- HEADLINES: Chicago corn/soy bounce on cash firmness and big domestic cash meal buying: Midday Argentine forecast stays dry into Feb 15.
- Chicago futures are mixed at midday with corn/soybeans higher on renewed fund buying and talk of active domestic soymeal business this morning. The cash meal market fell near the January lows which saw domestic livestock feeders taking coverage out as far as they were allowed (US crushers limiting forward coverage to May on soymeal with few confident that there will be enough domestic soybeans to crush thereafter).
- Corn followed meal higher with Gulf sources suggesting that China had shown new interest in US corn on the break. It appears that China has not left the US corn market and will add to their forward coverage on breaks. This is rallying CIF corn bids for February/March as export slots get quickly booked. A huge US corn export program lies in the offing which is underpinning US cash basis and futures spreads. The March/July corn spread is trading at 15 cent premium this morning,
- Soybean CIF offers are up 20 cents during the past week. US exporters are withdrawing offers for May forward positions amid US supply uncertainty. Like US crushers, exporters are not willing to sell forward soy positions amid the tightening US soy supply outlook. This should be a warning sign for rationing.
- There has been talk of China soybean switching to the US PNW and washouts of February cargoes by China in the Paranagua paper market (limited new crop available) which has pressured paper export premiums to 30-32 cents over March. We would point out that this paper trade does not come with a commitment to load soybeans at a prescribed contract date. CIF cash market contracts that have loadout provisions are soaring in premium on the lack of harvest/exportable supply. Our point is that there are two totally different cash traded soybean markets in Brazil. Looking at the paper trade in the Paranaqua corridor does not fully reflect the building concern for the latent Brazilian soybean harvest and a vessel line up that is nearing 10 million mt!
- The GASC tender indicated that Russia remains a world wheat exporter. Russia sold 2 cargoes of wheat with the €50 tax at a price just below $300/mt. Russian farmers have stepped up their cash selling knowing that a variable rate tax could be enacted for 70% above $200/mt after June 1. The sales have not been heavy, but it is a start. However, it is the exporter that will continue to draw on Russian cash wheat, not the miller or flour producer. Domestic availability of wheat will be tight which holds interior prices near the record highs. This was not what President Putin wanted, and a change in policy could come by late winter. For today, Russia still has 17.5 million mt of grain that can be sold with the tax of which 12.5 million can be wheat.
- Plains feedlots are looking at the price of HRW cash wheat compared to corn. The spread has narrowed so close that HRW wheat could be fed from May-August.
- The problem is that the US HRW cash market cannot allow wheat to be fed amid tightening stocks. If a feedlot chooses to use HRW wheat as a feedstuff, we advise that the supply and price be fixed. If the US feeds an extra 50-75 million bu of HRW wheat it tightens the US balance sheet to untenable tight levels which will send KC wheat futures to new highs at $6.70-7.00.
- For the first time in the 2020/21 growing season, an above normal rainfall pattern starts across all of N Brazil which persists into mid-February. The 11-15 day forecast is also wet which could hamper the start of the Mato Grosso/Goias harvest. A dry forecast is offered for the entirety of Argentina and most of RGDS in Southern Brazil. Parana and Mato Grosso do Sul will see near to below average rainfall.
- Record large US corn export sales are expected Thursday of nearly 280 million bu. Cash basis levels for US corn/soy are firming with new highs in Chicago needed to spur the next round of sales. Early soybean harvest yield data in Mato Grosso is disappointing. It is actual harvest yields in Brazil and Argentine dryness that spurs the next rally and new contract highs. We stay bullish on any break.