- HEADLINES: Chicago falls sharply on improved S American/US Plains weather; Fresh export demand lacking.
- Chicago futures are sharply lower at midday as markets extracts weather premium from price due to needed moisture across S America and the US Western Plains. KC wheat futures are down over 30 cents with French wheat futures falling to a 10-month low. Lower prices on the soybean chart left a gap that if it is not filled in the next few days ($15.03-15.04), it becomes a break-away gap with an acceleration of price to the downside. Corn and wheat futures did not leave similar chart gaps, however the next downside price target for Chicago March wheat futures is $7.00 and a test of the September 2022 lows.
- The decline in wheat keeps feed wheat (and milling wheat) offers below CIF US corn into North Africa and SE Asia. This will harm US corn export demand in the April/May period as farmers sweep their bins ahead of the coming harvest in July/July. Normally, world wheat trade seasonally declines in mid-February in preparation for a new Northern Hemisphere harvest. We hold to a bearish Chicago view this week and looks for a sharply lower close today.
- Chicago brokers estimate that funds have sold 6,900 contracts of wheat, 15,200 contracts of corn, and 9,100 contracts of soybeans. In the products, funds have sold 7,200 contracts of soymeal and 4,000 contracts of soyoil.
- US export inspections for the week ending January 19 were 28.6 million bu of corn, 66.4 million bu of soybeans, and 12.3 million bu of wheat. For their respective crop years, the US has shipped out 469 million bu of wheat (down 17 million or 3.5%), 453 million bu of corn (down 197 million or 30%), and 1,252 million bu of soybeans (down 35 million or 3%). The US has a record number of soybeans that are sold and not shipped in the middle of January.
- The USDA reported that 192,000 mt of US soybeans were sold to an unknown destination. The sale follows like sales that were completed last week. US exporters report that these soybeans are sold “optional origin” which means they could be sourced from the US, Brazil, or Argentina. Amid the cheap offers out of Brazil, we expect that the soybeans will be sourced from Brazil. This would produce a sales cancellation at some point in the future. There are 5 million mt of US soybeans sold to an unknown destination which raises the chance for a US cancellation depending on the price/availability of S American soybeans.
- Debate is ongoing as to where China’s purchase orders will rest in the marketplace when they return next week. The Argentine/S Brazilian rains are important, and China could slow its purchase pace. This will be watched closely.
- The midday weather forecast is slightly further west with the Argentine rain later this week compared to the overnight run. The GFS Ensemble and Canadian forecast models have the rain further east. The GFS’s track record has not been particularly good as of late as the EU model has outperformed on rainfall totals/locations.
- Moderate to at times heavy rain will fall across Argentina from late Wednesday into the weekend from a slow-moving storm cell with rain totals to date range from 0.4-2.50”. A few dry days follow with another system noted for the northern half of Argentina in the opening days of February.
- Near normal rain drops across N and C Brazil which is ideal for late podding soybeans. There will be enough dry slots for N Brazilian farmers to advance their harvest and start the seeding of winter corn. No extreme heat is forecast.
- It is a down and dirty day in Chicago as weather premium is extracted due to improved precipitation for Argentina/Southern Brazil and the Western US Plains. The next level of key support rests at $14.40-14.60 March soybeans, $6.45-6.52 March corn and $7.00 March Chicago wheat. Brazil is more actively harvesting soybeans while China is on holiday. We remain generally bearish looking for additional long liquidation.