- HEADLINES: Chicago falls hard on new managed money selling; Cash Brazilian basis sags on the advancing soybean harvest: GFS midday weather forecast slight drier for Argentina.
- Chicago grains are weaker at midday with soybeans, soyoil and soymeal forging new lows for their respective declines. Soymeal has been able to recover on active oil share spread unwinding while corn/wheat futures are just off their mid-morning lows. Worry about China’s property sector and future consumptive demand along with the ongoing decline in soybean basis in the Brazilian paper market (April/May) has sparked the Chicago selling. Chicago soyoil appears like it wants to test the spring low at just under $0.45/pound before trying to bounce.
- We suspect that this may be “opposite week” with Chicago values down on Monday and then bouncing later in the week. Sub $12.00 March soybeans and sub $4.40 March corn are not levels to establish new net short positions.
- Chicago brokers report that the managed money has sold 3,400 contracts of wheat, 6,300 contracts of corn, and 6,600 contracts of soybeans. In the products, funds have bought 4,200 contracts of soymeal and sold 4,600 contracts of oil. Managed money is adding to an already large net short position.
- There are rumours that Purdue Poultry off the US East Coast will import 2-3 cargoes of Brazilian soybeans to crush. The falling Brazilian cash basis bids have produced the opportunity for import. Last year, there were 420,000 mt of Brazilian soybeans imported into the Eastern US Coast for crush. We look for like import totals this year. There is no interest in importing Brazilian soybeans to the US Gulf as US crushers do not want to segregate the soyoil so that domestic production stays eligible for biofuel credits.
- There is talk that President Milei is having trouble with his proposal to raise Argentine soy product and grain export taxes amid Congressional resistance. The Argentine Congress does not want to grant approval due to flagging world grain/oilseed prices. If the Argentine Congress does not approve the 2-3% tax increase they will stay at the prior levels at 12% for wheat/corn, 33% for soybeans and 31% for soybean products.
- US export inspections for the week ending January 25 were 35.5 million bu of corn, 32.7 million bu of soybeans, and 9.8 million bu of wheat. Crop year to date exports stand at 1,016 million bu of soybeans (down 314 million or 24%), 615 million bu of corn (up 141 million or 29%), and wheat at 403 million bu (down 82 million or down 17%). The US export pace has been routine since the start of 2024.
- Brazil is considering a new expansion of its blend of soyoil in their domestic diesel supply to aid crush margins and cut greenhouse gas emissions. Hope is building that Brazil could blend 25% of diesel supply with soyoil by 2027.
- China’s SinoGrain is rumoured to have rolled 3-5 cargoes of US soybeans for February/March forward to April on surging freight costs. The switch to the PNW will save logistical cost. We note that Sino is not cancelling the business, just rolling the sale forward.
- The midday GFS weather forecast is consistent with hot/dry weather forecast for Argentina and far Southern Brazil through February 8 when the chance of better rain returns to Buenos Aires and the southern half of Cordoba. North Central Argentina and Southern Brazil hold in a drier pattern with extreme heat noted this week. High temperatures will range from the mid 90’s to the lower 100’s with locales enduring heat of 102-105 degrees.
- Brazilian weather calls for near to below normal rainfall across the southern half of the nation and near normal rainfall across the north. Outside of RGDS, no extreme heat is noted with high temperatures ranging from the 80’s to the mid 90’s. It is Southern Brazil where better rainfall, and less heat is desired.
- The bears are out in force due to sagging Brazilian soy export premiums which some argue hints at a larger Brazilian harvest. Independents will release their crop tour estimates on Tuesday morning of the Brazilian soybean crop. The HOBO spread (heating oil vs soyoil) is back to positive for the first time in years suggesting that profit margin exists for bio/renewable diesel producers, regardless of the sagging on D4/D6 RIN values. The US importing 2-3 cargoes of Brazilian soybeans into the Eastern US Coast is not a surprise and does not alter balance sheets. The Chicago bearishness can be cut with a knife today…..