HEADLINES: Chicago mixed at midday; More Ukraine corn to China; GFS weather forecast wetter for central Midwest. Wheat is a drag; corn is the coming story; soybeans caught with soyoil sagging on oil share profit taking.
Chicago grain futures are mixed at midday with corn holding in the green, while wheat futures follow Paris futures lower as Russian 12.5% wheat sags to $209/mt. The Russians have been aggressive in shedding old crop wheat and trying to boost export demand. Shipping from the Black Sea is accelerating amid favourable weather and large interior supplies are pressuring values. A new crop Black Sea weather threat is needed to turn the market as the Russian Government is willing to let cash prices sag. However, the downside price risk for fob Russian wheat appears to be $205/mt fob which is several standard deviations below fair value based on Russian stocks/use analysis. Russia is single handedly constraining world wheat valuations, much as it has been doing for months.
Corn futures are higher at midday with May holding support and looking to test last week’s high at $4.34, which is the next level of resistance. A push above $4.34 would produce a key reversal on the charts and start to produce some pause to the algo/AI trading systems. Monitor $4.34 May corn closely.
December corn futures rallied above last week’s high and created a reversal. The initial money flow appears to be heading to the back end of the corn futures market. We would note that China continues to book Ukrainian corn with a few additional cargoes sold today. In total, Ukraine has some 12-15 cargoes of corn to China which can come in via their free trade zone. The profit margin on Ukraine corn imports to China is estimated at 20-23% to an importer. We note that Chinese corn prices keep rising which is strange if last year’s harvest was record large as reported by the government. TRQ’s are being released slowly, which could translate into US corn demand off the PNW.
We are having trouble confirming rumours that US soybean sales that are being shifted to Argentina.. There may have been a few cargoes shifted, but we doubt any swapping is widespread. This rumour started yesterday and we would suggest that the news is following the market.
US weekly ethanol production was 319 million gallons, up 7% from last year and continuing a stretch of far better than needed weekly grinds to achieve the USDA annual estimate. Favourable weather has aided US ethanol producers, but it is the profit margin via cheap corn that is driving production. US ethanol stocks rose to 1,093 million gallons, up 5% on last year. We argue that WASDE will raise the 2023/24 US ethanol grind by another 25-50 million bu.
Chicago brokers report that managed money has sold 4,100 contracts of wheat and 1,000 contracts of soyoil, while buying 9,000 contracts of corn, 4,200 contracts of soybeans, and 2,900 contracts of soymeal into midday.
The midday GFS weather forecast is slightly wetter across North Central Brazil with 10-day rainfall of 0.75-1.75”. The rain will be enough to satisfy the early moisture needs of corn, but soil moisture levels are in retreat and the forecast must be closely watched. The southern third of Argentina is also in need of moisture, but it is not critical based on last week’s rain. No lasting extreme temperatures are forecast with highs ranging from the 80’s to the mid 90’s.
It is a choppy day in Chicago with the exceeding of yesterday’s high in May corn causing a fund buying flurry of 5,000 contracts which pushed values against $4.30. First notice day against March futures is ahead and deliveries will be modest.
HEADLINES: Early rally fades as China demand for US corn off the PNW cannot be confirmed; GFS weather forecast drier for NC Brazil.
Chicago grains are higher at midday. Short covering and selective speculative buying rallied Chicago futures ahead of March first notice day on Thursday. We suspect that short covering could lift Chicago valuations into Wednesday with actual delivery intentions then determining if a correction is needed later in the week. A seasonal low has likely been scored with the break below $4.00 March corn and $11.25 in March soybeans on Monday, but new US export demand news and/or confirmation of smaller S American crops is needed to sustain a recovery. Chicago futures became too cheap amid the liquidation of cash related long March corn/soybean positions, but a fundamental trigger is lacking to scare the bears. We look for a higher Chicago grain close (values unlikely to finish near day’s high) which leaves the market vulnerable to a break.
