• HEADLINES: New contract highs in soybeans/soyoil as demand rationing need rises on smaller S American crop potential; GASC wheat purchase news awaited.

• Chicago futures are sharply higher at midday with corn, soyoil and soybean futures posting new contract highs. News that China continues to secure old and new crop soybeans out of the US reaffirms S American crop losses and the need for acute demand rationing. If S America has lost 24-28 million mt (880-1,025 million bu) of soybeans from initial season estimates that lost demand must flow to others, namely the US. This is a big demand shift with price trying to ration demand. Whether $14.75/bu rations demand has yet to be seen, but China’s short bought position heading into their Lunar New Year would suggest that any chart-based corrections will be well supported. Corn is following soybeans with traders discussing larger Argentine corn yield losses and enlarged US corn exports. China’s near record corn price into early 2023 has many traders betting that China will return to the US corn market following their holiday. We look for a sharply higher close with soybeans/soyoil and corn the upside leaders.

• Chicago brokers estimate that managed money has bought 4,600 contracts of soybeans, 5,900 contracts of corn, and 4,400 contracts of wheat.  In soybean products, funds have bought 4,100 contracts of soyoil and 4,800 contracts of soyoil. This will be the highest weekly settlement in soyoil since July with the next upside price target being contract highs at $73.74. We doubt that the old contract high will halt this rally amid rising energy values and the new renewable diesel refineries that are coming online.

• FAS reported in its daily reporting system that 251,500 mt of US soybeans were sold for the 2021/22 crop year, and 264,000 mt to China for 2022/23. And 141,514 mt of US soybeans to Mexico for 2021/22. In total, there was 393,014 mt of soybeans sold in an old crop position and 264,000 mt in new crop. S American export premiums continue to rise with the US nearly competitive for LH July. Based on smaller S American soy crop estimates, the US will enjoy sizable late summer world soybean export demand of 3-4 million mt.

• Indonesia, the world’s largest palmoil exporter, has moved to raise domestic supplies, boost domestic biodiesel production, and cap exports with this week’s new government regulations. Adding to the complexity of world palmoil trade is a ruling by the US that the world’s largest palmoil plantation, Malaysia’s Sime Darby, uses forced labour which allows its produced goods to be seized at US port. Since Sime Darby production is hard to identify from Malaysia, importers will have difficulty assuring identity of a Malaysian producer. The US move further tightens available US vegoil supplies.

• Traders are still awaiting the results of the GASC wheat tender.

• Reporters on the border of Ukraine indicate that Russia is moving medical supplies/stored blood to the front lines, a new concern for an invasion. Traders have been watching to see if Putin moved in medical supplies to the front line for a heightened invasion worry. Something new to worry about.

• The midday GFS 10-day weather forecast is slightly drier in far W Argentina but otherwise consistent with the overnight run. A classic La Niña dry pattern is offered, but light showers may sneak into Argentina and S Brazil from time-to-time. A high-pressure ridge will hold across the area and spur below normal rainfall into mid-February from Parana in Brazil southward. High temperatures are forecast to return to the 90’s to lower 100’s in the 11-15 day period. And heavy/unwanted rain returns to Central and Northern Brazil which will slow the harvest. High temperatures hold in the 80’s to the lower 90’s.

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