- HEADLINES: Soybeans turn down on Argentine rain potential, soymeal to new lows: Chicago corn correction on hope for improved Argentine rain in mid-February: Wheat ends lower as spot EU futures tests contract low.
- Soybean futures closed lower on Friday to give back all the early week gains. Market news remains limited, and the focus remains on S American weather with rain in the forecast for Argentina after February 10.
- The Commitment of Traders report showed for the week ending Jan 23, that funds had sold just over 15,000 contracts, extending the net short position to 92,000 contracts, the most since February 2020. Funds were net sellers of close to 15,000 contracts in meal to take the recent net short position to 19,000 contracts. Funds covered 2,300 contracts of the net short position in soyoil, trimming the position to a net short 44,700 contracts.
- The CoT report shows that soyoil is now the most oversold in 5 years, soybeans the most in 4 years, and meal the most in 3 years. Chicago ag markets are oversold, and prices are cheap (relative to years beyond 2020), all while energy prices continue to move higher. Upcoming Argentine heat/ dryness is a concern, while harvest results from Brazil point to a smaller harvest. March should hold $12.00 support.
- March Chicago corn ended 5 cents lower. Spot corn in Brazil fell 12 cents to $5.66/bu. Spot corn in Europe remains perched near contract lows equivalent to $5.14/bu. Chicago corn’s failure to trade through initial chart-based resistance this week has allowed selling to resume.
- There are hints of improved rainfall in Argentina late in the 11–15-day period, but soaking rain is unlikely prior to Feb 10. The evolution of the mid-Feb Argentine forecast over the weekend is key, and supply premium will be added if dryness is extended into the second half of the month. Overall, S American weather drives daily/weekly price discovery into early spring.
- Managed funds on Tuesday were short a net 265,000 contracts, up 5,000 from the prior week, a surprise. Funds’ current short is the twelfth largest since record keeping began in 2006. A fundamental spark is needed to pry the spec community from this short position, but covering will be violent if S American yield loss is confirmed. Supply risk remain in place as a vast majority of S American corn enters its reproductive phase in Feb, March and April.
- World wheat markets ended lower following China’s adding of Argentine supply to its list of acceptable origins. Other breaking news was absent, and the longer-term outlook remains a battle of abundance in Europe and the Black Sea against rising new crop supply risks. Europe’s market continues to probe for enlarged export demand. Spot Russian fob is offered at $240/mt, vs. $245 last week. Competition for old crop world trade is elevated.
- Yet, work maintains fair value lies between $5.80-6.60, spot Chicago and cover is advised at the lower end of this range.
- The N African drought is becoming historic in nature, which is important to the trade in crop year 2024/25. Record N African imports are all but assured. The rapid development of La Niña in summer also poses risks to Argentine production next autumn. The list of forward supply unknowns is lengthy. Managed funds in Chicago on Tuesday were short a net 65,000 contracts, vs. 69,000 the previous week. Wheat futures are basing awaiting Northern Hemisphere weather conditions.
- Sagging Brazilian soy fob premiums will restrict US export demand in spring, while the longer-term soy outlook still hinges on actual S American production, which ultimately determines the duration of Brazil’s 2024 export program. An already dire drought in N Africa worsens into mid-Feb, which is important to wheat, but short-term bullish news is lacking today.