There have been rumours that China has purchased a modest amount of US corn off the PNW for April/May. We cannot confirm any US sales. As we suggested on Monday, China did release TRQ’s to the corn and livestock industry late last week which is causing purchases of Ukraine corn. US PNW corn could work due to rising vessel costs, but we doubt large US corn tonnage sales. PNW cash corn basis is firm to 5 cents higher at midday.
Chicago brokers report that managed money has bought 6,200 contracts of wheat, 4,400 contracts of corn, and 3,900 contracts of soybeans. In the products, funds have sold 1,900 contracts of soymeal while buying 3,200 contracts of soyoil. Money managers were said to have bought 5,800 contracts of the July $12.60 soybean calls and 2,500 contacts of the July $12.40 calls overnight which started the bullish ball rolling. The call buying is likely new money coming into Chicago grain markets.
Brazil’s corn ethanol industry is enjoying rising profits on sliding corn values. IMEA forecasts that ethanol production margin grew by 37% during February on the slide in the price of corn. The rising margin will boost the Brazilian corn grind which could reach a record this year amid tightening supplies of sugar. Domestic total Brazilian corn demand is estimated at 77-79 million mt with 14 million coming from ethanol. This means that any production losses from adverse weather will come right from export demand. USDA forecasts that Brazil will export 52 million mt of corn, down 4 million from last year using a crop harvest of 124 million mt. We see the crop at 119.3 million mt with CONAB forecasting the Brazilian corn crop at 113 million mt, a sizeable 11 million difference.
The USDA sold 123,000 mt of US soybeans to an unknown destination in the 2023/24 crop year. Rumours have the buyer being Mexico. Rising ocean freight rates is tipping this demand back to the US for late summer.
The midday GFS weather forecast is slightly drier across North Central Brazil with 10-day rainfall of 0.75-1.25” which is just 40% of normal. Northern Brazil is drying down which must be followed closely for winter corn production. To date, corn is too immature for outright worry, but in another few weeks that could all change. The Southern third of Argentina is also in need of moisture, but it is not critical based on last week’s rain. No lasting extreme temperatures are forecast with highs ranging from the 80’s to the mid 90’s. It is North Central Brazil dryness that is worrisome.
As previously reported, China has purchased 8-12 cargoes of Ukraine corn, but a US corn sale off the PNW cannot be confirmed. Oil share spreading is noted which is helping soyoil futures hold early day gains. Wheat pushed above Friday’s high, but Russia fob wheat values are flat. The US market needs to see a bottom in Russian wheat to sustain a lasting recovery. Volatile weather is forecast across the Central US. Blizzard warnings are posted for the ND/MN border with gusty winds to stress HRW wheat in the Plains. The record warm winter statistically correlates to Central US summer heat. Be prepared for volatility.
HEADLINES: Chicago recovers as farmers roll basis sales forward; China demand for Ukraine corn and Brazilian soybeans; GFS weather forecast drier for north central Brazil.
Chicago grain markets are mixed at midday. US wheat futures recovered from a lower opening, but corn/soybeans are holding in the red on fresh speculative selling and ongoing farm basis contract rolling/liquidation. First notice day against March futures is Thursday, and most elevators are demanding that US farmers have their cash March basis contracts cleaned up by Tuesday’s close. March corn futures slid to $3.945 with May corn futures pulling back to $4.0875. March soybeans scored a new low for the decline at $11.2475 while US wheat futures are finding support from cash demand to fulfil Chinese SRW sales and the heat/dryness that is spurring a “greening” of wheat across the Plains. Bringing the wheat out of dormancy is not a problem unless arctic cold returns in March/April. A mixed Chicago is expected. A close above $4.00 March corn would signify that a key low is likely in place. Brazilian premiums are rising on moderate Chinese demand this morning as crush margins likely triggered new demand. We hear that 5-6 cargoes of Brazilian soybeans were sold to China this morning. Additional demand is said to being worked on scale down basis. Also, Brazil is getting ready to expand their soyoil contribution to diesel by 2% on Friday which is firming Brazilian basis.
