- HEADLINES: Soybeans/corn bounce amid energy price rise; Mideast geopolitical tensions rise; GFS weather forecast stays wet for N Brazil offers arctic cold for central US after January 15.
- Chicago grain futures are mixed at midday with wheat weaker on sliding EU values while soybean/corn futures rebound on improving demand. End user pricing in soy products has been featured with soyoil finding support following yesterday’s chart-based bullish reversal. And WTI crude oil futures rallied 3% on local protests that closed Libya refinery that produces 300,000 barrels of products per day and a growing worry surrounding Mideast geopolitics. The combination of continued attacks across the Red Sea and growing political tensions within Iran is adding to the upside risk of world energy values. The kettle of world energy is coming to the boil as the Israeli war against Gaza/Hamas rages on. Geopolitical risk is growing in seriousness and should be followed.
- Corn and soyoil futures are rising as heating oil futures have rallied 9 cents which is raising profit margins for US renewable and bio diesel producers. We look for a mixed Chicago close with soy gaining on wheat and Nov soybean futures needing to secure acres for spring seeding by holding above $12.00. However, trade talk of a sizeable decline in US SRW 2024 wheat seeding is noted.
- Soyoil as a feedstock for green diesel is competitively priced against tallow, cornoil and even yellow grease, which is encouraging bottom picking in soyoil futures. Cheaper S American soyoil will not enter the US based on it not being eligible for carbon credits along with a US import duty of 19%. And US cash meal is priced well above Chicago March futures, but the return of Argentina as an important exporter from April onward will limit a return of sizeable US export demand. Argentina is offering 46% soymeal for April/May at $15.00 under Chicago vs the US Gulf at $25.00 over. The $40/mt cheaper Argentine offer will entice world meal importer demand with normal growing weather for their developing crop. Oil share will continue to perform in the coming months.
- Chicago brokers estimate that that fund managers have sold 5,000 contracts of wheat and 2,000 contracts of soybeans, while being flat in corn. Fund managers have bought 1,900 contracts of soybeans and 3,200 contracts of soyoil. As of yesterday’s close, we estimate that funds are net short 54,000 contracts of soyoil, not that far away from the record fund short of 80,000 contracts.
- The USDA did not announce any new daily export grain sales. US corn remains competitively priced through July, but Brazilian soybeans are $0.85/bu cheaper from mid-February onward which will limit future US sales much like last year. We hold to a 1,725 million bu 2023/24 US soybean export estimate with the smaller Brazilian crop and larger crush due to the soyoil inclusion of 14% of their diesel supply adding to Brazil’s crush rate. This opens a window of export opportunity for US soybeans in the late summer and autumn.
- We want to highlight that China is preparing to issue 2024 TRQ import grain licenses. We are not expecting that the import licenses will be larger than prior years. It is just that new private Chinese demand could be found in the grains depending on US values and import profit margins. China looks to import 9.5-10.5 million mt of wheat and 25-28 million mt of world corn in 2023/24.
- The midday GFS weather forecast is wet across Northern Brazil as the forecast keeps a pattern of near daily showers in place there into Jan 18. The 10-day outlook is consistent with the overnight run offering monsoonal rainfall of 4-6.50”. Drier weather occurs across S Brazil and Argentina without any lasting heat. February and March are the key weather months for yield determination across Argentina/RGDS in S Brazil. So far, weather conditions have been crop favourable in both areas.
- US wheat futures are enduring new fund selling based on technical considerations, while soy/corn futures bounce as improved Northern Brazilian rain is now digested. The question of Brazilian soy crop size hinges on actual harvest yields across Mato Grosso/Goias in mid to late January. Early soy yields are disappointing to producers. We look for Chicago choppiness into next Friday’s USDA report with a short covering top due in the US dollar by Friday.