- Confirmation that China has secured 2.6 million mt of US soybeans with another 274,000 mt going to an unknown destination caused profit taking on Chicago longs amid “sell the fact” trading. The bulls wanted to trim their market risk ahead of Friday’s USDA Crop report. Including Monday’s USDA sales announcement that China bought 612,000 mt, total China soybean purchases in recent days are pegged at 3.6 million mt. Commercial sources argue that another 500-750,000 mt will be announced on Wednesday which means that China has virtually completed its 5 million mt purchase program that was offered as negotiation plum to President Trump. Amid limited news and light volume, the grains followed the soybean market lower without any conviction. The market has clawed back some of its losses on the expectation of reduced US corn/soybean yields in Friday’s USDA report. Old vs. new crop wheat spreads are gaining on tightening world supplies and rising fob values. US cash basis bids for SRW/HRW are firm.
- Chicago brokers estimate that funds have sold; 2,400 contracts of soybeans, 3,200 contracts of corn and 2,100 contracts of wheat. In soy products, funds have sold 1,400 contracts of soymeal and bought 1,900 contracts of soyoil.
- The Brazilian soybean export line up is record large for early February. However, most export sources argue that it is based on the early maturation of the Brazilian crop. Yet, cash basis bids are weak and likely to weaken farther as the harvest advances. For most Brazilian farmers it is tough to find a good cash bid for spot shipment. This is likely due to US soybeans being pushed into China which is reducing demand in Brazil. Brazil is anxious to get more sales on the books amid steep Argentine discounts for LH March/April. Argentine soybeans for April are offered $.36/bu cheaper than the US Gulf, and $.50/bu cheaper than Brazil.
- Dryness questions are starting to redevelop for portions of Eastern Europe and Western Russia. Winter crops are uncovered as prior snows have melted which raises the risk of winterkill. However, the crop is still in dormancy, but the forecasts offer continued dry weather through February, which will make March rainfall/snows important. Remember that the 2019 winter wheat crop did not properly get established due to a lingering drought.
- Canada Dec 31 canola (rapeseed) stocks were 14.6 million mt, up 5% from last year with wheat stocks equal to last year at 23.2 million mt. Oat stocks were down 20% at 2.9 million mt. The December 31 oat data was bullish with canola slightly bearish.
- The midday GFS S American weather forecast is a tad drier with diminished rain chances across the southern third of Brazil. Northern Brazil has solid rain chances with 10-day totals of 3-7.00”. The rains should help finish off the soy crop and aid winter corn crop establishment. A drier forecast is offered for Argentina which is initially helpful to crops. No heat is expected across Argentina which will help preserve soil moisture. The Argentine corn crop is filling, and soybeans are blooming. We look for the Brazilian soybean harvest to reach 25-28% through the weekend. The S American weather forecast is favourable for the next two weeks.
- Friday’s USDA Crop report will produce considerable market volatility with the focus on US corn/soybean yield, and 2019 winter wheat seeding. We look for a positive report with the US corn yield being down 2-3 bushels/acre and soybeans down 0.4-0.6 bushels/acre, while US winter wheat seeding is at a 110-year low, down 600-900,000 acres from 2018. The State of the Union address from President Trump will feature US Trade progress and a call for a new US infrastructure program. Good for raw material prices.