Chicago brokers report that managed money has bought 2,400 contracts of wheat and 3,200 contracts of corn, while selling 2,400 contracts of soybeans. In the products, funds have sold 2,300 contracts of soymeal while being flat in soyoil with early purchases being sold back out on the break.
There continue be to strong rumours that China has booked 7-10 cargoes of Ukraine corn for March/April. The demand is coming from the recent distribution of 2024 TRQ’s with Chinese importers looking at a profit margin of $3.25/bu including payment for the import tariff. China’s margin for corn imports is fancy and additional purchases are expected. There is a freight cost of $21-22/mt to go around the horn of Africa if the cargoes do not transfer through the Red Sea. This extra cost helps make US corn more competitive. However, for now it is expected that cheap Ukraine corn will help fulfil new TRQ demand.
US futures brokers indicate that US farmers are rolling March length forward into May. The March/May corn spread pushed out to 15.5 cents May premium today amid the active rolling. We expect that as first notice day against March passes, US corn end users will have to start paying up again for future cash supplies. Look for basis bids to start firming again in March.
US farmers are actively applying fertilisers and preparing ground for spring seeding due to record Midwest warmth and a lack of soil moisture. The question is how early will producers start planting corn and soybeans due to late winter warmth. US revenue insurance policies provide dates across the Central US when summer row crop planting can begin. For the key states like Iowa/Illinois, corn and southern state soybean seeding can start on April 10 with the more northerly areas of each state having to wait until April 15 to seed soybeans. Thus, farmers can get early fieldwork completed, but it is the RMA (Risk Management Agency) and key seeding dates that will hold back Midwest planting.
The March liquidation break is coming to an end. The S American weather forecast features drier/warmer than normal weather across most of North Central Brazil that is drawing down soil moisture and making March rainfall highly important for Brazil’s winter corn crop. China is more active in seeking Brazilian soybeans with private buyers/importers securing Ukraine corn for April. Being bearish is a crowded trade, but a lasting rally demands adverse weather and a loss of supply to a major producer/exporter. USDA has a history of making important and sizeable S American crop changes (reductions or increases) in their March report. Our current bet is a more important reduction based on harvested yield data. Watch to see if corn can form a key reversal on the charts.
This should be the week that a liquidation bottom is formed ahead of first notice day in March futures. A recovery effort should follow, though it will be choppy unless Northern and Central Brazilian weather poses a threat to their winter corn crop. China’s soy crush margins are in the green and feedgrain import margins are at a two-year high. The bears will press the downside, but the risk vs reward is shifting to the bulls with a new Northern Hemisphere growing season ahead.
HEADLINES: Soybeans end lower in late week trade: Spot Chicago corn trades below $4.00 for first time since 2019; Liquidation ahead of first notice day: Chicago wheat corrects as corn drops; SRW basis firms.
Chicago soybean futures remained under liquidation pressure on slow US and Brazilian export demand. China has not been an aggressive buyer this week.
The holiday delayed US weekly Export Sales report showed soybean sales fell to a marketing year low of 2 million bu, as world demand shifted to Brazil. Soymeal exports continue to hold above average, and the cumulative is record large 5.9 million short tons. Outstanding sales are 27% above a year ago, and export commitments are record large at 9.9 million tons. The problem for the market is that record large production has kept pace with export demand into May.
Soybeans are deeply oversold, but the market lacks news to fundamental trigger a rally. We see the 2024 Brazilian soybean crop under 145 MMTs.
Global corn markets ended lower for a third session, with cash selling ahead of March’s delivery period noted. The Brazilian market also ended sharply lower in concert with the recent collapse in Chicago values. US export sales in the week ending Feb 16 were a 6-week low 32 million bu, vs. 51 million the previous week. March liquidation has dominated this week’s trade.
