• HEADLINES: Risk off trading dominates in Chicago; Crude oil nears long held low at $65; Brazilian bio-diesel blend rates confirmed.

• Chicago ag markets mixed with the theme of the morning being “risk reduction”. Several traders have claimed that it is risk aversion, but in either case, it is the exodus of existing positions that is moving markets today. On the other side, few traders are willing to put on new risk amid the unsettled landscape of US and EU banking following massive inflows of capital from the US and National Swiss Banks. The massive $350 billion plus inflows to key banks is causing worry that other financial shoes could be dropped.

• US wheat prices are rising as funds hold a net short position in Chicago of 100,000 contracts. Fund managers are buying their way out of their net short wheat. And soybean/soymeal futures are in decline as funds are net long over 150,000 contracts (each) as of March 7. Last week it was corn/soyoil length was liquidated. Risk reduction is moving Chicago prices and playing a leading role in the decline of CME meat markets. Price is reacting to the flow of orders which all depends on the position of managed money.

• Chicago brokers estimate that funds have bought 3,500 contracts of wheat while selling 3,100 contracts of corn, 15,500 contracts of soybeans and 8,200 contracts of soymeal. Funds are flat soyoil with overnight selling being balanced by midday buying. We note that May soybeans fell below key support offered by the 100-day moving average at $14.88 and the February low at $14.7775. The break of the chart-based support produced a drop to $14.70. The next downside target is $14.55 and then $14.30.

• Brazil will raise their bio diesel blending rate to 12% from 10% as of April 1. Thereafter, the blending mandate will increase 1% each year. B13 in 2024, B14 in 2025, with B15 occurring in 2026. The stair stepping blend rates will tug at S American soyoil supplies downwards. We note that with the US no longer a major exporter of soyoil, that the world must turn to S America for supply. And rising Brazilian blend rates will further tighten supplies. B12 was widely expected to be announced as of April 1, but the Brazilian farmer was hoping for a 13% blend rate. Remember that back in November President Bolsonaro was openly discussing raising the blend rate to 15% for 2023. This was dismissed by President Lula with today’s announcement now confirming future Brazilian diesel blend rates.

• Whether or not the Black Sea Grain Corridor Pact expires on Saturday is up to lawyers to debate. Russia has formally extended it for 60 days due to the Turkish Presidential elections and are unmoved by Ukraine or the UN demands. Ukraine objects to the half extension, yet, grain is continuing to flow. No one appears to be overly concerned about the corridor breaking down in its functionality. For now, exporters are rushing out shipments and Ukraine will likely drop fob price offers to encourage vessel nomination and loading.

• USDA confirmed that China booked another 197,000 mt of US old crop corn today taking their total known purchases to 2.1 million mt. Other purchases may be individually under the 100,000 mt reporting total, which will wait until next week’s US weekly sales report. It was an active week for China buying.

• Risk off has been the theme of the week which makes the CFTC CoT report more important as a measure of fund length. We see cash basis gains and the decline in the Argentine soy crop to 25 million mt as being bullish. Yet, it is the macro financial bank worry that is keeping these bullish fundamentals constrained. The most fundamentally bullish grains, soybeans and soymeal, are in decline on liquidation, while the most bearish grain, wheat, is rising. Until confidence is restored in the US/EU banking system, it is a touch early to be making new purchases.

• HEADLINES: Soyoil soars on NOPA reported domestic demand; Turkish presidential elections keep the corridor at 60 days; More US corn to China.

• Chicago ag markets are mixed at midday with corn/soyoil trading higher while soybeans, wheat and soymeal hold in the red. Energy and equity markets have reversed early losses and are recovering as the EU banking worry has not spread beyond Credit Swiss. US bank deposits are backstopped by the US Central Bank, so the dark financial clouds may be starting to part. At least that is the hope of traders heading into next week’s US March FOMC meeting. We look for the US Central Bank to raise its fed funds rate by 0.25% in its war against inflation.

