- HEADLINES: Chicago soyoil breaks out of key chart pattern; China books additional US soybeans: GFS midday weather forecast wetter for Southern Brazil.
- Chicago grain futures are higher at midday with corn, wheat and soybean gaining on chart-based buying amid economic stability worry across Argentina and falling crop ideas in Brazil. Declining Brazilian corn/soy crop estimates underpins Chicago on breaks. And December soyoil futures have pushed above the neckline of a head-and-shoulders bottom which sets a target of $58.40. The 50-day moving average crosses at $54.49 December soyoil which is the next upside price target. The oil share spread appears to have formed a lasting bottom at 35% with the next upside price target being 39%. Corn appears to be following the soybean rally with wheat following news out of the Black Sea.
- We look for a mixed Chicago close with an inflow of new fund money noted on the opening. Traders wonder if additional days of inflows are ahead.
- Chicago brokers estimate that funds have bought 2,000 contracts of wheat, 3,000 contracts of corn and 4,100 contracts of soybeans. In the products, managed money has purchased 3,200 contracts of soyoil and sold 2,500 contracts of soymeal. The soymeal spreads weakened on the rally with traders fearing another week of tepid US soymeal export sales.
- There are rumours that Ukraine’s Odessa port endured infrastructure damage in a drone/missile attack late day from Russia. The Russians continue to target Ukraine’s grain export ability with European farmers placing blockages on the entry of Ukraine grain into eastern border countries. The struggles of Ukraine grain exports are weighing on the margins of interior Ukraine farmers which will likely cut their use of inputs or planted acres next spring. No Ukraine farmer planned for the war to enter its third year in late February. World wheat prices rallied on the news of a Russian attack, but details are awaited.
- China’s state buyer Sinograin is rumoured to have purchased 5-8 cargoes of US soybeans off the PNW for Jan/February. A few of the cargoes traded late yesterday, but a daily sales announcement is expected from USDA in the coming days. There is talk that China is also asking for US SRW wheat offers, no sales can be confirmed.
- Private Brazilian corn/soybean crop estimates are in decline. Brazilian farmers are struggling with drought across the north and flooding across the south. Their cropping options are not what they had hoped for. Mato Grosso/Goias farmers have the option of reseeding soy fields to get a better stand or planting full season cotton. However, if sparsely populated soybean fields are torn up and replanted, the opportunity to plant a second crop of corn is lost. In Southern Brazil, the window is open to seed soybeans into early January, but the harvest is pushed backwards into late April or May. The point is that Brazil will no longer harvest a record large soy crop and winter corn acres could be cut by an amount that drops production by 6-8 million mt.
- The midday GFS weather forecast is similar to the overnight forecast across Northern Brazil and wetter across Southern Brazil. The prior weather pattern of a high-pressure ridge across N Brazil and a low-pressure trough across S Brazil is returning. This will leave N Brazil wanting more rain while S Brazil struggles to seed spring crops amid flooding rains. The best chance for N Brazilian rain will be from through Saturday before drier/warmer weather returns. Unfortunately, S Brazil just stays wet with the 11–15-day period exceptionally wet with another 3-6.00” of rain. Southern Brazil is becoming as concerning as Northern Brazil amid all the rain and impact on crops from Parana south.
- Funds are sizeable shorts in corn/wheat but there are no other notable sellers. Farmers in the US, Brazil and Argentina will not sell corn/wheat in a down market. And US farmers have sold a large percentage of their crop on the rally. We remain bullish of soyoil and soybeans, while the grain markets forge seasonal lows. The US weekly export sales report will be released Friday morning before the Chicago opening which could produce liquidation of long soymeal futures.