- HEADLINES: New high for soybeans on smaller MGDS crop estimate; US tells Americans to leave Ukraine; US central bank decision before the close.
- Chicago futures are sharply mixed at midday with wheat sharply lower, soybeans sharply higher while corn trades in-between. The midday Chicago volume is active with spreaders bull spreading corn but exiting long wheat/corn. Resting orders are lacking which enhances daily market volatility. Chicago brokers report inflows from investment funds, but at a rate below yesterday.
- It will be interesting to monitor the financial market’s reaction to the US Central Bank interest rate decision. Amid the sharp stock market sell off, a relief rally is likely. We look for a mixed Chicago grain close. We doubt that President Putin will flinch while amassing troops at Ukraine’s border. Putin has already gamed out his next move of either invasion or holding troops along the Ukraine border for a considerable amount of time until his demands are met. Putin will not come home as a loser.
- It does not require much volume to push Chicago grain markets sharply in either direction. Today’s varied direction is based on differing fundamentals. Wheat is easing as Putin masquerades his troops while soybeans are sharply higher on a smaller soy crop.
- French President Macron will be speaking to Putin at the end of the week. The problem is that Europe is not offering a cohesive package for withdrawal of Russian troops. And NATO appears to be floundering in a package that meets Putin’s demands. And the US Government is suggesting that all Americans leave Ukraine immediately. The suggestion of a US evacuation does not indicate that Putin is backing down or that the world has dissuaded him from invading. To sum it all up, Ukraine President Zelensky told its people to; “Protect your body from viruses, your brain from lies and your heart from panic”. These maybe are the new words for a wheat trader to live by.
- Chicago brokers report that funds have bought 6,200 contracts of soybeans, while selling 5,400 contracts of wheat and 4,900 contracts of corn. In soy products, funds have bought 2,600 contracts of soyoil and 800 contracts of soymeal.
- Mato Grosso Do Sul state agency Farmasul indicated that its soy yield would fall 20% to 50.5 bags/ha vs. an early season trendline estimate of 62.84 bags. The yield reduction was a surprise in that MGDS weather was better than either Parana or RGDS. Assuming the RGDS state agency soy crop total of 10.7 million mt is correct (down 10.3 million mt) and Parana’s soy loss exceeds 9.3 million mt, a Brazilian soybean crop below 127 million mt is the making. It is the sheer size of the Brazilian soy crop loss that has pushed Chicago soybean futures to new highs. Total S American soy crop losses are now surpassing 24 million mt, a big deal that calls for additional demand rationing. Chicago soybean futures are too cheap if S American soy production is down 25-30 million mt.
- Chicago corn futures are going to find it difficult to sustain a break as world fob corn values rise and domestic US cash basis firm amid cold temperatures and expanding export demand. There are rumours that Decatur paid 24 cents over while the St Louis barge market is trading $6.65/bu. March corn futures should keep rising and trade at premium to May/July with flat price at $6.40-6.60.
- The midday GFS weather forecast is similar/consistent with the overnight run with a below normal rainfall trend for Argentina and S Brazil. Near to above normal rain returns to N and C Brazil which will slow their soy harvest. It is Argentina, RGDS and Paraguay where extreme drought will deepen amid a below normal rainfall pattern. The only good news is that temperatures will moderate to seasonal 80’s/90’s.
- Informa estimated 2022 US corn seedings at 91.5 million acres with soybeans at 87.8 million acres for a total of 179.3 million acres. We agree with the Informa corn seeding total, but we have US 2022 soybean acres at 89.0 million acres. The point is static US corn/soy acres cannot plug the S American drought shortfall. We remain bullish of soy/corn, with the wheat break unlikely to be sustained. KC wheat near $8.00 is a buy in our opinion.