- HEADLINES: Wheat to a fresh multi-month high; March corn above $6.30; US cash market leads Chicago advance on push for supply.
- Chicago futures are sharply higher at midday with corn, soybeans and wheat leaping higher as the US equity market slides for the 7 day out of 8. March corn has posted a new rally high with wheat soaring above the December highs on short covering. March KC wheat is posting gains of nearly 30 cents taking values back against $8.50. March corn reached above $6.30 with the contract high at $6.40 the next upside target. Soybeans have followed the grains with traders lamenting how S American soy crop losses will further tighten world vegoil supplies. Canola, rapeseed and palmoil are already at record high prices (record low stocks) with sunoil values in tow. Soyoil joins the more bullish vegoils crowd as world demand is more exclusively focused on the Gulf based on rising S American premiums. The tone of Chicago is bullish with the March/May corn spread trading 37,000 contracts as March holds a 3.25 cent premium. Cash corn movement has been active over the past 2 trading sessions with futures showing limited impact. In fact, end users are raising basis trying to expand the movement. Soybean movement has been poor as US farmers are well sold on old crop stocks. We look for a strong Chicago close on fund manager interest in their long commodity short stocks macro market play.
- Brokers report that funds have bought 9,200 contracts of wheat, 12-14,000 contracts of corn, and 4,500 contract of soybeans. In the products, funds have bought 3,200 contracts of soyoil while being flat in soymeal. Funds are showing a strong interest to cover shorts in wheat and own additional corn.
- US interior cash markets are leading the rally in corn/soybeans as end users and exporters search for supply. Barge corn is trading above $6.60 at St Louis while interior Central IL corn bids are 15-25 cents over. Ethanol and livestock producers are now fighting enlarged Gulf corn export demand for nearby supply. The cold/snowy weather across the Northern Midwest is slowing cash movement and causing barge freight rates to soar. Cash bids are exceptionally strong, like last year, and there will be less feed wheat available for Plain’s cattlemen. The record US corn demand is expected to maintain strong cash corn bids into early spring.
- Falling 2022 Brazilian soybean production keeps pushing export premiums higher. The Southern Brazilian province of RGDS estimated soybean yield losses of 49% with the worst hit fields showing drought losses exceeding 70%. RGDS was expected to produce a soybean crop of nearly 21 million mt, but that production estimate has now been cut by at least 10 million. RGDS corn losses are estimated at 3-3.5 million mt. Brazilian soybean crop losses are rising with Mato Grosso yields not being as good as hoped for. A Brazilian soy crop under 130 million mt is realistic with Brazilian export premiums rising to levels just below the US Gulf for May-June-July. The US should see sizeable late summer soybean demand.
- 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 5. 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. Crops have been damaged by weeks of record heat/dryness and the forecast does not call for a pattern change. The S American weather pattern looks to be returning to its December form of too much rain across the north and too little across the south. The long- range models deepen the Argentine drought during February. Close attention should be paid to N Brazilian rains (harvest) and Southern Brazilian dryness.
- Last year Chicago corn rose to $7.75 and soybeans to $16.00 for seasonal highs in April/May. This year’s S American soy crop losses are far more important and acute demand rationing is required. March corn’s next upside target is $6.40, then $6.80 and $7.00-7.20. March soybeans should score new contract highs with resistance noted between $14.50-14.75. Russian/Ukraine tensions will keep wheat values pointed upwards with contract highs at $8.85 in focus. Our Chicago outlook remains bullish.