• Yet, traders are loath to take on new risk until after the weekend. They do not want to get caught in any new bank liquidity issues as US and European regulators look through the capital positions of their regional banks. We would note that it was bad risk management at Silicon Valley Bank and Credit Swiss that caused the need for additional capital. The willingness of the US and Swiss Government to backstop the 3 failed banks is psychologically important.  We hold a view that this is no place to be selling Chicago breaks, a new Northern Hemisphere growing season is ahead and macro issues should be declining in importance. A pause period is ahead for world Central Banks.

• Chicago brokers estimate that funds have sold 3,700 contracts of wheat and 3,900 contracts of soybeans, while buyers of 9,500 contracts of corn. In soymeal that have sold 4,300 contracts of soymeal, while buying 3,400 contracts of soyoil. May soybeans tested their late February low at $14.7775 this morning.

• The UN is demanding that Russia extend the Ukraine Grain export corridor (as the July Black Sea Corridor Pact that was signed last July indicates) for 120 days. However, Russia is unmoved from its offer of a 60-day extension. Questions abound as to why Russia will only extend the corridor for 60 days, but it appears to be tied to the Turkish Presidential election on May 14. A 60-day pact extension means that the corridor pact expires on May 17, 3 days after the Turkish Presidential election.

• Russia wants to make sure that Turkey’s president is favourable to its position as grain export gatekeeper in Istanbul. In fact, the polls show that current President Erdogan is behind in the polls to Kemal Kilicdaroglu by as much as 10%. In fact, it appears that Turkish President Erdogan is facing his biggest challenge in his 20-year Turkish rule. This worries Russia and it does not want to extend the grain pact if Erdogan is no longer president.

• The USDA/FAS announced another 641,000 mt of US 2022/23 corn sold to China which takes their 3-day purchases over 1.9 million mt. We expect that total China purchases of US old crop corn in this purchase round will be completed at 2.4-2.6 million mt with crop year sales commitments rising to 7.0 million. In total, we look for China to import 8.5-9.0 million mt of US corn in the 2022/23 crop year.

• US weekly export sales for the week ending March 9 were 12.4 million bu of wheat, 48.7 million bu of corn, and 24.4 million bu of soybeans. China purchased another 208,000 mt of soybeans with old crop purchases on a known basis rising to 30.5 million mt with 2.2 million mt held in an unknown destination category. We see China taking 33.0-33.5 million mt of US soybeans in the 2022/23 crop year.

• The GFS weather forecast at midday is consistent in calling for rain across Central Argentina beyond March 21, but a pattern of complete dryness and abnormal warmth continues through the weekend. The drought is ongoing and crop losses are building. The Brazilian forecast is favourable. Needed dryness occurs into late March across Parana, where safrinha seeding is delayed, while there is no sign that the wet season ends prematurely in Mato Grosso and Goias.

• China’s 2.4-2.6 million mt of US corn purchases will raise US 2022/23 corn exports to 1,900 million bu and drop stocks by 50 million bu. Russian/E European wheat offers to GASC are aggressive which will cap US wheat futures rallies. The soyoil renewable bull market is beginning (domestic demand greater than production) while July beans will push to new highs by mid-summer. The key March Stocks and Seeding report is due out on March 31.

• HEADLINES: Grains rally, soy falls following CTFC update; Plunge in crude weighs.

• Chicago ag markets are again mixed, with US/world grain markets firm and the soy complex in correction mode. Price action this morning is partially a reflection of the CFTC’s commitment of traders update Tuesday evening, with record long liquidation (147,000 contracts) occurring in corn through the week ending Feb 28 and funds in Chicago wheat were short a sizable net 92,000 contracts. Funds were net long 130,000 contract of soybeans and 140,000 contracts of meal. We estimate managed funds today are long just 58,000 contacts of corn and 135,000 contracts of beans. Modest long soy/short grain spreads are being unwound. Yet, we would note that old crop-new crop spreads continue to perform. Spot soy basis in Central IL is still quoted $0.35/u above May Chicago, which is historically firm.

• Macro markets provide a blanket of weight with spot WTI crude oil down another $4.00/barrel and trading below $70 for the first time since December 2021. Concern over the health of developed economies is dominant, but we also note that crude oil stocks less reserves have built steadily since early January. EIA pegged US crude stocks less reserves on March 10 at 480 million barrels, up 1.5 million from the previous week and up 15% year-on-year.

