- Chicago futures have rallied sharply to start the week as SE Asian hedge fund selling has ended and commercials have stepped forward to extend their coverage. There are air pockets above and below the market with limited selling noted until March corn reaches $5.10 and March soybeans $13.45. The wheat rally has not been as robust without strong export demand. We look for a higher close as the market forges a trading low in the 5-month demand led bull market. Note that 10% corrections occur from time to time in demand led rallies.
- Chicago brokers report that funds have bought 7,400 contracts of corn, 6,500 contracts of soybeans and 4,500 contracts of wheat. In soy products, funds have bought 4,800 contracts of soyoil and 4,600 contracts of soymeal. A lack of selling over the market has pushed Chicago values upwards
- FGIS weekly US Inspections for the week ending January 21 were; 54.8 million bu of corn, 72.7 million bu of soybeans and 19.2 million bu of US wheat. Last week’s US soybean exports were raised to 83.5 million bu, up another 7.9 million bu. China loaded 44.5 million bu of US soybeans or 1.2 million mt. China will load an average of 1.9 million mt of soybeans during the year. Brazil nor Argentina exported any soybeans to China last week, with the US the only supplier.
- For their respective crop years to date, the US has loaded about the same number of soybeans for the entirety of the 2019/20 crop year at 1,664 million bu. This is up a record 737 million bu or 79%. The US has now exported 83% of the WASDE annual US export estimate and only needs to export an average of 11.6 bu/week for the remainder of the crop year (to achieve the USDA export forecast of 2,030 million bu). Such a forecast is woefully low and argues for higher prices and a more aggressive effort with demand rationing. The US also shipped out 737 million bu of corn (up 337.4 million bu or 84%) and 591.5 million bu of wheat (down 4 million bu which is down 1%). The US corn export pace will be rising sharply into May amid the US’s price competitive position.
- Brazil has harvested less than 1% of its soy crop, well below historical averages due to latent seeding dates amid the September-November drought. The bulk of the Mato Grosso soy harvest will not be occurring until the third week of February. This means that the record tonnage of vessels 6.3 million mt waiting to load as of today, will swell to 10-12 million mt by mid-February. We doubt that Brazil will be a sizeable soybean exporter until the opening days of March.
- There will be additional switching and new outright purchases of US soybeans to bridge the supply gap of Brazil’s soybean export program. 3-5 week harvest delays will push loadings backwards and cause logistical struggles in March.
- The midday GFS weather forecast is slightly drier across Eastern and Central Brazil, but wetter across Paraguay, Parana and all of Southern Brazil where some areas could receive as much as 8-12.00″ of rain. The excessive rain in S Brazil will slow the harvest and cause widespread soybean rust outbreaks. Far Northern Argentina will also be in this wet pattern. Central and Northern Brazilian dryness is edging soy yield potential lower. It was hopped that soybeans in Parana would allow the Brazilian harvest to start in earnest, but low-level flooding is now causing delays.
- Big markets have big swings. Recent Chicago price action points to the heightened volatility that we expect TO continue. Soy futures have an acute economic need to ration US demand. The worrisome delay in the Brazilian soy harvest only adds to the upside Chicago price potential. Black Sea fob wheat offers are impossible to find after Feb 15 which will soon shift world demand to North America.