- HEADLINES: Soyoil rallies sharply on Philipps 66 plant opening potential in Rodeo CA; USDA weekly export inspections as expected; GFS weather forecast drier for Argentina in 11–15-day period.
- The morning has been mixed in Chicago with values trading either side of unchanged. Soybeans and wheat futures are higher at midday while corn holds in the red. Soyoil has been able to rally strongly on the news that a massive Philipps 66 biofuel plant in Rodeo, California received environmental approval that would allow them to open in the weeks just ahead. The 50-day moving average in March soyoil futures crosses at $49.81 while the oil share spread is trading at 40%. Many in the industry expect that as new US renewable diesel firms come online that the oil share could push back out to 50-52%. The story in soyoil is tightening stocks into the spring and summer draw period that bumps soyoil higher at the expense of soymeal. Oil share is a position that is gaining confidence of cash traders.
- Chicago brokers estimate that managed money has bought 4,300 contracts of soyoil, 1,200 contracts of soybeans, while selling 3,900 contracts of soymeal. In the grains, managed money has sold 3,500 contracts of corn and is flat in wheat.
- FAS/USDA reported that for the week ending Jan 18, the US shipped 28.0 million bu of corn, 42.6 million bu of soybeans and 11.5 million bu of wheat. For their respective crop years to date, the US has exported 577 million bu of corn (104.6 million more), 982 million bu of soybeans (206 million less), and 393 million bu of US wheat (73.5 million less). The USDA did not announce any new daily sales.
- Brazilian farmers are just depressed. In Northern Brazil yields are down 15-60% from last year, but cash prices due to basis losses and transportation costs are even worse. Mato Grosso farmers around Sorriso are seeing cash bids of just $8.77/bu for newly harvested soybeans with June/July winter corn bids at $3.71. Such prices are well below last year and causing many producers to consider whether they should take the financial risk and plant a winter corn crop. At least 30% of farmers surveyed will not take the risk on planting winter corn due to negative profit margins. The rally in the value of the Real has added to the bearish farm mentality. Current depressed cash prices are causing supply loss for the Northern Brazilian farmer.
- Traders are trying to understand S American crop sizes. Private and public Brazilian soy crop estimates range from 135-159 million mt or a massive spread of 24 million mt with Brazilian corn crop estimates ranging from 112-127 million mt or 15 million. The price impact on Chicago valuations is massive depending on where the final crop ends up. And there is weather risk for Argentine and the Brazilian winter corn crops. Following the recent break, traders are going to be careful about selling in a hole or chasing a rally until there is crop size clarity.
- The midday GFS weather forecast is little changed from the overnight forecast with limited rainfall for Argentina over the next 10 days. Temperatures will warm to the 90’s to lower 100’s (after Thursday) with searing heat forecast for much of next week. However, the 11-15 day forecast subtracted Argentine rain in an overall arid weather profile heading into February 5. Soil moisture loss will be acute making the need for rain important heading into mid-February to preserve trendline crop yields.
- Regular showers drop across Northern Brazil with 10-day totals of 4-9.00” forecast. Bahia will endure totals in excess of 10.00” that will spark harvest delays. Cool temperatures prevail across all of Northern and Eastern Brazil with highs in the mid 70’s to the mid 80’s.
- Has Chicago digested enough bearish news with China becoming a more active daily buyer in the Brazilian export market? Brazilian farmers are also hesitant sellers of cash soybeans, not wanting to lock in losses. Technically, soyoil is forging a bottom and forecast to at least test the 50-day moving average at $0.4982 basis March futures. Corn and wheat are following amid a lack of fresh news.