• Biofuel markets have borne the brunt of weakness today, with May Chicago soyoil down $0.75/lb and spot rapeseed in Europe falling to a newer 21-month low. A bull story looms in US soyoil, but production/supplies tend to peak in March before eroding seasonally into the new crop soy harvest. A different US vegoil market landscape is anticipated in the April-Aug period as reduced output collides with additional renewable diesel production capacity.

• NOPA-member soybean crush in Feb totalled 165.4 million bu, slightly below the trade’s guess and fractionally above Feb 2022. Sep-Feb NOPA soy crush totals 1,044 million bu, down 7 million year-on-year. This is aligned with USDA’s forecast, and no further downward revisions to domestic US soybean disappearance are expected.

• US ethanol production in the week ending March 10 totalled 298 million gallons, vs. 297 million the previous week and in line with pace needed to meet USDA’s target. There is no evidence to support a hike in US corn industrial use, but USDA’s current forecast is about right.

• FAS in its daily reporting system confirmed that China has secured another 667,000 mt of US corn, and China in recent days has increased its US import commitment by 30%. US corn export sales on Thursday, through the week ending March 9, are projected at 30-40 million bu, but sales the following week will be 60-70 million. Recall exporters must average weekly corn sales of only 25 million bu to validate the USDA’s forecast. Ultimately, an increase in USDA’s corn export forecast of 25-50 million bu is possible given the absence of S American supplies.

• The midday GFS weather forecast is consistent in calling for improved rain chances in Central Argentina beyond March 21-22, but a pattern of complete dryness and abnormal warmth continues into the weekend. Confidence is rising with respect to a temporary pattern shift in Argentina next week, but this is no way will reverse 60-day moisture deficits of 6-7” across the driest areas of Cordoba, Santa Fe and Entre Rios.

• The Brazilian outlook leans favourable. Needed dryness occurs into late March across Parana, where safrinha seeding is most delayed, while there is no sign that the wet season ends prematurely in Mato Grosso and Goias.

• There will be no end to volatility as heightened macro concerns continue and the Northern Hemisphere growing season begins in earnest. We caution against chasing daily moves, but tight old crop US, exporter and global stocks place a floor under markets until summer climate patterns are known.

• HEADLINES: Russia to extend the grain export corridor for just 60 days; Weaker US dollar is the result if the US central bank pauses; Algeria receives cheap wheat offers.

• Chicago ag markets are mixed at midday in a risk off day as wheat futures are higher, while soybeans/corn are lower. The “risk off” mentality has fund managers exiting positions amid the volatility/uncertainty in the US financial markets. Regional bank questions abound which has caused dramatic rallies and declines in the US stock market. There are times when grain valuations are not based on supply/demand, but order flow and macro market considerations.

• Amid the rising financial market volatility, funds are exiting short wheat while selling out corn/soy length to cut their market exposure. There are times in investing when cash can be the new asset class. The nearby best interest rates in a decade makes money markets a safe harbour for liquid assets.

• The US March inflation report (CPI) will be released Tuesday morning with the expectation that the monthly rate has cooled. The New York Fed in a survey released today estimated the US inflation rate a year from now at 4.2% with food inflation coming down to 7.3%. Both are uncomfortably high with the FOMC target for inflation at 2.0%. However, amid the economic stress that is facing regional banks, the US Central Bank could hit the pause button which would place an offer over the US dollar for months to come.

• A weaker US dollar would push new investment into hard assets and provide lift to an emerging economy that has struggled with rising costs since the pandemic started 3 years ago. The value and trend of the US$ will be pivotal once confidence is restored in US regional banks.

• Chicago brokers estimate that funds have bought 3,900 contracts of wheat, while selling 5,100 contracts of soybeans and 6,900 contracts of corn. In products, funds have sold 3,500 contracts of meal and 2,100 contracts of oil.