Corn futures are dangerously oversold ahead of key Brazilian weather and N Hemisphere planting. The technical indicator, RSI, is the lowest since July 2014. Managed funds on Tuesday were short a record 341,000 contracts and we estimate funds’ current short at a massive 367,000 contracts. Additional liquidation ahead of March’s expiry is possible, but a complete readjustment of the marketplace occurs if hot/dry March climate forecasts across Brazil are proven correct. Brazilian weather becomes a priority beginning in March. We view this market as being extremely complacent with regards to forward supply risk.
World wheat futures weren’t immune to summer row crop liquidation. Breaking wheat specific news was lacking, but we would note that interior US SRW basis continues to firm. The hunt for supply ahead of enlarged exports to China is ongoing. Additionally, our long-term thinking strongly suggests the world/exporter balance sheets stay historically tight. A wide-swinging market continues until the N Hemisphere harvest starts. New Russian sanctions will likely not slow Russian wheat sales/exports.
Managed funds on Tuesday were net short a combined 110,000 contracts in Chicago and KC. Funds combined short on Friday is estimated at 137,000 contracts, the largest since November. The 2024 growing season is imminent. Upside targets are unchanged at $6.50 basis May/July Chicago. Black Sea weather becomes critical in May/June and will be closely monitored. Any issues create a new world wheat landscape due to tightening new crop exporter supplies.
To download our weekly update as a PDF file please click on the link below:
HEADLINES: Chicago grain markets are mixed at midday. Chicago wheat rallied smartly following the morning reopening with March Chicago reaching psychological resistance at $6.00.
The sharp rally in wheat pulled corn into the green with soybeans/soymeal sagging on weakening Brazilian paper trade with March Paranagua said to be trading at -$0.80/bu vs Chicago. We would note that liquidation of cash and futures against March contracts is ongoing. Midwest cash basis levels are holding, but most elevators want cash basis or vs cash contracts cleaned up by early next week. First notice day against March futures is a week from today. We look for a mixed Chicago close with soyoil bouncing off contract lows while the Chicago March/May wheat spread has traded out to a 6 cent premium.
The USDA reported the sale of 126,000 mt of US sorghum to China. Private Chinese importers do not need a TRQ (import license) to book and import US sorghum into China. US sorghum sales as of Feb 8 were 173.1 million bu vs just 35 million in the year prior or an estimated 75% of the annual forecast.
Chicago brokers report that managed money has bought 2,100 contracts of wheat while selling 2,100 contracts of corn and 3,200 contracts of soybeans. In soy products, funds have sold 2,500 contracts of soymeal while being a net buyer of 1,500 contracts of soyoil.
US weekly ethanol production was 318.7 million gallons vs 318.4 million gallons last week. The weekly total was up 5% from last year and record large. Since the bitter cold of mid-January, the US ethanol grind has been in strong recovery based on positive margins. The interesting aspect of the ethanol grind is that US ethanol stocks fell by 13 million gallons to 1,071 million gallons, which is unchanged from last year. We maintain that US ethanol production will stay robust with another 25 million bu hike in the annual grind expected from WASDE.
Chicago March corn open interest stood at 274,027 contracts at Wednesday’s close. Additional liquidation is required which is applying pressure to futures. March corn has fallen into the middle of long-term key support at $3.98-4.10. March option expiration on Friday should inspire a low by Monday.
The midday GFS weather forecast is like the overnight run with below normal rainfall for Argentina/South Central Brazil, and near to below normal rainfall for Northern Brazil. Heat will be returning in the 8–12-day period with highs ranging from the mid 80’s to the mid 90’s. Brazilian high temperatures hold in the 80’s to the lower 90’s. The Brazilian weather forecast helps the early soybean harvest but is worrisome in terms of soil moisture for winter corn. We maintain the importance of paying close attention to the Northern and Central Brazilian weather forecast in March.
