- HEADLINES: Ag markets relax on Chinese corn cancellations and mixed export sales.
- Chicago grain and oilseed futures opened the morning lower and have remained under pressure into midday. Soybeans were the downside leader in early trade but have recovered to within a few cents of unchanged. Corn has been 5-8 cents lower, while wheat has recovered from early selling and is just below unchanged. Soybean meal has been lightly mixed, and soybean oil has corrected from contract highs set on Wednesday.
- Early weakness in corn was tied to a USDA announcement that China had cancelled 15 million bushels of corn purchases. Some traders wonder if Thursday’s announcement had been misreported. Wheat futures have relaxed as tensions on the Ukraine/Russian appear to have eased somewhat. However, March wheat tested the 200-day moving average for the first time since July and has turned higher.
- There were no soybean sales announcements for Thursday, but Chinese buyers are rumoured to be working orders on this break, with additional demand thought to be below the market.
- Chicago brokers estimate that managed money has been net sellers of 8,000 contracts in corn, 3,000 contracts in soybeans, and 1,500 contracts in wheat.
- The US weekly export sales report was mixed relative to estimates. For the week ending January 27, US exporters sold 46.3 million bu of corn, just 58 million bu of wheat, 40 million bu of soybeans. The corn and soybean sales were within expectations, while the wheat sales were well below estimates.
- For the respective crop years to date, exporters have sold 634 million bu of wheat (down 189 million or 23%), 1,776 million bu of corn (down 432 million or 20%), and 2,413 million bu of soybeans (down 488 million or 23%).
- Additionally, exporters sold 32.4 million bu of new crop soybeans, which was well above estimates and at a marketing-year high. There were not any new crop corn sales registered, but new crop wheat sales also rose to a marketing-year high of 3.8 million bu.
- In the soy product markets, soybean meal sales were well above estimates and jumped to a 2 year high of 667,433 short tons. Soybean oil sales fell to a 3-week low of 9 million lbs, while weekly exports dipped to an 11-week low of just over 4 million lbs.
- In other markets, crude oil has held above $88 this morning, March natural gas has plunged 12%, while the US Dollar Index has dropped to a 3-week low.
- The midday GFS weather forecast is similar to the overnight run. Light/widely scattered showers will impact Argentina on the weekend, with totals in excess of 0.25” favouring La Pampa and Buenos Aires. Widespread dryness then blankets all of Argentina Feb 8-18. Temperatures in Argentina will be rather variable, though the GFS does maintain the risk of readings in the 90s and low 100s next week. This upper air pattern will also sustain above normal rainfall across key areas of Central and Northern Brazil. Harvest there remains sluggish, while Brazil’s soybean vessel line-up continues to grow.
- Wheat lacks the demand spark seen during late summer and autumn, with EU values probing for spring export demand. Corn and soy markets have paused following the recent dramatic rally but there is nothing to suggest lasting highs have been scored. Recall normal seasonal corn/soy price trends stay positive until the growing season begins in earnest. We would maintain that seasonal strength this spring will be exacerbated by exporters competing with feeders/processors for finite supply.