21 January 2022

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  • HEADLINES: Corn gains on US price competitiveness; China said to be buying US soybeans for August; US/Russia talk – no deal just talk.
  • Chicago futures are mixed at midday with corn/soyoil trading firmer while wheat, soybeans and soymeal hold in the red. The morning Chicago rally took corn to its early January highs at $6.17 with news emerging from Geneva, Switzerland that the US/Russia would continue to have dialog on Ukraine. This pulled Chicago grain values off their highs. The US pledged to provide a written document to address the demands of Russia early next week. Russia wants the US/European nations to pledge that they will never allow Ukraine to join NATO or any other Western Nation alliance. And to reduce military armaments pointed at them.
  • It is possible that Russia could stand down via the US documentation which would prevent a Ukraine invasion, or Russia could use the US document as a bait and switch campaign, saying that they were tricked into thinking that the US and Europe had plans to alter Ukraine’s independence. We doubt that the brewing Russia/Ukraine dispute is resolved.
  • Chicago brokers estimate that managed money has bought 3,500 contracts of corn and 400 contracts of Chicago wheat while selling 6,200 contracts of soybeans. In meal, funds have sold 4,600 contracts while buying 1,500 soyoil. Traders are questioning the massive 34,000 contracts of March soymeal that traded overnight and why active periods of trade did not move the market more.
  • FAS reported for the week ending January 13, the US sold 14.0 million bu of wheat, 43.0 million bu of corn, and 24.7 million bu of soybeans. For their respective crop years to date, the US sold 607 million bu of wheat (down 179 million or 23%), 1,584 million bu of soybeans (down 521 million or 25%), and 1,675 million bu of corn (down 168 million or 9%). US soybeans are becoming competitive again in the July/August timeframe with China said to be active in securing August import need.  China is also said to be seeking US soybeans for March via their reserve.
  • FAS announced the sale of 132,000 mt of US soybeans to China and 247,800 mt of corn to an unknown destination. Most are pointing to Mexico or China as the unknown corn buyer. Chinese demand for US soybeans reflects the US’s competitive price position for July/August.
  • March/May corn at 3 cent and July/November soybeans at a $1.13 premium reflects tightening US grain stocks and improving export demand profile. The task of the market is to push demand forward into new crop. China cash corn is trading near/above $11/bu, Brazilian cash corn at $8.40/bu and EU cash corn at $7.40/bu, which makes Chicago corn at $6.15/bu look cheap. US corn is cheaply priced.
  • And the July/November soybean spread at $1.13 argues for 2021/22 US soybean end stocks below 250 million bu on a hike in US export demand during July/August. S American crop losses will push world soybean demand back to the US. Paraguay has been the hardest hit with their soy crop cut by more than 50% to 5.0-5.5 million mt. This will reduce soybeans into Argentina for processing.
  • The midday GFS weather forecast is similar/consistent with the overnight run with needed rain dropping across Central/Southern Argentina with 1-3.50” totals over the next 10 days. Rains will be limited across the Southern 2/3’s of Brazil next week with better chances in the 7–12-day period.  The heat/dryness is pulling S American corn/soy crops further downward. Northern Brazilian weather will favour the harvest.
  • The first week of August was the last time that a Chicago soybean futures contract settled the week above $14.00/bu. Soyoil is taking a breather, but its fundamentals are extremely bullish. Chicago corn is too cheap amid rising world feed pricing and US corn export demand looks to gain. Fund flows into commodities are expected to persist next week. We hold to bullish corn/soyoil/KC wheat.
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