Corn futures are liquidating and could push to key support at $4.00 March, the top range of the highs from 2013-2020. China is securing a few cargoes of Brazilian soybeans each day, but their cumulative demand is disappointing. We understand that China will auction off 1.0 million mt of soybeans from their reserve to help domestic crushers with spot tightness. Each year China rotates is soybean reserves.
The US weekly export sales report is not expected to hold any bullish fanfare, but the trade is watching to see if China booked a few US SRW cargoes on the break. Funds are holding a record corn short position, but a reversal is needed to confirm a bottom.
HEADLINES: Chicago corn sinks to new low at $4.11 March; Brazilian soy crop estimates edge lower; GFS midday weather forecast like overnight run.
Chicago grain markets are lower at midday with speculative selling felt early in the reopening in corn, soyoil and soybeans. Speculators appear to be less willing to pressure wheat until more is known about new US economic sanctions that will be placed on Russia on Friday by the Biden Administration.
March soybeans are back testing last week’s low at $11.62/bu while March corn futures have scored a new low at $4.13. The corn market is sagging lower as price has yet to reflect a sizeable increase in US corn export demand beyond Mexico. Chinese corn import margins are rising, but there has been no indication of Chinese demand for US corn following record imports from Brazil and Ukraine. Ukraine is pricing wheat/corn cheaply to gather cash to seed 2024 crops with fob corn offered at $4.25/bu and wheat at $5.70/bu. Ukraine wheat has an export chance to Indonesia depending on freight costs through the Red Sea or around the Horn of Africa. Brazil is not offering corn for export until late July at $0.60 over, which is nearly flat with the US Gulf corn price offer. US SRW Gulf new crop wheat is offered at $230/mt or $6.20/bu.
Chicago brokers report that managed money has sold 1,900 contracts of wheat, 2,400 contracts of corn, and 1,500 contracts of soybeans. In the products, fund sales have been 2,100 contracts of soyoil and 2,500 contracts of soymeal.
Brazilian 2024 soybean and corn crop estimates keep sliding. One key Brazilian forecaster trimmed their soybean crop estimate to 152.2 million mt vs a prior forecast of 153.8 million due to lower than expected yields across Northern Brazil. Long-time crop analyst, Dr Cordonnier reduced his Brazilian soy crop estimate to 145.0 million mt, which is down another 2.0 million in the past week due to later planted soybean yields being disappointing. He left his Brazilian corn crop estimate unchanged at 112.0 million mt. Others have the Brazilian soybean crop at 145.4 million mt whilst awaiting further yield surveys late February. Deral in Parana estimates that their soybean harvest has reached 42% completed, nearly double the rate of last year. The 2024 Brazilian soybean harvest is pushing ahead at a near record pace.
Ukraine corn exports will jump in February on aggressive sales due to the need for producer cash flow to seed the 2024 spring crop. Ukraine will export over 4 million mt of corn in February, well above last year’s 3.3 million. Ukraine pricing of corn has been to move stocks. We calculate that USDA’s forecast for Ukraine to export 23.0 million mt of corn in 2023/24 is likely too low by 1-2 million mt. Ukraine farmers have an estimated 1.4 million mt of corn in the field from last year. As the war continues for a third year, the financial condition of the Ukraine farmer is worsening amid negative margins and a lack of capital.
The midday GFS weather forecast is like the overnight run with below normal rainfall for Argentina and South-Central Brazil and near to below normal rainfall for Northern Brazil. Heat will be returning in the 8–12-day period with highs ranging from the mid 80’s to the mid 90’s. Brazilian high temperatures hold in the 80’s to the lower 90’s. The Brazilian soybean harvest will continue to score strong progress, while drying Argentine soils only become a problem with the return of a high-pressure ridge aloft and extreme heat. It is March when focus on the longevity of the Brazilian monsoon will be important as Amazon soils are exceptionally dry.
