- HEADLINES: Old crop corn/wheat retreat on profit taking; Brazil to lower biodiesel blend rate to B6 or B7 from B10; Egypt buys vegoils.
- Chicago futures are mixed at midday with old crop corn and Chicago wheat lower while soybeans, soyoil and new crop corn hold in the green. The volume of trade has been better than prior days with profit taking noted from the managed money crowd. The end of the quarter and month looms along with an all-important USDA March Seeding and Stocks report. This has slowed the fund buying (compared to Monday) and caused profit taking in the front end of corn, soymeal, and wheat futures markets. Also, traders are preparing for a slowdown in the US corn, soybean, and wheat export sales pace on Thursday vs. recent weeks. The market tone in Chicago is mixed with bear spreading active in corn as Chinese corn demand has not stepped forward on their Ukraine corn shortfall/cancelations due to the ongoing Russian war. Fund managers are moving their long positions backwards to participate in an extended bull market should the Russian war persist, causing a disruption to spring Ukraine grain seeding.
- Chicago brokers estimate that funds have sold 3,000 contracts of wheat, 7,000 contracts of corn, and 3,400 contracts of soymeal. Managed money has been buyers of 3,500 contracts of soyoil and 2,300 contracts of soybeans.
- There are export rumours that Egypt has been a large buyer of optional origin vegoil in their last tender to the tune of 60-80,000 mt. Food security concerns may have fuelled the large oil purchase, but few exporters are willing to say whether the vegoil is US or S American soyoil. The market will be watching for a FAS sales announcement on Wednesday should any of the soyoil be supplied by the US.
- And rumours in Brazil that they could move next week from B10 biodiesel blend to B6 or B7. The high price of soyoil within Brazil and need by the world market for vegoils could facilitate the biodiesel blending downgrade. We note that Brazil also dropped their import tax on ethanol to 0% from 10% starting in April. The lower ethanol import tax is not expected to produce much change for US exports nearby, but the tax reduction will be important from August onward. Brazil’s sugar harvest is ongoing and domestic ethanol supplies are adequate, but they will become exceptionally short by August. The lower tax will support US corn ethanol grind rates from August into January.
- FAS/USDA announced that 240,000 mt of US soybeans were sold to an unknown destination, likely China. This was the first new sale to China in 5 days. China remains historically short on their forward soybean coverage into August.
- The midday GFS weather forecast is like the overnight run with another chance of Plains rain during the middle of next week with moisture totals estimated in a range of 0.25-1.50” for OK, KS and NE. The upper air flow pattern is open and shows no evidence of a blocking pattern which should offer rain chances every 4-6 days for the Plains and the Midwest. There is a chance that several areas of the Delta will become too wet for spring grain seeding, but soil moisture restoration is underway elsewhere. The first half of April weather pattern appears normal for the Central US which will favour a timely start for the seeding of US summer row crops.
- Chicago grain futures are at historical highs for late March, heading into the end of the quarter and a major USDA crop report. Look for the bulls to bank profits on rallies while end users will be slow to buy dips hoping that US farmers will seed fencerow to fencerow amid full margins. US March 1 corn stocks will be above last year, which means that China or other Ukraine corn buyers need to shift more of their demand to the US if Chicago corn is to rally above last year’s high at $7.75. Brazil is becoming more aggressive in offering new crop corn at sizeable discounts to the US Gulf. We hold a sideways/range bound view heading into April.