- HEADLINES: Grains correct on chart-based selling; Soybeans add premium as Brazilian crop estimates continue to slide; Heat returns to N Argentina/Paraguay.
- Chicago futures are mixed at midday with soybeans/soymeal higher while corn, wheat and soyoil futures correct recent gains. The break this morning is corrective in nature following the push to new contract highs in corn/soyoil overnight. Wheat futures are waxing and waning with the market trying to measure Russian intentions regarding Ukraine. Comments from Russia that it does not intend to invade Ukraine nearby were taken as slightly bearish. However, no country announces it is going to invade another beforehand. Russia would not announce to the UN that it was planning a Ukraine invasion. Wheat has become a political market tied to daily flow of Russian intention news regarding Ukraine.
- We doubt that corn/soyoil futures have scored important highs and like a host of world financial markets, that market volatility is ramping up that produce daily 10-20 cent price swings in the grains and 20-30 cent price swings in soybeans and more than 1-2.00 cent daily price swings in soyoil. Be prepared for wide swinging markets with an upward bias in the weeks ahead. The market has not yet reached price levels that ration enough world soybean demand to prevent a dramatic tightening of US 2021/22 and 2022/23 end stocks.
- Chicago brokers estimate that managed money has bought 2,600 contracts of soybeans, while selling 7,600 contracts of corn, and 3,900 contracts of wheat. In soy products, funds have sold 3,200 contracts of soyoil and bought 3,600 contracts of soymeal.
- Private crop surveys in Brazil have estimated the 2022 Brazilian soybean crop at 125.1 million mt and the corn harvest at 106.0 million mt. The Brazilian soybean crop is based on sizeable yield falls in Parana, Santa Caterina, RGDS and MGDS. Deral in Parana and RGDS have already forecast sizeable crop declines based on harvested yield data.
- Compared to early season estimates, a 125 million mt Brazilian soybean crop would call for a drop of 19 million mt of production. And early Brazilian corn production was estimated to be cut just over 9 million mt. The combined fall amounts to nearly 30 million mt of crop. The losses are massive and will cause a large shift of world demand back to the US. Already US soybeans are nearly competitive with Brazilian offers for late July and August. We understand that China is still bidding for US soybeans for late summer delivery. New crop US 2022/23 soybean end stocks have tightened dramatically and with this smaller Brazilian harvest, US exports will grow.
- US export inspections for the week ending January 27 at 40.8 million bu of corn, 51.9 million bu of soybeans, and 13.3 million bu of wheat. Weekly soy shipments were above expectations. Wheat and corn data is unexciting, but corn shipments are beginning to rise seasonally. Weekly corn export inspections reach 50-60 million bu by mid/late Feb.
- The midday GFS weather forecast is consistent with the morning run in that meaningful S American rainfall into Feb 10 will be confined to Central and Northern Brazil. A few light/moderate showers are possible in La Pampa and Buenos Aires, but the main portion of Argentina’s ag belt will see cumulative precipitation through the period of just 0.1-0.50”. Most important is that this appears to be the return of a La Niña-based climate pattern in Argentina, with below-normal precipitation most probable in Argentina into the middle of next month. Additionally, we note that max temperatures will again reach into the upper 90s/low 100s across N Argentina, Paraguay and RGDS in far southern Brazil into late week. This year’s heat has been thye primary thief of yield in Argentina/Paraguay/S Brazil.
- The market has traded tighter US/exporter stocks/use relative to current USDA forecasts, but the market has not yet digested the sheer size of US export potential between now and the very end of 2022. Extreme volatility lies ahead, but corn and soy (particularly Nov 22) are undervalued. Spot Brazilian corn today is quoted at $7.90/bu.