- HEADLINES: Macro meltdown ahead of US central bank meeting; S American crop estimates decline; China buying soybeans on morning break.
- Chicago futures are mixed at midday with wheat futures rising to sharp gains on rising Black Sea political tensions while corn/soybean futures falter on fund profit taking, weekend rainfall across the southern half of Argentina, and the macro market meltdown of the past 8 days. The DOW has now corrected 10% while Bitcoin has fallen more than 50%. US/world equity values are posting sharp losses with portfolio managers shedding market risk ahead of the US January Central Bank meeting that starts Tuesday and concludes Wednesday. A hawkish policy response is expected from the FED amid to the highest US inflation rate in nearly 40 years of 7.1%. Fear of a Russian invasion of Ukraine and fear of a hawkish US Central Bank for the next 2 years is hitting Chicago grain futures. Emotion always soars on days like these, but it is long commodities and short equity values that should prevail into midyear.
- Chicago brokers estimate that managed money has sold 6,700 contracts of soybeans, while buying 4,400 contracts of wheat and a net 3,200 contracts of corn. In the products, funds have sold 3,400 contracts of soyoil and 2,900 contracts of soymeal. March soymeal is near downside support at $385/ton and below.
- US crude oil futures are down nearly $3.00/barrel and the US$ higher. Wheat and corn are performing very well amid such financial market losses with the March-May corn spread pushing out to a 3.5 cent premium. Soybeans came under selling pressure due to the charts. The strength in the grains reflects the concern for the several of the world’s largest exporters, Russia and the Ukraine. One does not want to be short of grain should Russian set foot on Ukrainian soil in an aggressive manner.
- Questions abound on the availability of seed/fertiliser and chemicals within Ukraine with the spring seeding season just 7-8 weeks off. Producers report that crop input supplies are snarled at the border due to the Russian conflict. The impact on summer row crop seeding/yields is something to closely monitor. If Russia holds their troops along the northern and eastern borders, Ukraine crop inputs for 2022 will likely be in short supply. Ukraine farmers have halted grain sales which is causing exporters concern amid the geopolitical uncertainty.
- US export inspections for the week ending January 20 were 43.9 million bu of corn, 47.7 million bu of soybeans, and 14.7 million bu of wheat. Soybean/corn exports were above trade expectations, while wheat exports were routine. For their respective crop years to date, the US has exported 647 million bu of corn (down 97 million or 13%), 1,276 million bu of soybeans (down 398 million or 23%), and 485 million bu of wheat (down 108 million or 18%). China is active booking US soybeans for late summer and new crop due to their coming Lunar New Year holiday which starts on Monday. China also has interest for US corn on below $6.00 March.
- Brazilian farmers have halted new crop sales amid falling production. Crop yields are coming in well short in Northern Brazil due to excessive rainfall during November/December. A sub 128 million mt Brazilian soybean crop, sub 6.0 million mt Paraguayan and sub 44 MMTs Argentine soy crop adds up to a S American soy production loss of 27 million mt vs the October WASDE forecast, a very big deal!
- The midday GFS weather forecast is similar/consistent with the overnight run with a below normal rainfall trend for Argentina and Southern Brazil into February 3. Near to above normal rain returns to Northern and Central Brazil which will slow their soy harvest. It is Argentina, RGDS and Paraguay where extreme drought will deepen. S American crops have been damaged by weeks of record heat/dryness.
- The rallies in wheat/corn are noteworthy with the DOW off nearly 1,000 points at midday. We expect the portfolio mindset of buying commodities and selling equities to prevail. This should help rally Chicago grain markets amid the export and new crop uncertainty out of the Black Sea. A close above $8.10 KC March wheat and $6.20 March corn turns price trends upwards. We also see considerable value in November soybeans below $13.00. We stay bullish the grains and look to secure soyoil and new crop soybeans on this break.