- HEADLINES: Chicago chops sideways in slow volume session. US corn sales will be massive on Thursday morning; HRW wheat feeding purchases become active.
- Dull/mixed is Chicago at midday with corn/wheat lower while the soy complex trades firmer. An early Chicago rally faded with strong cash markets underpinning the midday decline. US farmers show no interest in selling a break with commercial elevator sources reporting that rising cash soy basis is having no impact on securing additional supply. Cash soybean buyers argue that they could raise soybean basis bids by 50 cents and secure only limited bushels.
- Elevators/farmers are sold out of old crop soybeans and have only a modest amount of old crop corn in store. As farmers become active with spring fieldwork/planting, the last thing on their mind will be moving any remaining old crop grain. Regardless of what next week’s NASS Stocks/Seeding report shows, cash market strength will persist on record large cruslh/export demand.
- We look for mixed/firm Chicago close as traders’ position for large US corn/wheat sales tomorrow. S American soybeans are cheaper, so US soybean sales will be less than 10 million bu. But with the US already having sold 99% of its annual export forecasts in corn/soybeans, future slow sales will not produce a bearish market reaction. The surprise would be that current price does not produce a dramatic slowdown in US corn/soy export sales!
- Strong cash corn/soybean basis is producing an impression that the US has overused the corn/soy crop. May corn is trading at 16 cent inverse vs July with May soybeans at a $2.00/bu inverse to November. Cash basis and futures spreads argue for a bull report next week.
- Chicago brokers estimate that fund managers have bought 2,600 contacts of soybeans, while selling 2,200 contracts of wheat and 4,200 contracts of corn. Funds have bought 1,200 contracts of meal and 1,900 contracts of soyoil.
- Plain’s feedlots are securing massive amounts of HRW wheat to feed from April 1 onward. The recent Plain’s rain is providing hope for a big harvest which is providing comfort from elevators that they can offer HRW wheat as feedstuff across the Plains into October. The USDA indicated in its February Outlook Forum estimate that 140 million bu of US wheat (all classes) will be fed in 2021/22. Based on cash price spreads, we see US 2021/22 all wheat feeding being 175-195 million bu amid the $0.80/bu discount of US HRW wheat to corn in TX. It is the Plains wheat cash discount that is enticing massive HRW wheat feed use.
- The US ethanol grind produced 271 million gallons of production, down 14 million gallons from the prior week. US ethanol stocks grew to 916 million gallons.
- The GFS weather forecast is slightly wetter for Central Brazil with rain amounts of 0.25-0.75″. The coming sunshine/dry weather is initially helpful to winter corn, but regular and above normal April rainfall will be essential to final yields. The forecast offers above normal rainfall for Southern Brazil (RGDS) and the northern half of the Argentine crop belt. The rains come too late to produce a yield bump, but it will allow for stabilisation. Dry Argentine pockets remain, but they will be offset on above normal rains in other regions. Heat will be felt on NE and C Brazil with highs in the mid 80′s to the mid 90′s. The forecast leans mixed to supportive corn.
- Low volume and mixed is Chicago at midday. Thursday’s USDA corn export sales should be near record large at 160 million bu. Chicago has been choppy with soyoil/soybeans rising and wheat futures in decline. However, wheat has reached a spread (vs corn) where it is becoming the main starch ingredient in cattle rations through the summer. Moreover, Russia looks to hold to a variable rate tax system that will start on April 1. We fremain bullish on Chicago breaks with a desire to just get past the always uncertain March 1 Stocks/Seeding report. The market risk is to the upside.