March corn futures have pushed to fresh contract low at $4.11/bu on renewed speculative selling. The Brazilian soybean harvest is ongoing and paper premiums have eased by 5-9 cents on the extra supply. China booked 2-3 cargoes on the morning break, but they are not showing any urgency in the Brazilian soybean market. US weekly export sales will be pushed backwards due to Monday’s holiday. March-May Chicago wheat has pushed out to a 4-cent premium as exporters push for supply to fill Chinese orders. The bear market is reaching a mature stage, but it will take time before a Chicago rally can be sustained.
HEADLINES: Markets higher at midday, but off the opening rally; Soyoil tests prior bottom while US soymeal rallies on an export sale.
Chicago grain markets are higher at midday. Corn, soybean, and wheat futures are bouncing from an oversold technical condition while soyoil is seeing pressure from oil share spread unwinding and a new US daily soymeal export sale. Chicago values have fallen sharply in recent months with prices sitting at multi-year lows with funds/managed money holding a near record short position. The Chicago mood is bearish, but traders are loath to sell a break with the short side historically crowded. Chicago will have to form a base before any sustained rally can be launched when key moving averages would come into play. The timing for a low is seasonally right, but the time for a sustained rally is later in the spring. Chicago values should be range bound and choppy in the weeks ahead. Sustained downside price risk demands large Northern Hemisphere crops.
The USDA reported that 155,000 mt of US corn was sold to Mexico for 2024/25 and 228,000 mt of soymeal that was sold to the Philippines in the 2023/24 crop year. It is interesting that Mexico is starting to see that new crop US corn has value and booking coverage. We note that the soymeal sale was to a Philippine importer/end user that cannot take pelleted soymeal from S America. Argentine soybean meal is offered $23-35 below the US Gulf in the same timeframe.
Chicago brokers report that managed money has bought 3,200 contracts of wheat, a net 400 contracts of corn, and 2,400 contracts of soybeans. In the products, funds have sold 2,300 contracts of soyoil while buying 1,900 contracts of soymeal.
US weekly export inspections for the week ending February 15 were 14.0 million bu of wheat, 36.2 million bu of corn, and 43.6 million bu of soybeans. The export pace was greater than expected for soybeans, less than expected in wheat and in line in corn.
For their respective crop years to date, the US has shipped out 713 million bu of corn (up 173 million or 32%), 1,174 million bu of soybeans (down 346 million or 22%), and 444.3 million bu of wheat (down 94 million or 22%). The US soybean export pace continues to lag the pace needed to achieve the USDA annual export forecast. Future US soybean export cuts are ahead from WASDE.
Brazilian premiums are holding firm with truckers across Mato Grosso looking to transit soybeans to Northern arc ports at cheap rates. The paper premium rally is different from last year due to the smaller soybean harvest and unwillingness of farmers to sell the new crop off the combine. Producers are estimating that Mato Grosso will be 76-78% completed with their soybean harvest by Friday with 74-76% of the winter corn crop planted. The soybean harvest focus is shifting to MGDS and Parana in the weeks ahead. Basis bids in the soybean paper market have rallied 50-56 cents in the past 2 weeks. China has booked 10-12 cargoes of Brazilian soybeans in the past 24 hours for April/May. China has considerable coverage to book from LH May onwards.
The midday GFS weather forecast is like the overnight run with below normal rainfall blanketing most of Argentina with showers occurring in the week 2 timeframe. The drying Argentine weather should not be a problem for crops amid a lack of heat, assuming the forecast is correct with showers restarting March. High temperatures will hold in the 80’s to the lower 90’s, a few degrees warmer than normal for late February.
Near to below normal rain will persist across Brazil with most crop areas enjoying some needed rain throughout the 10-day forecast. The driest area will be Southern MGDS where soil moisture levels are reported to be short. Otherwise, the forecast leans neutral to slightly negative to S American crop production for the next 10 days.