• Russia is willing to extend the Black Sea Grain Export Pact by 60 days, not 120 days, to provide time for the rest of the world to come up with a proposal to help its exports which are being hobbled by economic sanctions. Russia wants tangible progress to be shown on the normalisation of its agriculture exports. Russia wants the progress to be shown “not in words but in deeds”. This means that the current pact will be extended until May 18, with considerable uncertainty thereafter regarding its continuance. We doubt that neither the US nor EU will be willing to ease or drop banking/freight/insurance sanctions as Russia ramps up the war effort. A May renewal is highly uncertain, and the world grain market will closely follow if the US/EU show any willingness to amend existing economic sanctions.

• US weekly export inspections for the week ending March 9 were 39.3 million bu of corn, 22.7 million bu of soybeans, and 9.15 million bu of wheat. For their respective crop years to date, US corn exports are down 378 million bu or 37%.  US soybean export inspections are up 39 million bu or 25%, while US wheat exports down 12 million bu or 2%. US corn exports are now in in seasonal increase.

• Algeria wheat offers went in cheaply with there being only 1 Russian wheat offer at $310/mt CIF and other European offers ranging from $312-316/mt. Assuming a $34-38/mt freight, this works back to a $275-278/mt fob Russian wheat equivalent in April/May. The cash world wheat market continues to drop as end users sweep up aggressively priced old crop wheat. We continue to argue that end users should see such prices as an attractive and book wheat well into mid-summer.

• The failure of several large US banks has caused worry that the recent dramatic increase in US interest rates will cause other banks to fail or falter at a time of record large consumer debt, are there other financial shoes that could fail? This has investors looking for the safety of money markets. We maintain longer term that any Chicago break will be short lived amid the fall in Argentine/Ukraine grain production. Russia is not expected to renew the corridor export pact without significant changes in late May as the US/EU cannot drop sanctions.

• HEADLINES: Wheat rebounds on short covering and corn/wheat spreads unwind; China rumours noted for US corn/soy; Macro markets have ruled this week.

• Chicago ag markets are mixed with corn/wheat values firmer while the soy market sags. Macroeconomics has been the driver amid the US March Jobs Report that showed February nonfarm payrolls expanded by 311,000, while a California bank that is favoured by tech starts, Silicon Valley Bank (SVB), was closed by regulators. The bank made bad bets on interest rates while there was a run on their deposits by customers. The result is that the FDIC closed the bank and took control of its deposits. Bankruptcy or a merger is in the future of SVB.

• The US dollar declined sharply on the employment data/SVB news with fund managers looking at commodities with some favour again. The SVB closure and limited wage growth in the March employment report has some economists wondering if the US Central Bank will hit the pause button after raising their lending rate by 0.25-0.50% next week. The flow of funds has been out of commodities this week following testimony from US Fed Chairman Jay Powell that US rates needed to rise further for longer to get inflation down to their target of 2%. There is more stability today with all eyes being on the Tuesday’s CPI report and the market reaction following the Fed’s rate hike. Just a 0.25% rate rise would be seen as dovish and considered bullish to assets.

• Chicago brokers estimate that funds have bought 4,700 contracts of corn and 3,900 contracts of wheat, while selling 5,600 contracts of soybeans. In products, funds have sold 2,500 contracts of meal and 3,300 contracts of oil. We calculate funds entering a modest net fund soyoil short for the first time in years. There has also been some wheat/corn profit taking this morning. The big rise in Chicago open interest in recent days is being widely discussed, with varied opinions. We all need to see the CoT report a week from today to draw any real conclusions.

• Commercial traders reflect that China continues to ask for offers of old crop US soybeans/corn on a frequent basis. The unknown sale of 184,000 mt of US old crop soybeans that was announced yesterday is likely for China as it replaces the 1 million mt of Argentine soybeans that were washed of due to the dire  drought. China can only use US or Argentine soybeans to replace reserve soy sales which means that there will be an additional 800,000 mt of US old crop soybeans that will be purchased with shipment off the PNW. This fact along with the Argentine drought its why we raised our 2022/23 US soybean export estimate to 2,025 million bu, 10 million above WASDE. China is on pace to import 99-102 million mt of soybeans in 2022/23 with vessel loadings calling for record imports during both March/April from Brazil. The Chinese demand amplifies the Argentine soybean crop loss as US soybean stocks will be run down to pipeline levels with crushers fighting exporters for supply.

