- HEADLINES: Soybeans retest contract high on rising SE Asian vegoil price/adverse S American weather; Oil/Meal share at best level since 2013, Wheat follows.
- Following a disappointing FAS weekly US corn, soybean and wheat export sales, traders turned their attention to S American weather and a likely decline in Argentine/Brazilian soy/corn production due to too much rain across N Brazil and too little across Argentina/RGDS. Moreover, rumours of China buying Brazilian soybeans and rising Asian vegoil values pushed Chicago soyoil futures to fresh highs. Wheat and corn have been followers, but Argentine crop progress/condition estimates this afternoon will be closely followed. Crop condition falls are expected following the recent dry weather trend.
- The midday market holds a bullish tone with soybean contract highs within reach heading into the weekend. It is S American weather and the USDA March Crop Report on Tuesday that will direct Chicago valuations next week. Grain charts are turning the corner with May corn holding support at $5.30, May KC wheat at $6.20 while soybean futures push to highs.
- Chicago brokers estimate that funds have bought 3,000 contracts of corn, 9,600 contracts of soybeans, and 2,200 contracts of wheat. In soy products, funds have bought 6,200 contracts of soyoil and 1,100 contracts of soymeal.
- It appears that OPEC+ is agreeing that it will keep oil production flat this spring with Russia/Kazakhstan allowed modest production gains. The world was hoping that Russia would boost production 1-1.5 million barrels/day to cool rising prices. However, OPEC+ pricing power is strong as the US fracking industry remains hobbled by COVID-19 and limited new investment due to the Biden Administration’s desire to push away from fossil fuels in coming years. The OPEC+ decision could push crude prices back to $70-75 by mid-summer.
- US export sales for the week ending February 25 were 8.1 million bu of wheat, 4.6 million bu of corn, and 12.3 million bu of soybeans. The US corn sales were a marketing year low. For their respective crop years to date, the US has sold 874 million bu of wheat (up 23 million or 3%), 2,328 million bu of corn (up 1,279 million or 122%), and 2,210 million bu of soybeans (up 960 million or 77%). The US has now sold 88% of the USDA’s corn export estimate and 98.5% of the soybean export forecast. The US shipped out 42.6 million bu of soybeans and a crop year high 79.0 million bu of corn last week. China shipped 14 million bu of corn and 12 million bu of soybeans. China has exported a record 34.5 million mt of US soybeans with open sales of only 1.2 million mt. Corn switching from unknown to China raises their US corn purchase total to 18.7 million mt with 7.1 million shipped. We anticipate that China will purchase/ship 21-23 million mt of corn in 2020/21.
- Rosmeteo (Russian Crop Service) issued their winter wheat condition report this afternoon which showed falls in conditions relative to the past 5 years. The biggest surprise was that 10.2% of the Ural crop was rated as poor. The Russian winter wheat crop ratings were well down from last year with an estimated 1.4-1.8 million ha (3.5-4.4 million acres) needing to be reseeded. It is expected that these failed acres will go into spring barley/sunflowers. Research maintains a 2021 Russian all wheat crop estimate of 76-78 million mt.
- The midday GFS weather forecast is like the overnight solution. Near to above normal rain will fall for N Brazil and while a flash drought deepens across Argentina into March 20. Heat will be a feature for Argentina with highs in the 90′s to the lower 100’s for another week. The warmest period will be on the weekend when readings rise to the lower 100′s. The combination of heat/dryness is taking a toll on the Argentine crop yields.
- Fed Chairman Powell indicated that the US Central Bank would be patient with transitory increases in inflation. This suggested that a policy of low rates and rising asset prices (reflation) will persist. S American crop losses due to adverse weather could be especially bullish for US corn amid the growing delay in the Brazilian winter seeding while Argentina’s first and second crops both enduring acute stress during pollination. Research expects that China will secure an additional 2-3 million mt of old crop corn this spring and export all the 10 million mt of open sales. However, the US$ is rising which has taken some of the lustre away from midday Chicago valuations.