- HEADLINES: Markets mixed; Brazilian soy crop estimates falling rapidly.
- Chicago futures are again mixed at midday, with soy complex values higher, wheat down 7-14 cents and corn unwilling to move in either direction. Wheat values worldwide have reacted to rumours suggesting high odds of a NATO-Russian resolution, but this is completely unfounded, and we expect Black Sea tensions to be ongoing as an easy exit is not available for either party. Soybeans continue to account for declining S American soybean estimates and government entities in Brazil are beginning to corroborate sharply lower private estimates this week.
- Deral, the crop monitoring body for the state of Parana in Brazil, now estimates soybean production there at 12.8 million mt, down 5.6 million mt (30%) from December. This adjustment alone would trim CONAB/USDA Brazilian soy crop estimates to 133-135 million mt. Mato Grosso do Sul has also pegged soybean production in that state at 11.4 million mt, vs. CONAB’s 12.6, and so a sub-130 million mt Brazilian soy crop is feasible. The domestic market in Brazil continues to outbid the exporter, and amid weak S American soy carryover supplies, any tonne lost in Brazil becomes US export demand, or the market works to slow world trade as a whole. Both are bullish relative to current prices.
- Most importantly, the Brazilian cash soy market is rising rapidly despite harvest beginning, which is historically rare. Spot fob basis in Brazil for March shipment is now quoted at $1.00/bu over Chicago futures. This compares to basis of $0.60 in mid-January. Additionally, ship waiting times in Brazil are beginning to rise as vessels are slow to be filled. Demurrage is costly now, and US soybeans are priced competitive against Brazil for early spring delivery. S American soy yield loss bodes most favourably for new crop US soy export demand, rising total costs in Brazil will boost interest for US soy in the near-term as well.
- US weekly export sales were at/slightly above trade estimates. Corn sales through the week ending Jan 20 totalled 55 million bu, vs. 43 million the previous week and a 6-week high. Soybean sales were 38 million bu, vs. 25 million the previous week. Wheat sales were a crop year high 25 million bu. US exporters sold another 27 million lbs of soyoil, with cumulative soyoil commitments as of Jan 20 a record 74% of the USDA’s annual forecast, with 36 weeks left in the marketing year. Soyoil’s long term bull story centres on expanding renewable diesel production, but nearby it is exports that warrant additional price premium. Recall Malaysian palm oil overnight scored a new all-time record high. We also note that China secured 8 million bu of US sorghum last week. China will be more active in securing US corn during the spring months.
- Interior corn markets are reflecting a growing export program, with St. Louis paying $0.25/bu over. This compares to $0.10/bu under in late December. Cash markets are strong worldwide.
- China will be on hiatus next week as the Lunar New Year collides with the beginning of the winter Olympics. China this week has been moderately active in securing spot beans from Brazil and new crop supplies from the US.
- The midday GFS’s 10-day weather forecast is wetter in far Western Argentina but otherwise consistent with prior runs. A classic La Niña set up lies ahead, and though light showers may sneak into Argentina and Southern Brazil and pattern of below normal precipitation is anticipated into the first full week of February. Heavy and unwanted rain returns to Central and Northern Brazil. Heat in the next 10 days will remain cantered on Rio Grande do Sul in far Southern Brazil.
- Our outlook into early summer stays bullish as current prices have not digested the size of S American crop loss, and associated boost in US export demand. Periodic profit taking can be expected but the path of least resistance is up into May/early June.