- HEADLINES: US, international markets continue surge; Ukraine calls for emergency declaration; US HRW belt stays arid.
- Chicago ag markets are again sharply higher on the addition of risk premium. Wheat remains the upside leader following Putin’s recognising of territories in eastern Ukraine, followed by a proposed emergency declaration from Ukraine, which along with ongoing threatening Plains weather mandates the need to keep US wheat export demand slowed. This in turn becomes complicated if world importers lose access to Black Sea through the duration of the 2021/2 marketing year. The tone is clearly bullish.
- Exporters sold another 132,000 mt of soybeans to China. Other breaking news is absent.
- However, even corrective breaks have been difficult to sustain in Chicago amid soaring global ag markets. Spot Malaysian palm oil scored a new record high for a fourth consecutive session. It is clear global vegoil supply and demand will stay imbalanced for some time. And competing minor vegoil markets will work to sustain palm/soy demand.
- Cash rapeseed oil in Europe this million is quoted at $0.80 per pound, and with spot palm oil priced at $0.71 there are indication that US soyoil exports won’t continue at a pace well above what is needed to meet the USDA’s forecast. Recall that as of Feb 10 the US has sold 81% of the USDA’s annual forecast.
- Additionally, the Brazilian Real traded below traded (fractionally) below 5:1 for the first time since July 2021. This has pushed spot Brazilian corn to a new record high $8.30/bu. US Gulf corn fob offers, on paper, are now quoted above EU/Black Sea feed wheat, but until new wheat crops are harvested this summer, feed wheat cannot fill the gap in trade left by reduced S American corn crop sizes. As of mid-Feb, corn shipments from the largest exporters total a record 66.7 million mt, up nearly 10% year on year. USDA predicts global corn trade in 2021/22 to rise only 6% from the previous year.
- The spot futures-based soybean crush margin is calculated at $1.40/bu, UP $0.05 from Tuesday and well above year-ago levels. The message is that value is relative, and today there is no sign that Chicago ag markets are overly expensive.
- In the near-term grain futures add premium until there are signs of relative calm in the Black Sea. Soybeans add premium in an effort to maximise new crop seedings, which will be challenging amid rising corn and even cotton prices. Yet, we reiterate that extreme volatility must be expected, particularly as some measure of this week’s advance is based on uncertain geopolitics.
- The midday GFS weather forecast at midday is consistent with the overnight run in projected at least a temporary and favourable pattern shift in S America. Continued regional dryness in Central Argentina and Southern Brazil must be monitored, but the driest areas of NE Argentina and RGDS and Santa Caterina in far Southern Brazil will see 10-day precipitation accumulation upward of 2-4”. Topsoil moisture will be replenished. And soybean harvest accelerates in much of Mato Grosso and Goias beginning this weekend.
- It is difficult to know just how much of this week’s premium addition is due to Black Sea logistical risks or due to tightening US balance sheets and the need to plant every possible acre of arable land this spring. Recall revenue insurance prices will be determined in just four sessions time, which should fundamentally be most supportive to Nov soybeans. Current valuations are aligned with global/exporter supply and demand.