- HEADLINES: Wheat recovers and forges a second key reversal; GFS weather forecast drier at midday for N Brazil with searing heat; China cancels 264,000 mt of US SRW wheat.
- China cancelled an additional 264,000 mt of US SRW wheat which elevated the 3-day total to 504,000 mt. Commercial talk has another 2-3 cargoes that could be cancelled taking total cancelations to 600-650,000 mt. This would leave 600-650,000 mt of US SRW wheat sales that will be exported. Chicago wheat rebounded strongly from fresh contract lows at the opening. May Chicago soyoil has tested its 50-day moving average at $46.90 while May corn has exceeded key resistance at $4.40. Soybean/soymeal prices are sagging on spreads.
- It has been a mixed Chicago morning with the grains gaining on soybeans/soymeal. The volume of trade has been active with Brazilian corn futures rising on the worsening dryness forecast for Northern and Central Brazil. There is a strong correlation that dry March weather produce dry April’s across Northern Brazil which is underpinning corn. Brazilian farmers cut back on winter corn inputs (fertilisers) and the crop will not be able to endure deepening dryness. Brazilian fob export premiums are slightly weaker which is helping to cap Chicago rallies. Chicago has a mixed midday tone and Brazilian winter corn weather and the coming US spring growing season will play important for the marketplace heading into the NASS March 28 Stocks and Seeding report.
- Chicago brokers estimate that funds have sold 3,500 contracts of soybeans and 2,100 contracts of soymeal. On the buy side, funds have purchased 5,200 contracts of corn, 1,900 contracts of soy oil and a net 2,100 contracts of Chicago wheat. There has been active spreading of long wheat/short soybeans.
- US farmers have engaged in modest cash corn sales on the rally. The cash movement improved as May corn futures rose above $4.40/bu. US soybean cash movement is constrained as US farmers appear willing to store corn heading into spring planting. There are rumours that S Illinois, Missouri and S Indiana farmers have planted a few acres of soybeans on rising soil temperatures. However, the risks of planting this early are high with even germination rates required for high yields. Amid the widening talk of summer US heat/dryness, farmers appear to be willing to push spring planting dates forward.
- US weekly grain inspections were 44.2 million bu of corn, 14.8 million bu of wheat, and 25.9 million bu of soybeans. Weekly US wheat/corn exports were above trade expectations, while soybeans were disappointing. For their respective crop years to date, the US has shipped out 858 million bu of corn (up 215 million or 33% more than last year), wheat exports of 491.4 million bu (down 92.6 million or 16%), and 1,286 million bu of soybeans (down 306 million or 19%). We maintain that US soybean exports could be reduced by 15-25 million bu with a like increases in the US soybean crush rate. Cash crush soybean margins are well above $1.00/bu and crushers are active processing due to record large US soymeal sales. The new Alta Iowa soy processing plant called Platinum will start operations in May.
- The midday GFS weather forecast is drier across Northern Brazil and more like the EU model solution. Our confidence is rising with respect to the coming lengthy period of below normal rainfall and above normal temperatures across a majority of Brazil’s safrinha corn belt. Enough rain falls in Mato Grosso nearby, but little/no rain and warmth are advertised in Parana, Mato Grosso do Sul and Sao Paulo. There are hints that better rain for N Brazil in very late Mar/early Apr, but the strength of Brazil’s monsoon begins to wane in April and the rainfall outlook for winter Brazilian corn is concerning. The Argentine forecast is favourable except for the heavy rainfall for NE Argentina with totals of 4-7.00” which will produce localised flooding.
- CONAB will be out early Tuesday with an update on Brazilian corn and soybean production. We look for a CONAB soybean crop at 145-147 million mt which will keep the spread between itself and USDA at an important 8-10 million mt of supply. Note that world 2023/24 soybean end stocks are only 12 million mt above last year. A smaller Brazilian crop is key with WASDE raising Chinese soybean imports to a record 105 million mt. Brazilian soy exports in February are estimated at 14.5 million mt. Wheat has forged a key chart reversal following bearish news.