the 8–10-day period, but confidence in midday GFS output is low. We note that neither the GFS ensemble nor the midday Canadian model features widespread heavy Argentine precipitation outside of La Pampa and portions of western Cordoba into Feb 28. Close attention will be paid to this afternoon’s EU model run, but ongoing net soil moisture loss remains probable across Central and Northern Argentina.

• Today’s market is defined by geopolitics, but overall, we must expect similar volatility throughout the coming N Hemisphere growing season. The outlook stays bullish as focus shifts from S American supply loss to US demand. Note also that regular soaking rain will be needed in Southern Brazil March 1 onward to maintain trend safrinha yield potential.

14 February 2022

Posted on February 14, 2022 by simon

• HEADLINES: Low volume correction as market volatility ramps up; China said to secure USD soybeans on morning break; Funds are sellers.

• Chicago futures are in retreat on chart-based considerations and light profit taking. The volume of Chicago trade is down from recent days (Super Bowl hangover maybe) with importer and end user pricing noted on the morning break. China is a sizeable short and using any breaks to extend their forward coverage in US soybeans. We continue to hear that China did secure US corn last week for 3-4 million mt, but when the purchase will be announced is unknown. COFCO as a domestic merchant of US grain can secure the Central US cash corn, and not announce the sale until it is destined for export. Thus, a corn sale announcement to China could be several days or several weeks away. The point is that cash basis levels remain strong and neither US or S American farmers have any interest in selling a break.

• Corn and soyoil has held better than soybeans, wheat, or soymeal this morning with the unwinding of spreads and strengthening cash basis. Soyoil basis in S American has been ripping to the upside and is trading at a 3-3.5 cent premium to Chicago. The rally in soyoil basis in S America will underpin breaks in Chicago. Cash soymeal in Brazil has also rallied strongly to $20/mt over.

• Also supportive is the need of the market to secure all Central US acres. The soybean market needs to assure at least 90 million acres of new crop soybeans or risk having tight stocks for another crop year. And crop size worry persists for Argentina/Southern Brazil amid arid weather forecasts for the next 10 days. Breaks will be supported, but rallies will depend on how aggressive a buyer that China wants to be and S American weather. Note that soybean futures have already rallied over $4.00/bu so a modest pause is anticipated.

• Chicago brokers estimate that funds have sold 3,000 contracts of wheat, 2,000 contracts of corn, and 5,100 contracts of soybeans. In soy products, funds have sold 2,500 contracts of soymeal and 2,100 contracts of soyoil. Funds have been sellers in each of the Chicago primary grain and oilseed markets.

• For the week ending February 10, the US exported 57.8 million bu of corn, 42.4 million bu of soybeans, and 16.0 million bu of wheat. For their respective crop years to date, the US has exported 790 million bu of corn (down 112 million or 12%), 1,426 million bu of soybeans (down 422 million or 22%), and 532 million bu of wheat (down 110 million or 17%).

• Brazilian President Bolsonaro headed off to Russia today to plead with Putin regarding its fertiliser supplies/availability. Brazilian farmers are extremely worried about nitrogen/potash supplies to seed their crops starting in September. The Brazilian push for fertiliser seems poorly timed as Putin amasses troops along the Ukraine border, and pushback has been widespread.

• The Russian Duma will meet Wednesday to discuss the Minsk Agreement that was signed in 2014 which was related to ongoing fighting E Ukraine and Russia’s hope for peace. However, the expectation is that the Duma will vote to void the agreement as additional pressure for Putin’s demand for Ukraine never to become a NATO member. The ending of the Minsk agreement could cause additional “invasion angst” heading into the weekend.

• The midday GFS weather forecast is like the overnight run, with meaningful precipitation in S America isolated to the 9th/10th day of the model run. The EU/GFS models have not been aligned in their rainfall forecast in the week 2 timeframe. Clarification is needed, but the forecasts show no massive change in the overall pattern.  A high-pressure ridge holds across the region but weakens into Feb 24. Near to above normal rainfall will persist across N Brazil with totals of 3.5-6.50”. Above normal temperatures are forecast.

• Market volatility is going to be ramping up into late March and the USDA Seeding/Stocks report. A consolidation of recent gains is expected with corn/soyoil expected to score new rally highs. The low volume break should produce a Turnaround Tuesday. S American crop sizes continue to decline with Argentina at risk. China is said to have bought 4-6 cargoes of US soybeans on the morning break.