• We now think of the Chicago soy complex on a flat price, not a spread basis. The world needs additional soybean, soymeal and soyoil supplies. The downside appears to be limited below $14.80-15.00 May soybeans, $470-475 May soymeal and $0.55-0.56/pound in soyoil. Oil share has come in to 37%, but cash soyoil demand will pick up in coming weeks via renewable diesel and it makes little sense to be bearish. Our point is that the Argentine drought has turned the complex into a flat price, not a product spread trade.

• The midday GFS weather forecast is consistent with the overnight forecast with hot/dry weather across Argentine crop through Monday before widely scattered showers develop across La Pampa and Buenos Aries. Extreme heat will prevail with highs ranging from the 90’s to lower 100’s. Some better rains start to return in the last half of next week with totals of 0.25-1.00”. The time for the rain to do any good is running out.

• A weakening US dollar would return funds to the long side of commodities (risk assets in general) following the US Central Bank rate hike next week. The Argentine soy/corn drought decline is bullish longer term and should push soy futures to new highs. We see corn/wheat scoring/forming seasonal lows.

• HEADLINES: Funds unleash selling on the charts; Argentine crop fall bullish for months to come; World ocean freight rates rising on demand.

• Chicago ag markets are sharply lower with the grains pacing the decline. The soybean market is lower but trying to hold on the Rosario Exchange shockingly lower Argentine soy crop estimate of 27.0 million mt. The Buenos Aries Grain Exchange (BAGE) is expected to lower their corn/soybean crop estimates later today. A 27 million mt Argentine soybean and 35 million mt corn estimate has produced a crop season loss of both crops of 43-44 million mt of grain.

• The Chicago selling is fund liquidation based on the breaking of last week’s low and the sinking of US wheat values as funds pile into a larger short position. The charts are pointing down and will need time to heal before a recovery. End user pricing is noted as Chicago open interest keeps rising. The Chicago break has taken December corn futures down to support at $5.50 while July Chicago wheat has fallen to $6.80. Chicago spot wheat at $6.60 is at its lowest price looking backwards to July of 2021. The European wheat market started the decline on the movement of Ukraine wheat into the EU and their inability to sell wheat abroad due to aggressive Russian pricing. Paris wheat futures are likely to move to a carry so that EU farmers can hold their wheat stocks into summer. Wheat must bottom for the rest of Chicago to rally.

• Chicago brokers estimate that funds have sold 15,100 contracts of corn, 5,900 contracts of wheat, and 2,200 contracts of soybeans. In soy products, funds have sold 3,100 contracts of soymeal and 5,300 contracts of soyoil. Fund managers are cutting their corn/soymeal/soybean length while entering a modest net short position in soyoil.

• FAS reported that for the week ending March 2 the US sold 9.8 million bu of wheat and 55.6 million bu of corn with net cancelations of 900,000 bu of soybeans. The US also sold 319,000 short tons of soymeal and 7,300 short tons of soyoil.

• For their respective crop years to date, the US has sold 639 million bu of wheat (down 44.0 million or 6%), 1,206 million bu of corn (down 770 million or 39%), and 1,790 million bu of soybeans (down 134 million or 7%). US soy product sales are also below last year as the record Brazilian soybean crop weighs on demand.

• World freight rates have been soaring on improving demand for S American soybeans with the backlog of vessels worsening in Black Sea. There are over 14 million mt of vessels waiting to load Brazilian soybeans, a record high. Brazil is running full tilt to meet world oilseed demand. The rise in world freight rates argues for improving grain demand with China to import a record tonnage of soybeans in March/April. This could boost their total crop year import program to 99-100 million mt. Regionally, Russia continues to load out a record tonnage of wheat while China is stepping up its imports of soybeans. China’s economy is in full recovery following the end of Covid lockdowns.

• The midday GFS weather forecast is consistent with the overnight forecast in the persistence of hot/dry weather across Argentine crop areas for another 2 weeks. There maybe a few spits of rain, but most totals will be less than 0.15” and won’t help crops that have been suffering for months of acute drought. Argentine crop sizes will continue shrink.

