- HEADLINES: New fund flows into Chicago reverses overnight losses; Cash basis sags in US; Argentine weather forecast little changed.
- Chicago futures are mixed at midday with soybeans/corn/wheat enjoying another day of fund inflows. Managed funds appear to be putting additional money to work which showed up just after the reopening. We note that this money is being categorised as managed since it is index (long only) fund type money that can move between different commodities. This managed movement classifies it as managed money, not just as typical long only fund in raw materials. The index fund/long only positions as measured by the weekly CoT report has been steady/flat since the start of the year.
- We look for a mixed close with March soybeans back targeting the contract highs at $15.50 while March corn ran up against resistance near $6.90. March Chicago wheat will find resistance at $7.80-8.00 with Russian fob wheat offers steady to slightly lower early this week.
- Chicago brokers estimate that funds have bought 4,800 contracts of soybeans, 3,100 contracts of wheat, and 5,900 contracts of corn. In the products, funds have bought 2,900 contracts of soyoil while selling 1,900 contracts of meal.
- The USDA/FAS did not announce any new purchases of US corn, soybeans, soy products or wheat in its daily reporting system. China has been securing US soybeans for their reserve, but those purchases have wound down as China must replace them following a reserve sale in 120 days. China soybean auctions ended in late summer. Minnesota, South Dakota, and Ohio crushers all dropped basis bids by 3-5 cents. US soybean crushers area again struggling with arctic cold which is slowing their daily run rates.
- Statistics Canada will be releasing their December Grain Stocks report on February 7. We look for their all-wheat stocks to be 22.5 million mt (vs 16.8 million in 2022), canola of 11.6 million mt (vs 8.79 million in 2021), and oat stocks of 3.6 million mt (vs 1.87 million in 2021). It will be hard for the report to be bullish based on the comparisons in a drought year, and Canada’s import of US corn is also down accordingly. Canada has booked just 17 million bu of corn for import in 2022/23, down nearly 80% compared to last year. Reduced Canadian and Chinese imports are key reasons why we see 2022/23 US corn exports dropping to 1,800-1,850 million bu by the final WASDE count.
- The midday GFS weather forecast is like the overnight solution, but our confidence in the GFS model is low. Widely scattered showers will break out Wednesday/Thursday, but the GFS is under forecasting rain amounts and coverage. We look for 0.25-1.25” on 60% of the Argentine crop area. Thereafter, a weeklong dry trend follows, but we doubt that Argentina is slipping back into the dire drought as La Niña collapses in the Equatorial Pacific. The next Argentine/S Brazilian rain chance is offered in the 11–15-day period. This rain chance looks solid on the midday run. Extreme heat is lacking which will help Argentine crop potential recover.
- Leftover fund buying is underpinning Chicago corn, soybean, and wheat futures. Trying to gauge when the flow will end is always difficult. But the Brazilian soybean harvest is advancing and should reach 20% by February 10. A record soy crop looms and US export sales totals are in decline. If the rain for Argentina in the 10-15 day period is pulled forward in the forecast, soybean sellers will return. February 1 starts the price averaging for the US crop insurance program. Watch for bull spread weakening and a rally of backend futures ahead of the USDA Outlook meeting in late February. This is no place to chase a rally and old crop corn/soy should all be sold.