- HEADLINES: Canola (Rapeseed) soars above $700/mt to best price since 2008; China rumoured to have bought 2 million mt US corn/soybeans as well.
- Midday Chicago futures have rallied sharply with corn, soy and wheat posting strong gains on fresh US export demand. Demand led markets respond to new sales with vigour as US cash supplies/stocks dwindle. And exporters continue to sell US soybeans as a rapid pace, which means that US crushers must cut their runs so the US does not run out of soybeans. This is the driving fundamental of a demand led bull market in trying to decide the price that slows/stops demand.
- China booked 1.4 million mt of US corn in a daily FAS sale with rumours that another 600,000 mt was also completed (but not announced). And cash connected traders report that China continues to secure US soybeans over the past 36 hours with an estimated 300-350,000 mt sold off the PNW for February. China remains active as a buyer of US corn/soybeans on the worsening worry that Brazil’s main soybean harvest will be pushed back to the third week of February due to late Mato Grosso seeding and excessive rains across Parana/Santa Caterina.
- The ongoing rapid sale/export of US soybeans has Western US crushers unwilling to offer soy products beyond May, unless you sell them soybeans in the same period. The point is that US crushers are worried about local soybean supply availability for processing which is starting to panic US end users.
- Canola (rapeseed) futures soared to limit up gains before retreating on profit taking. This was the second consecutive day where canola futures jumped the limit. Canola futures rallied above $700/mt for the first time in 13 years, and are now targeting the all-time high at $750/mt set back in 2008. The shortage of canola seed/oil is real and along with soaring sunoil prices is bullying US soyoil futures. Cash soyoil ex Decatur IL is nearly trading 2.0 cents above Chicago futures which will limit the movement of cash soyoil into delivery.
- Chicago brokers estimate that funds have bought 9,300 contracts of corn, 7,500 contracts of soybeans, and 4,600 contracts of wheat. In the products, funds have bought 3,400 contracts of soymeal and 4,900 contracts of soyoil.
- US farmers have sold an estimated 82-87% of their soybean and 80-85% of their corn crops based on the sharp Chicago price rally and strong basis levels according to US merchandisers. This is allowing China and other nations to secure US corn/soybeans without rallying the cash basis very much. Commercials are selling out of their net long cash with ease. There is a point in late February or March where any new US demand will become bullish to futures and cash basis. With farmers heavily sold, there is no natural seller above values
- It is surprising that Egypt’s GASC has not tendered for world wheat in recent days. One would have thought that Friday’s break would have sparked a tender. GASC is close bought on wheat and needs coverage in the late February forward timeframe. Any GASC tender will show if Russian sellers exist in any size.
- ADM Chief Financial Officer Young reported in its earnings call that China had secured about 200 million gallons of ethanol into mid 2021, a near record amount. CFO Young was upbeat on additional China ethanol demand and China’s total ag demand in the second year of the Phase One agreement between the US/China.
- The midday GFS weather forecast is consistent with the overnight run with soaking regular rain to drop across the southern third of Brazil. This rain will cause crop quality issues and low-level flooding with 10-day rains of 6-9.00″. East Central Brazil will hold in an arid flow along with the southern half of Argentina. The combination of dryness for East Central Brazil and excessive rainfall for the south raising crop yield risks in early February. No extreme heat is noted but temperatures will be warmer than normal across most of Northern Brazil.
- The almost insatiable Chinese demand for US and Brazilian soybeans argues for new highs that turns crush margins negative. It is remarkable that China is this active with purchases prior to their Feb 12 Lunar New Year holiday. Brazilian harvest delays are worrisome for both soybeans and their winter corn crop. Stay bullish!