• Growing in importance is the excessive rain that has fallen across MGDS and Parana in Brazil. Deral estimated today that just 37% of their winter corn is planted against 69% last year. MGDS is also struggling with excessive soil moisture and delayed corn seeding rates. The planting window is closing on Central Brazilian winter corn. And RGDS will holds in a dire drought.

• The Chicago break today does not make much sense! End users should be using the weakness to make forward purchases in corn/wheat and soyoil. December corn against $5.50 and May soyoil below $0.58/pound are too cheap. Argentine/Ukraine crop losses combined produce the need for record large US corn/soy crops this summer. We were bearish until Argentine abandonment rates started to soar thereby sparking these low crop totals. This is not a place for new sales. Closely follow Brazilian winter corn seeding in Parana/Mato Grosso Du Sol. Buy this break in corn, soyoil, and soybeans. Wheat should be very close to a seasonal/annual bottom. The new crop price risks are to the upside.

• HEADLINES: WASDE cuts to Argentine 2023 corn/soy crops combined 15 million mt: US corn exports cut 75 million bu, soybean exports raised 25 million bu; How low is low for Argentine crops?

• Chicago ag markets are mixed following March WASDE Report. WASDE cut its estimate of Argentine soybean production by a record 8 million to 33 million mt and lowered corn by 7 million to 40 million mt. In total, Argentine summer row crop production fell by 15 million mt, a record for both crops combined. The Argentine drought has been dire and further crop falls are anticipated as acres are abandoned. From here forward, every tonne of soybean crop that is lost will come directly from crush as exports cannot be cut much below 3.2 million mt and imports above 7.25 million mt will be nearly impossible logistically. If the Argentine 2023 soybean crop is 27-28 million mt as feared, this would slash their crush down closer to 30 million mt.

• Brazil’s soybean harvest was left at 153.00 million mt which means that world soybean end stocks were pulled down to 100 million mt, just 1 million above last year. The smaller Argentine crop will boost US 2022/23 soybean exports and drop stocks to pipeline levels amid record crush margins. Spot soybean futures will find support under $15.00 amid tightening cash supplies into summer.

• The USDA lowered US 2022/23 corn exports by 75 million bu to 1,850 million and raised soybean exports by 25 million to 2,015 million bu. The US 2022/23 soybean crush rate was cut by 10 million to 2,220 million bu with the result being 210 million bu of 2022/23 soybean end stocks. Such soybean end stocks are seen as near pipeline, the bare minimum needed in the US at the end of the crop year. We doubt that US corn exports will fall further due to the sharp drop in the Argentine corn crop due to drought. And 2023/24 corn exports will be nudged upwards with support noted around $5.60/Bu basis December corn.

US Crop Production (bu/acre & billion bu)

Corn             Soybeans

Yield     Production    Yield     Production

2021/22        176.7    15,074        51.7    4,465

2022/23 Feb USDA    173.3    13,730        49.5    4,276

2022/23 Mar USDA    173.3    13,730        49.5    4,276

S American Crop Production (million mt)

Corn             Soybeans

Argentina   Brazil    Argentina   Brazil

2021/22        49.5          116    43.9           129.5

2022/23 Feb USDA    47          125    41           153

2022/23 Mar USDA    40          125    33           153

US End Stocks (billion bu)

2021/22    2022/23    2022/23

Feb USDA    Mar USDA

Corn            1,377        1,267        1,342

Soybeans        274        225        210

Wheat            698        568        568

World End Stocks (million mt)

2021/22    2022/23    2022/23

Feb USDA    Mar USDA

Corn            305.69        295.28        296.46

Soybeans        99        102.03        100.01

Wheat            271.45        269.34        267.2

• The US wheat balance sheet was left completely untouched which makes sense given relatively strong exports, compared to USDA’s projected 775 million bu. World wheat data leans bearish but rising exporter stocks/use has been digested via the recent collapse in values. Aussie production was lifted another million tons to a record 39 million mt. Aussie exports were raised only 500,000 mt amid logistical restraints. Kazakhstan’s 2022 wheat crop was increased an unexpected 2.4 million mt (17%) to 16 million mt, and it was this that pushed 2022/23 exporter wheat stocks/use to 14.4% vs. 13.8% in Feb but vs. 15.3% a year. However, WASDE lowered carry in wheat stocks by 5 million mt lowering 2022/23 world wheat stocks to just 267 million mt, the lowest since the 2016/17 crop year.