Chicago is a bear market, but it is reaching a mature phase. However, this does not mean that lows have been formed or that rallies can last longer than a few days. Choppy base building is ahead as traders/producers assess new crop weather and supply opportunities. Chinese soymeal and soybean supplies are tight, so tight that China may have to release some reserve stocks. Look for China to be a more aggressive Brazilian soybean buyer on breaks. Traders that follow charts are looking to gauge if soyoil is forming a double bottom. More back and forth trade is what to look for into late week.
HEADLINES: Chicago mixed in thin pre-holiday trade; Soybeans rise on Brazilian ag ministry talk that crop under 145 million mt; GFS S American forecast little changed.
Chicago grain markets are mixed at midday. March Chicago wheat tested long term chart support below $5.60/bu with prices sagging. The USDA Outlook Forum concludes in a few hours with a long US holiday weekend ahead. China will return from their weeklong Lunar New Year Holiday on Monday amid the hope for additional government stimulus in the coming weeks. Chicago price trends are down, but spot Chicago corn, soybean and wheat futures are near longer term support.
The US January PPI was stronger than expected at a +0.3% versus a consensus of +0.1%. The last mile for the US Central Bank to get inflation under 2% is going to be arduous. US interest rose on the news while the US stock market pulled back from record highs. The US dollar advanced on rising US interest rates.
The Brazilian ag ministry commented at the USDA Outlook Forum that the Brazilian 2024 soybean harvest would likely be 145 million mt or less as yields are not recovering as hoped. USDA has the Brazilian soybean crop at 156 million mt or some 11 million larger.
The debate on the size of the Brazilian crop has been ongoing with the Brazilian farm soybean group named Aprosoja telling its members that the final total will range from 130-135 million mt and that producers should not sell at current low prices. As the Brazilian soybean harvest pushes beyond 50% there will be more clarity on the final crop. The size of the 2024 Brazilian soybean crop has an important statistical impact US 2024/25 exports due to their export tail being shortened. Brazilian export premiums continue to rise as crushers and exporters fight for supply.
Chicago brokers report that funds have sold 3,200 contracts of wheat and 2,100 contracts of soyoil. Managed money has bought 3,200 contracts of corn, 1,800 contracts of soybeans and a net 1,100 contracts of soymeal. Oil share spread unwinding is offering pressure to soyoil futures.
Based on vessel counts, US soybean exports will range from 49-55 million bu on Tuesday. The US remains aggressive in shipping out soybeans with China a featured shipper. US corn export inspections are seasonally ramping up ahead of the S American harvest which gathers steam in May/June.
World freight rates continue to advance with the panamax index up for its 9th straight session on tightening vessel supplies due to the extra time to navigate around the horns of Africa and S America. The rising freight cost has added to the cost of food importers cargoes in transit from the Black Sea into Asia by $21-23/mt. Ukraine fob grain prices have declined as a result.
March/May Chicago wheat spread has pushed out to a 2-cent premium as export sources are trying to pull cash supplies from the farmer to fill an SRW export sale to China. The US has shipped 14.7 million bu of US SRW wheat to China but there remains another 55 million bu that is sold to China and 8 million bu to an unknown destination (likely China). US SRW wheat prices have backed down, but cash bids and spreads are staying firm amid Chinese demand.
The midday GFS weather forecast is like the overnight run with below normal rainfall blanking most of Argentina with showers occurring in the week 2 timeframe. The drying Argentine weather should not be a problem for crops amid a lack of heat, and new chances for showers starting after February 24. Near normal rain will persist across most of Brazil with all crop areas enjoying some needed rain throughout the 10-day forecast. Brazilian temperatures hold close to seasonal averages while near to above normal highs in the mid 80’s to mid 90’s occur across Argentina.
