- HEADLINES: Chicago May soybeans test contract high against $14.30 on fund buying; S American weather forecast consistent; Brazilian soy products below US Gulf.
- Money managers pile into new soybean length on chart pattern.
- Sharply higher Chicago soy futures is the keynote of the morning with May soybeans seeking to test contract highs in the lower $14.30′s while soyoil pushed to another new contract high at $49.27. Fund managers have piled into new soy length based on a bullish chart pattern of breaking out of an upside pennant. The market appears to be following chart patterns with no major change in fundamentals, outside of the coming warm/dry weather pattern for Argentina and Southern Brazil.
- Corn has followed soy to the upside while wheat futures have held in the red in an active morning of trade. The Chicago tone is bullish, and traders are trying to decipher the amount of fresh fund buying that is yet to come. Amid the deepening Brazilian soybean harvest, we find this a difficult place to chase a rally. Funds are already holding a large net Chicago long, but they are being paid for that market stance. Traders believe that funds will be largely finished with their soybean buying by Wednesday’s midday trade which could cause prices to sag.
- Chicago brokers estimate that funds have bought 9,100 contracts of soybeans and 4,900 contracts of corn, while selling 1,900 wheat. In soy products, funds have bought 5,400 contracts of soymeal and 3,300 contracts of soyoil.
- The soybean chart pattern appears to the upside driver that is pulling in new fund buying. But there are macro features that are helping as the US$ is weaker, Monday’s strong crude oil rally and the news that EPA will be enforcing the principles of the 2007 Energy Bill. There is no one bullish driver this morning in Chicago, it is a combination of technical and macro financial factors.
- Last week’s Central US bitter cold weather likely caused a decline in the weekly corn grind (for ethanol) as plants reduced runs or pushed to maintenance only to withstand the chill. The weekly ethanol production decline could lean bearish on Chicago corn on headline risk, but most plant managers are back to normal production starting on the weekend. The weekly report will be released by EIA early Wednesday.
- Ukraine reported that its total February 1 grain stocks were 18.2 million mt, 3.5 million less than the same date in 2020. The data comes from its State Statistical Agency which advised that the Ukraine has been an active exporter of wheat/corn. The 2020 Ukraine grain harvest fell to 65.4 million mt from a record 75.0 million in 2019 due to poor late summer growing conditions.
- On March 15, Chicago position limits will rise to 57,800 contracts in corn (from 33,000), 27,300 contracts in soybeans (from 15,000 contracts), and to 19,300 contracts in wheat (from 12,000 contracts). The position limit increase comes at a time of additional fund interest in Chicago grain.
- 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 the Northern third of Brazil with high temperatures in the 80′s to lower 90′s. The forecast models are consistent in hinting at better Argentine rainfall after March 7.
- Supply driven bull runs are never linear or march like the demand led bull market from September into mid-January. Research advises against chasing today’s soy/corn rally amid the quickening Brazilian harvest and their resulting cheaper fob offers. And WASDE may wait for expanding Brazilian yield data before making a crop adjustment in March. S American soyoil/meal are offered well below the US Gulf which will cap US export demand. This latest rally world vegoil prices appears to be speculative in nature. Be careful with today’s Chicago rally.