- HEADLINES: Chicago mostly higher at midday with November soybeans to close above $12.00 for the first time since July 2014; Argentine/S Brazilian dryness into March 6.
- Spreading and charts cap old crop soy futures; grains rise on S American weather worry.
- Mixed in declining volume is Chicago trade at midday. November soybeans and corn/wheat futures have paced the morning rally while bear spreading and March liquidation pressure old crop March soybean futures. March soymeal is (again) bouncing off support at $420/ton while November soybeans look to close above $12.00 resistance for the first time in years.
- The last time that a November soybean futures contract was able to muster a close above $12.00/bu was back in July of 2014. Assuming the WASDE US 2021/22 stocks/use ratio of 3.2% is correct, it would justify November soybean futures reaching $13.00 pre-planting to entice additional acres.
- To date, US farmers are not showing any willingness to break away from current summer row crop rotations. And Dakota farmers are strongly complaining about dry soils and that neither soybeans or corn have an economic advantage. Unless soy futures rally strongly, it may be difficult for NASS to report 90-91 million acres in its seeding/stocks report on March 31. NASS will start their March Seeding and Stocks survey later this week.
- Chicago brokers estimate that funds have bought 3,400 contracts of corn and 3,600 contracts of wheat, while selling 2,900 contracts of soybeans. In soy products, funds have sold 2,500 contracts of soymeal while being flat in soyoil. The oil/meal spread could be near a short term price peak.
- The Brazilian Real has declined sharply to 5.50:1 US$ on news that Brazilian President Bolsonaro replaced the CEO of state-run oil company Petrobras, with a retired general of the military to lower fuel prices and halt the sale of unprofitable assets of the company. The prior CEO, Roberto Branco was a favourite of investors due to his trusting hand and ability to lower costs of the state-run company. Active selling in the ADR (ordinary shares) of Petrobras pressured its price to $7.80, a nearly 20% decline as world crude oil prices soar. The BOD of Petrobras will be meeting Tuesday. The drop in domestic diesel prices was greeted favourably by Brazil’s truckers as it cut cost in their transit the Brazilian soybean crop to crushers and exporters.
- US weekly FGIS exports for the week ending February 18 were 49.0 million bu of corn, 26.5 million bu of soybeans, and 12.0 million bu of wheat Last week’s US soybean export estimate was raised 4.2 million bu to 33.9 million bu.
- For their respective crop years to date, the US has exported 945 million bu of corn (up 421 million or 80.5), 1,870 million bu of soybeans (up 812 million or 77%) and 653 million bu of wheat (down 14 million or 2%). US soybean exports are record large and indicate that future shipments must average just 14.4 million bu/week.
- World ocean freight rates are rising with panamax/handy costs at 10-year highs. We understand that the April/May cost to transit Brazilian soybeans to the SE US Coast is $35-37/mt ($1.00/bu) not including off load/inland transit fees. This means that one would need a margin of at least $1.20/bu just to breakeven bringing in Brazilian soybeans. The current fob spread is $0.35/bu, which means that Brazilian beans are a long way from working into the US.
- The midday GFS weather forecast is consistent with the overnight model with limited rain across the southern third of Brazil and the entirety of Argentina. And there will be numerous days with high temperatures in the 90′s. And above to much above normal rain will drop across N Brazil with 80′s to lower 90′s. The N Brazilian harvest is slow.
- Demand rationing is required in both old/new crop soybeans, and to a lesser degree in corn. Any breaks will be well supported with tightening cash availability to underpin spot futures. The US farmer has limited old crop left to sell as adverse S American weather slows the harvest. Parana soy yields are not matching producer expectations. As freight rates rise and the July/Nov soybean spread comes in, rationing old crop soy is becoming difficult. A close above $13.92 is bullish May soybeans.