• HEADLINES: Chicago sharply lower on massive fund selling; funds sales dominate trade; no fundamentals explains the acute Chicago break.

• Chicago futures are sharply lower at midday The market tried to bounce off the overnight lows on larger than expected US weekly exports of summer row crops while wheat has tried to follow. Wheat futures have languished with little resolve amid sinking Paris futures on a pickup in French farm sales. The volume of Chicago trade has been massive with the charts turning lower amid this week’s inability to rally. This is the first week in six that Chicago corn /soybeans futures did not close higher.

• Chicago brokers report that funds have sold 34,000 contracts of corn, 21,900 contracts of soybeans and 15,400 contracts of wheat. In soy products, funds have sold 8,200 contracts of soyoil and 9,400 contracts of soymeal.

• The USDA/FAS reported that the US sold 136,000 mt of US soybeans and 123,000 mt of US sorghum for the 2020/21 crop year. On the week, the US sold just over 430,000 mt of old crop soybeans, 16.0 million bu.

• The USDA reported that for the week ending Jan 14 the US sold 12.1 million bu of wheat, 56.6 million bu of corn, 66.8 million bu of soybeans, and 11.6 million bu of sorghum.

• For their respective crop years, the US has sold 785 million bu of wheat (up 40 million or 5%), 1,843 million bu of corn (up 1,044 million or 131%), and 2,108 million bu of soybeans (up 962 million or 84%). Including what the US has announced sold on their daily reporting system this week, the US has sold 2,115 million bu of soybeans or 95% of the WASDE annual forecast. US corn and soybean sales are record large for the middle of January and as a percentage of the crop year total. The US cannot keep making these large weekly sales or the US is going to quickly run out of soybeans. Acute demand rationing will be needed at some point, it is all a question of timing.

• China has booked a known 34.4 million mt of US soybeans (1,263 million bu) in the 2020/21 crop year with another 2.5 million mt likely held in an unknown destination category. The point is that China has secured a record 37.0 million mt of US soybeans and they are still bidding for February and late summer shipment from the US Gulf and PNW. A couple of fresh cargoes have sold today. Based on the sales pace, the USDA should be raising their 2020/21 US soybean export estimate above 2,400 million bu or 150-170 million bu more than they are forecasting. The problem is that if the USDA were to make such an export adjustment, US 2020/21 soybean end stocks would be negative. Negative end stocks will not occur as the market must reach significantly higher prices to starve demand. Today’s liquidating market is sending the wrong message to importers and end users.

• US and S American farmers have shut of cash sales on the market decline. We look for cash bids to rally next week on the sharp futures drop.

• The midday GFS weather forecast is slightly drier from the overnight run, but it is more in line with the EU model with limited rainfall across the southern half of Argentina in the next 10 days. Mostly dry weather holds across NE and EC Brazil for at least the next 10 days while regular rain falls across Parana, S Mato Grosso do Sul and N Argentina. No extreme heat will be lasting with 90s/100s expected across Argentina this weekend before a cold front pulls northward on Tuesday. The primary weather models have not been consistent from a run-to-run basis. A drier profile is offered in the extended range for both N Brazil and much of Argentina in the 9-15 day period.

• Surprisingly, large US export sales of US soybeans and corn should be pushing Chicago values higher in a rationing rally. Instead, the Chicago is in massive liquidation with funds racing each other to sell out long positions. We cannot find a headline or fundamental to justify today’s plunge. This appears to be just good old purge of excessive market length. End users and importers should be using this break to extend forward coverage. We continue to doubt that seasonal highs have been formed. This is a good old fashioned washout.

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