- HEADLINES: Funds continue shedding soy length; Corn export sales soar; KC-Chicago spread nears 2011 high.
- Net liquidation continues in global ag markets as funds shed what are still sizeable net long positions in soybeans and meal. We estimate that managed fund length in soybeans this morning sits at 90,000 contracts, with meal length at 110-115,000. Funds have shed nearly 100,000 contracts of net length in soybeans, but additional selling is possible until there are signs of a bottom in Brazil’s fob market. Spot Brazilian beans are offered for April delivery $0.75 under the board, which reflects a new low in basis there. Ultimately, adequate export demand will be found in Brazil and crush in Mato Grosso and Mato Grosso do Sul will be maximised amid the need for meal and slowing crush rates in Argentina. But cash markets are king and Brazil’s soy market remains weak. We also hears of 1-2 cargoes working into the South-eastern US as Brazil’s discount to US Gulf origin reaches $60/mt ($1.60/bu).
- May corn’s failure to trade above its 20-day moving average for any length of time keeps chart-based weight intact. Chart patterns and money flow have dominated daily price discovery.
- US exporters in the week ending March 16 sold a net 122 million bu of corn, above expectations, and the largest total since mid-March 2021. Chinese purchases were known, but sales to non-Chinese destinations were 33 million bu. Recall sales must average only 24 million/week to meet the USDA’s target and we would suggest that US corn exports will be raised within the May or June WASDEs. Exporters sold another 123,000 mt to China this morning. Dire drought in Argentina, and probably final production there of 30-35 million mt, opens the door to sustain enlarged US corn exports throughout spring and early summer. A large Brazilian crop is needed to funnel global demand back to S America July onward.
- US wheat export sales totalled just 5 million bu, vs. 12 million the previous week. Soybean sales totalled 6 million, vs. 254 million the prior week. Both were below expectations. For their respective crop years to date, the US has sold 1,376 million bu of corn, down 34% year-on-year but a rather normal 74% of the USDA’s forecast, 1,818 million bu of soybeans, down 8%, and 656 million bu of wheat, down 5%. The USDA is unlikely to revise US export forecasts in its April report.
- The US dollar index has fallen another 0.3% to 102.1, with initial chart-based support now just under the market. The Dow is up 330 points as equity markets cheer a likely end to Fed rate hikes. Crude/gasoline markets are mixed, but dollar weakness and coming seasonal demand have kept spot WTI crude above $70. The outlook for US energy demand in late spring/summer is positive as retail gasoline prices above $4.00, on a national basis, will be avoided this year.
- The spot KC-CBOT wheat spread at $1.58/bu is nearing 2011’s record ($1.73). Additional upside exists as little/no subsoil moisture exists currently across the HRW Belt and limited relief is projected into the first week of April. Abandonment rates soar if this pattern stays unchanged into mid-April, which appears likely.
- The GFS weather forecast is a bit wetter across the southern Midwest, with two major systems forecast in the next 7-8 days. Cumulative precipitation worth 4-7” is possible in MO, southern I, IN, OH and pockets of KY. Heavy snow is offered to NE, IA and WI next Thurs-Fri. The Southern and Western Plains stay arid.
- The speculative community’s mantra since late Feb has been to get smaller or get out entirely. We view prices of US corn, soy and wheat as undervalued given the need for at least trend yields in 2023. Dryness in the Plains, snow in the Dakotas/MN and inundating precipitation in the E Midwest argue against early planting dates.