• World wheat exportable supplies are adequate and will be used as feed due to the shortage from Argentina. This is no place to be bearish of wheat ahead of a new Northern Hemisphere growing season.

• The midday GFS weather forecast is consistent with the overnight forecast in the persistence of hot/dry weather across Argentine crop areas. There maybe a few spits of rain, but most totals will be less than 0.15” and won’t do much to help crops that have been suffering for the past 6 weeks of acute drought. Any showers that start next Tuesday/ Wednesday favour La Pampa and Southern Buenos Aires. High temperatures will range from the mid 80’s to the lower 100’s. Crop maturity is being pushed by the drought such that late March and April weather will decline in importance.

• RGDS in S Brazil will share in the hot/dry outlook with limited rain for the next 2 weeks. High temperatures will hold in the 90’s with limiting cooling for filling corn.

• The big question is how low is low for Argentine corn/soy production. Can the Argentine soybean crop fall to 25-27 million mt. It is the abandonment of acres that is the reason for the sharp fall in Argentine crops. A corn crop of 34-38 million mt is not unreasonable. The Argentine ag economy is in shambles amid 2 years of drought. Argentine farmers face financial ruin and will hold onto crops in the hope of rising prices. We now doubt that Chicago breaks can be sustained.

• HEADLINES: Row crops weaken; Wheat recovers; Macros lean heavy on fed chair comments.

• Chicago ag markets are mixed and rather listless at midday. Corn and soybeans are trading steady to lower in preparation for Wednesday’s WASDE release, in which US corn exports may be lowered 25 million bu and 2022/23 US soy crush is likely to be trimmed slightly. There is not yet evidence to boost total US row crop consumption, and while Argentine drought has become historic in nature and in the long run funnels corn and meal demand to other markets, including the US, this is unlikely to be printed tomorrow. We do note that nearby spreads continue to perform, with March corn’s premium to May widening to $0.10/bu. March soybean’s premium to May is up $0.04/bu to $0.16/Bu. FAS’s daily reporting system was void of new export sales this morning.

• Otherwise, it has been a largely macro day. Federal Reserve Chairman Powell this morning hinted that US benchmark interest rates in 2023 would likely exceed market expectations following ongoing strong economic performance and unrelenting strength in the labour market. The US dollar index is up a full 1.1% at a newer two-month high.

• Spot WTI crude is down $2.40/barrel at $78, which leaves $80 as decently strong overhead resistance. The Dow at midday is down 320 points.

• The Argentine weather forecast at midday remains outright hot despite summer’s fade into autumn there. The GFS forecast maintains max temperatures in parts of Santa Fe and Entre Rios in the upper 90s/low 100s, while precipitation will be confined to fringe producing areas of Argentina’s southern crop belt. Argentine yield losses will cross thresholds seen only a few times in recent decades. Corn has been less willing to add premium due to this year’s contraction in total global trade, but uncertainty will hang over global soymeal and oil flows for some time. Argentine soy crush in 2022/23 is likely to drop 5-7 million mt year-on-year. Soy product supply tightness is unavoidable.

• A broad pattern of active precipitation and cold temperatures is offered to the Central US into the latter part of March. Additional snowfall of 6-15” is possible across the Dakotas and in NE/IA into the weekend. A warmer/drier setup will be desired in April.

• The midday GFS weather forecast is consistent with the morning release in calling for unrelenting heat and dryness across key areas of Argentina throughout the next 10 days. Temperature moderation is forecast thereafter, but confidence is low given the recent warmer trend. Argentine showers nearby will instead favour La Pampa and southern Buenos Aires. Normal/above normal rainfall and mild temperatures will continue in Brazil. Soy harvesting/safrinha corn seeding will be slowed in Mato Grosso do Sul.

