- HEADLINES: Funds aggressively buy soybeans/soymeal on charts/China reopening; Wheat follows on fund short covering
- Chicago futures are mixed at midday with soybeans/soymeal surging on new fund buying while wheat prices rise on short covering while corn sags. We look for a mixed Chicago close with traders noting that new fund flows are being witnessed in soybeans/soymeal. Charts can be the only reason why fund managers are putting new money to work into soybeans/soymeal at $15.25 and $480/ton respectively. Historically, investing on the long side of soybeans/soymeal has not produced a lasting payoff. The Chinese reopening trade has been popular for the past 2 weeks, but by midweek, we doubt that fresh inflows will be seen amid the war of world Central Banks against inflation. We look for a mixed Chicago close with traders eying future Chinese buying trends, Brazilian soybean yields and Argentine weather forecasts.
- Chicago brokers estimate that funds have bought 7,800 contracts of soybeans, 3,900 contracts of wheat, and 3,200 contracts of corn. In the products, funds have bought 7,800 contracts of soymeal and 3,000 contracts of soyoil.
- The USDA/FAS announced a daily sale of 112,000 mt of corn to Japan. US corn is competitive in the world marketplace through May, when S American corn will be more available and economic.
- For the week ending January 26, the US exported 20.7 million bu of corn, 68.2 million bu of soybeans, and 16.4 million bu of wheat. For their respective crop years to date, the US has shipped out 473 million bu of corn (down 217 million or 31%), 1,322 million bu of soybeans (down 17 million or 1%), and 485 million bu of wheat (down 15 million or 3%). The US corn export pace needs to rapidly grow to have any chance of reaching the USDA annual estimate with the crop year half completed by the end of February.
- China is securing Argentine soyoil for March/April with tonnages said to be nearing 100,000 mt. Sinograin is booking the soyoil for China’s reserve. The purchase further tightens world vegoil supplies and reflects the attractive cost position of S American soyoil. US Gulf soyoil is priced $0.14/pound above Argentina due to renewable diesel demand. The US is not competitive in the world market due to record large soyoil demand for green fuels. Traders will be closely watching to gauge if China adds additional forward coverage.
- Chicago soymeal futures have rallied to new contract highs on speculative buying. Brazilian meal is trading $40/mt below the US Gulf for March/April and even Argentine soymeal is $23/mt cheaper for April Decatur soymeal on the rail is trading flat to $2/ton lower. The cash market is not the leader.
- Northern and Central Brazilian soybean yields are massive, often record large by 4-8%. The yields have Brazilian farmers smiling with Chicago March futures above $15.00 and diesel prices in decline. Most Brazilian farmers are selling their soybeans off the combine, which will quickly fill the pipeline. There are 8 million mt worth of vessels waiting to load US soybeans, but that total is below that of recent years. This week the Brazilian soybean harvest will kick into a higher gear, but the massive crop will cause logistical strains.
- The midday GFS weather forecast is slightly drier than its overnight solution, but our confidence in this model is low. The GFS forecast has been under-forecasting Argentine and S Brazilian rainfall for weeks. The GFS forecast is missing showers/storms over Argentina late Wednesday/Thursday with rain totals of 0.25-1.25”. A weeklong dry trend follows, but we doubt that Argentina is slipping back into the dire drought of recent months as La Niña collapses in the Equatorial Pacific. The next Argentine/S Brazilian rainfall chance is offered in the 11–15-day period. No lasting extreme heat is forecast with soil moisture being the best in months following 2 storm systems that produced soaking Argentine rain over the past 2 weekends.
- The China reopening investment flow is in full view today with soybeans/soymeal surging on large speculative buying. We doubt that the rally can be sustained amid the record large soy yields being reported across N and C Brazil. The speculative China reopening push should be completed by the start of a new month on February 1. Corn and wheat are lagging and likely nearing a trading top. Chicago values have been choppy for months and our advice stays the same – “Don’t chase rallies with new purchases”.