• HEADLINES: Corn, soy continue recovery; Crude testing $80 per barrel.

• Chicago grain values are again mixed but generally firm at midday as market focus stays on falling Argentine crop estimates and the performance of nearby corn/soy spreads. We have previously highlighted the uplift in crush margins, while Central IL is still bidding $0.28 over for corn for spring delivery. Spot beans in Decatur are quoted at $15.50, and still processing margins are profitable. A transition to adequate supplies is probable in 2023, but this requires confirmation of both favourable weather in Brazil in April and the lack of threats in the Northern Hemisphere between May and Sep. We also note that spot corn and Chicago wheat contracts remain oversold and a further reconciliation with this lies ahead.

• FAS’s daily reporting system was void of new demand, but amid recent rumours of US corn/sorghum sold to China and a rally in Ukrainian fob basis there does exist a window for improved US corn export demand. The market must see/feel this demand be funnelled to the US, but it is just difficult to be bearish of May Chicago corn below $6.50 given the potential for exports.

• Focus on Argentina has rightly been centred on historic drought, but corn and soy harvests there will also be pushed back into early summer following this season’s planting delays. Our bet is that the corn harvest in Argentina will not reach 30% complete (which covers domestic use) until the second half of June. Argentine corn is not offered competitively into the world market until July.

• Macro markets lean supportive. Spot WTI crude is up $0.80/barrel at $79.00 and is again trading firmly above its 20 and 50-day moving averages. A test of $80 lies ahead. The Dow at midday is trading 160 points higher. Paris milling wheat and corn futures are down €0.75-1.25/mt. European rapeseed futures have followed soybeans to solid gains. The Baltic Dry Ocean Freight Index, a widely followed proxy for global demand/trade, has scored a newer 7-week high and has rallied 116% in the last two weeks. China is digging out of its Covid hole and has triggered a boost in the movement of goods.

• Other news is lacking. The Northern Hemisphere growing season lies just ahead, with some reporting that corn planting has started in earnest in pockets of Louisiana. Markets in the next 30 days will be defined by Northern Hemisphere weather patterns, while late March’s USDA stocks and seedings report will be important in determining final old crop supply availability and the 2023 acreage matrix. Firm interior basis levels suggest corn and soy stocks will be tight. Water availability will not be an issue in the Midwest, but problems linger in US Plains, Western Europe, and India.

• The midday GFS weather forecast is much wetter in northern Argentina, with 10-day totals of 2-4” offered to northern Cordoba and Santiago de Estero. The core of Argentina’s ag belt stays warm/arid into March 13. Confidence in the details of precipitation intensity/location is low, but northern Argentina has been the target for intermittent rains this growing season. Relative dryness in Central Brazil allows for normal soybean harvest progress nearby. Soaking rain returns to Mato Grosso and Goias in the 6–10-day period.

• This week’s emotional break in corn and wheat is overdone, Gulf SRW is offered below French for new crop delivery, basis fob, while there is still little tolerance for US wheat/soy yields this summer. Rallies are selling opportunities, but there is more short-term upside than downside risk in grains at current prices.

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• HEADLINES: Rumours of Chinese purchases of US sorghum/corn abound; Russia says no deal on black sea corridor without unfettered Russian ag trade.

• It has been a mixed morning in Chicago with corn/wheat sagging to new lows for the decline while soybeans/products hold in the green. The volume of trade has been active with funds aggressive on the sell side of the grains, while Chinese pricing in Brazil has placed a bid under Chicago soybeans. We look for mostly higher close as the Chicago tries to carve out a tradable bottom. Following a $0.66/bu drop in corn, $0.75 drop in soybeans and $1.00 drop in US wheat futures, traders wonder if price has reached levels that is stoking fresh demand.

• There are cash connected rumours that China initially showed interest in several US spot cargoes of Gulf soybeans while interest for US corn was noted at mid-morning. No commercial is willing to report if the corn interest is from the private and state buyers, but the Chicago break has pushed Chinese corn import margins back into the green. We suspect that any fresh Chinese interest for US corn is from privates that hold TRQ import licenses The March/May corn spread pushing out to a 3-cent premium suggests that cash demand has occurred, the question is for whom and in what tonnages.

• There are also rumours that China has purchased up to 5 cargoes (300,000 mt) of US sorghum with delivery in May/June from the US Gulf. The break has caused China to be more active in their purchase of US sorghum with rumoured totals being the largest in months.

• Chicago brokers report that funds have bought 2,100 contracts of wheat and 3,800 contracts of soybeans, while selling 4,100 contracts of corn. In the products, funds have bought 1,500 contracts of soymeal and 2,900 contracts of soyoil. The fund selling of corn futures was over 9,000 contracts at mid-morning.

• US weekly ethanol production was 1% above last that consumed 295 million bu of corn. The USDA is forecasting that for the remainder of the crop year, the US weekly ethanol grind must equal 295 million bu. There are rumours that the Biden Administration is preparing to allow E 15 to be statutorily sold year-round which could add 200-300 million bu to the annual US corn grind in 2023/24. US ethanol stocks fell to 1,039 million gallons, down 1% from 2022. We see the pace of the US 2022/23 corn grind as being in line of their 5,275 million bu annual estimate.

• Sources indicate that Argentine crops are suffering acutely as the hot/dry weather shows no sign of relenting. Extreme drought persists into at least mid-March. The USDA/WASDE will offer up sizeable cuts in Argentine soybean/ corn crop estimates in their March 8 report. WASDE pegged the Argentine soybean crop at 41 million mt and corn at 47 million mt on February 1 with private sources pegging the harvest at 31-32 million mt of soybeans and 39-41 million mt of corn. Such losses raise the importance of US/Brazilian corn production into July.

• The midday GFS weather forecast is like the overnight run with limited rainfall for Argentine crops into March 11. There is a chance of a few light showers of 0.1-0.8” in the next 48 hours, but then the forecast then goes hot/dry. High temperatures reach back into the 90’s/lower 100’s. Argentine crop stress is becoming acute on reproducing corn.

• Margin has come back to US ethanol producers while expectations for 2022/23 US soybean, corn, or wheat exports are low. Chinese interest for US sorghum/corn is a bullish surprise, though sales tonnage rumours vary. Another round of blistering heat is the death knell for some Argentine crops amid a dire drought. A tradable Chicago midwinter low is forming.  Russia has indicated that it will not continue the Black Sea Export Corridor Deal without free Russian exports of grain/fertilisers.