Short covering is the feature with the Brazilian ag ministry commenting on a sub 145 million mt soy crop. This has supported soybean/soymeal futures. Soyoil is weaker on oil share spread unwinding. The CFTC CoT report will be watched to gauge the size of the fund grain short.
To download our weekly update as a PDF file please click on the link below:
HEADLINES: Chicago sinks to fresh lows in corn/soybeans on large USDA stocks; NOPA reports record January crush.
Chicago grain markets have been mixed through the morning, with large fund selling noted on a lower morning open. Once that buying was filled, Chicago grain markets drifted lower off the highs, leaving corn, wheat, and soybean markets in the red at midday.
The soy product markets have been mixed with a burst of fund buying in soybean meal after the morning open, which was accompanied by similar selling in soybean oil. Meal slipped back into the red as the morning progressed, and soybean oil has been negative all morning.
The highlight for Thursday’s trade has been the USDA Outlook Forum’s acreage estimates. The USDA’s acreage and balance sheet estimates did not offer any major surprises, but the report release did relieve some of the overhead bearishness that has been in the market in anticipation of the release. NOPA reported a record large January soybean crush rate of 185.8 million bu.
HEADLINES: Chicago sinks to fresh lows in corn/soybeans ahead of USDA outlook forum; Corn fund short near or exceeds record; US weekly ethanol production gains.
Chicago corn, soybean and wheat futures are lower at midday. Corn futures slid to new lows with March futures faltering to $4.2215/bu while December corn has dropped to $4.63. Soybeans posted an early rally, but the weakness in the grains pulled the complex lower. March Chicago wheat fell to $5.775 and tested its mid-January low before recovering. The Chicago oil share spread is slipping.
Managed money selling has been the most pronounced in the grains. The tone of Chicago stays bearish ahead of the USDA Outlook Forum which is expected to show growing new crop supplies and stocks. And Thursday’s USDA/FAS weekly export sales report is expected to reflect sluggish US demand due to cheaper Russian wheat and Brazilian soybean offers. US corn is competitive against S American offers, but Ukraine remains the world’s lowest cost origin due to rising freight costs through the Black and Red Sea’s. A lower Chicago grain close is expected today. Any short covering will have to wait until after the USDA 100th Annual Outlook Meeting that starts early tomorrow. By our calculations, the net fund short position in corn has likely exceeded the prior record at 317,000 contracts today.
Chicago brokers estimate that funds have sold 9,500 contracts of corn, 4,300 contracts of wheat, and 4,300 contracts of soybeans. In the products, funds have sold a net 3,200 contracts of soyoil while being flat in soymeal.
The weekly US ethanol grind reached a record for the middle of February at 318 million gallons, up 14 million gallons from last week, and up 7% from last year. US ethanol stocks grew by 43 million gallons to 1,084 million gallons, 2% above last year. The US ethanol industry remains profitable across variable costs and is pushing to secure additional feedstock supplies. The recovery in US ethanol production since the arctic onslaught of mid-January has been dramatic.
The midday GFS weather run is dry for Argentina for the next 9 days with showers returning in the 10–15-day period. Northern Brazil will have open harvest weather through Sunday when better rainfall returning next week. The 2-4.00” of Northern Brazilian rainfall will slow the harvest. No extreme heat is forecast. The lack of Argentine rain is not a concern as long as the 10–15-day forecast is correct via the return of rain.
Traders are betting that WASDE will use a 2024 US corn yield of 181 bushels/acre plus and a soybean yield of 52.0 bushels/acre plus to produce growing 2024/25 supplies and end stocks. The funds are piling into a record or near record net short corn/soy position heading into a new Northern Hemisphere growing season. The timing of a record short does not make a lot of sense. Like last year, USDA is expected to release their new crop balance sheets when chief economist Seth Meyers offers the economic outlook for the US farm economy in 2024. Today’s sharp break is positioning for the USDA Outlook Conference with new lows in corn/soybeans.