• Argentine drought this year will prevent a build in corn stocks and weigh heavily on the build in global soy stocks anticipated just 60 days ago. Argentine production loss and uncertainty over spring/early summer Black Sea grain flows place a heavier burden on production across the Northern Hemisphere, which likely avoids major threats but this must be confirmed before lasting bear trends emerge. Wheat remains oversold in the US and Europe.

• HEADLINES: Wheat sags and soymeal soars on Argentine weather; Divergent price trends awaiting the USDA report on Wednesday; CONAB out Thursday.

• Chicago grain values are mixed at midday with corn/wheat/soyoil values lower while soybean/soymeal futures are higher. May soymeal futures has pushed to a new contract high of $494.70/ton on the ongoing acute drought impacting the Argentine soybean crop. On the other hand, the Chicago wheat market has pushed to its lowest price since September 2021 on renewed fund selling of the coming end of the old crop export season. Also, traders are banking on the Ukraine Export Corridor deal will continue based on the weekend comments from Turkey that they are working hard on its extension.

• We would feel better about an extension of the corridor pact if there were favourable comments coming from Russia. We believe that a UN corridor deal has not yet been ratified. A mixed Chicago close is expected with spreads trying to re-jig on Tuesday. Wheat/corn ($0.55/bu spot futures) and soymeal/soyoil spreads (37.1% oil share spot futures) appear to be out of line fundamentally. Argentina is the world’s largest soymeal and soyoil exporter and a loss of crop/crush is more bullish to soyoil with US exportable soyoil supplies going to renewable diesel. We continue to see no reason for May soymeal futures to sustain a rally above $500/ton. It is soyoil that has future upside potential.

• The USDA reported the sale of 110,000 mt of US corn to Japan and 182,400 mt to an unknown destination. Questions abound if the unknown US corn sale is to China, and we just don’t know currently. Also, there are rumours this morning that China booked a cargo of US soybeans for late March shipment off the PNW.

• Chicago brokers indicate that funds have sold 4,400 contracts of wheat, 2,400 contracts of corn, and bought 9,200 contracts of soybeans. In soy products, the funds have bought 6,700 contracts of soymeal while selling 1,300 contracts of soymeal. The funds fully jumped to buy soybeans this morning.

• US export inspections for the week ending March 2 were 35.4 million bu of corn, 20.0 million bu of soybeans, and 9.8 million bu of wheat. For their respective crop years to date, the US has shipped 601 million bu of corn (down 374 million or 38%), 1,524 million bu of soybeans (up 44 million or 3%), and 572 million bu of wheat (down 12 million or 2%). The corn and soybean exports were larger than expected.

• Focus on Argentina has rightly been centred on historic drought which shows no sign of relenting. The 2023 Argentine soy crop was pegged at 34-36 million mt and corn at 41-43 million mt near the close of February. However, the ongoing hot/dry weather has taken a toll on production. Private Argentine soy crop estimates have fallen to 29-32 million mt with corn at 36-40 million mt. This crop loss has shifted the world soybean balance sheets back to extreme tightness with questions being asked on whether logistically Argentina can import 7.5-8 million mt of soybeans from others to boost its soy product exports.

• Soymeal rallies as it makes up +77% of the soy product production from crush. This is why meal always reacts first to any Argentine drought/crop loss. However, the world is facing increasingly tight supplies of vegoils, and with the US no longer exporting soyoil, and Malaysian palm/Argentine soyoil production down on adverse weather, a supply bull story is budding in vegoils.

• The midday GFS weather forecast is drier for Northern and Central Argentina and more in line with the overnight EU model. The core of Argentina’s ag belt stays warm/dry into March 16. Any rain will be focused on Buenos Aries and La Pampa in far Southern Argentina. And extreme heat persists for another 10 days with highs in the 90s/lower 100s. Near to above normal rainfall falls across Northern Brazil to the benefit of winter corn, but the moisture will slow the remaining soybean harvest. Dry weather helps speed the harvest in Parana.

• Spreads are out of line on capital flows today, but we look for oil/meal and wheat/corn spreads to perform for the remainder of the week. The USDA March Report will be out Wednesday with Brazil’s CONAB releasing their crop estimates on Thursday morning.