- HEADLINES: Soyoil rallies on end user pricing as debate rages over US old crop soy supplies; US weekly corn exports must average 69 million bu for 3 billion bu 2020/21 total.
- Chicago values are lower at midday with old crop soybeans sinking on risk off trading ahead of the end of the month/quarter and Wednesday’s USDA/NASS Stocks/Seeding report. It does not take much volume to push the market either higher or lower, but this will change after Wednesday with fund managers and traders willing to return to more normal trading volume. Today (and recent day) volume has been constrained by the uncertainty of the report and diminished confidence in USDA data following last year’s corn stock’s revisions. Research looks for a lower close today with the day’s low already set in soybeans, corn, and wheat. A modest recovery into the close.
- FGIS weekly export inspections for the week ending March 25 were 66.7 million bu of corn, 15.6 million bu of soybeans, and 11.1 million bu of wheat. For their respective crop years, the US has exported 1,328 million bu of corn (up 614 million or 87% above last year), 1,987 million bu of soybeans (up 830 million or 72%), and 746 million bu of wheat (down 6 million or 2%). We would note that for the US to export 3,000 million bu of US corn for the 2020/21 crop year requires a weekly average of 69.7 million bu/week. This annual corn export pace is attainable with the US exporting 85-100 million bu on some weeks during the summer.
- Chicago brokers estimate that fund managers have sold 5,600 contacts of soybeans, 8,700 contracts of corn, and 3,200 contracts of wheat. In the soy products, funds have bought 2,200 contracts of soyoil and sold 4,100 contracts of meal. May soyoil has rallied sharply on new cash related strength and end user pricing on the decline.
- The two key data points to monitor in Wednesday’s NASS March Reports will be March 1 US soybean stocks and 2021 US corn seeding. Both are gaining the acute attention of traders amid their fear for a bearish report estimate.
- The Dec 1-February US soybean residual could be 40-90 million bu larger based on number of US soybeans that were in transit on Dec 1. The record US export pace and the difficulty in counting beans in transit to China might have skewed the December Stocks estimate to be more bullish. Will some of these soybeans be found back in March, that is the key concern. The average trade estimate indicates that 40-50 million bu will be found back (1,543 million bu is the average trade estimate) which could make it difficult for the report to be overly bearish.
- Moreover, traders are quietly raising their 2021 US corn seeding estimates, based on US farmers planting additional acres for yield. In a good growing year, corn yield gains surpass soybeans. And Last March’s US corn seeding estimate was 97 million acres, with the final being 6.3 million acres less. Based on farmers liking to plant corn, could US 2021 corn seeding reach +95 Mil acres.
- The midday GFS weather forecast offers showers for Central Brazil on April 7-8 with a weak frontal pass. The forecast is mostly dry for Argentina and Southern Brazil with limited rain over the next 10 days. Above normal temperatures prevail with Brazilian highs running in the 80′s to the mid 90′s while Argentine highs in the 70′s to the mid 80′s. Brazil’s winter corn area needs rain, but totals look to be light or limited into mid-April. This will place considerable importance for rain in the last 2 weeks of April and the first week of May. Our concern for the Brazilian second corn crop stays elevated.
- Chicago has been speculatively long and fund managers are liquidating risk for the report and the end of the quarter. The cash markets are firm on basis with farmers unwilling to sell stored cash grain on the break. And record high Brazilian corn bids are pulling supply from Argentina. Chicago corn/soybean values have priced in a somewhat bearish NASS report. Research does not see December corn sliding too far below $4.50 or November soybean too far below $11.50 until trend yields are confirmed. This is a highly unpredictable report, but the risk is starting to shift back to the bulls. A smaller US soybean residual shorts US processors of supply and would cause a return to bullish trends in soyoil. This is why March 1 soybean stocks are the most important number on Wednesday’s report.