- HEADLINES: Markets stay elevated amid Black Sea concerns; S American cash markets firm.
- Chicago ag markets are sharply higher at midday as funds are forced to cover short Chicago wheat positions, with frigid temperatures this week and ongoing dryness across the Plains lending further support. Select states across the Plains are scheduled to release updated winter wheat crop conditions this afternoon, and further deterioration is anticipated. Recall good/excellent crop ratring in TX in late January was just 7%, with KS at just 32%. Black Sea grain flows have been so far unaffected by Russian-Ukrainian tensions, but risks to corn, wheat and minor vegoil trade flows remain massive.
- US exporters this morning sold 120,000 mt of HRW to Nigeria, half of which is reported to be for new crop delivery. Exporters sold another 120,000 mt of soybeans to China for 2022/23 shipment.
- Additionally, we note that the Brazilian Real has fallen to a new 7-month low, which was worked to support domestic corn and soy markets there. Spot corn in Brazil is quoted at $8.15/bu this morning. Brazilian corn for May delivery is quoted at $8.00. That Brazil’s domestic corn market is perched above US Gulf fob offers is important, and we maintain that little/no corn will leave Brazilian ports over the next 4-5 months. Spot Brazilian fob soy basis has ebbed and flowed since this early Feb, but indications today place US Gulf beans below Brazilian origin for Mar-May shipment.
- There is talk that China is selling soybeans from its reserve to cool near-term supply/demand issues, and we must expect importers/end users to be apprehensive at extending coverage at current prices. Reserve sale tonnages are unknown. But in the long run, Chinese reserves must be replaced, and global/exporter grain and oilseed balance sheets will only be solved via trend/above yields in both hemispheres over the next 12 months. Extreme volatility will be a feature of the marketplace well into late 2022.
- US export inspections through the week ending Feb 17 included 62 million bu of corn, vs. 57 million the previous week and a new marketing year high. Soybean inspections totalled 36 million bu, v. 43 million the previous week, with wheat inspections totalling 20 million bu, vs. 17 million the prior week and also a crop year high. Based on the recent relationship between FGIS corn shipments and official Census exports, official US corn exports in Feb are likely to reach 280-300 million bu, a record for the month. Corn export disappearance stays elevated and is not forecast to peak until Apr-May. Rising EU wheat prices will also work to keep US corn competitive against feed wheat until new winter wheat harvests are available in early/mid-summer.
- The midday GFS weather forecast is consistent with the overnight run in offering a pattern reversal to S America over the next 10-12 days. High pressure ridging aloft S Brazil eases to allow needed moisture to flow across Argentina, eastern Paraguay and far Southern Brazil. Welcomed dryness will be established across key areas of Central Brazil into the opening days of March, with soybean harvest there to accelerate. We note that additional soaking rain will be needed in Argentina in the first of half of March to fully stabilise later planted corn yield potential, but the two-week outlook leans favourable relative to Dec-early Feb conditions.
- A long-term bullish outlook is maintained amid the need to reduce global soybean and possibly global corn consumption over the next 10-12 months. But daily price movement in the near-term hinges upon Black Sea military activity and the extent to which grain/vegoil exports are slowed, which is unknowable.