- HEADLINES: Chicago bounces with soyoil holding chart support; Brazilian premiums rise on demand; Wheat falls on Russian cash sales aggression.
- Chicago grains are mixed at midday with corn/soybeans recovering while wheat futures hold in the red due to sagging Russian/Black Sea price offers. Chicago March soyoil tested its prior contract low at $0.4449 and bounced. Strengthening cash basis bids and the rally in the Brazilian paper market offered early day support. Debate persists over S American crop sizes with Citibank pegging the 2024 Brazilian soybean crop at 148 million mt and 117 million on corn. Private soybean crop estimates are in retreat for Brazil in a massively large range of 135-157 million mt for soybeans. However, Argentine crop estimates are holding steady. The impact of the recent hot/dry weather is being assessed during the corn/soybean reproductive phase with at least another 10-15 days required to gauge if there are pollination issues.
- A mixed Chicago close is expected with short covering to occur on breaks heading into Thursday’s data dump from Statistics Canada (December 31 Canadian grain stocks), CONAB (Brazilian crop and stocks update), and the USDA February Crop Report. The bears are looking to take some money off the table just in case the USDA/CONAB slashes Brazilian soybean/corn crop more than expected.
- Chicago brokers report that the managed money has sold 3,400 contracts of wheat, and bought 1,300 contracts of corn and 2,700 contracts of soybeans. In the soy products, funds have bought 3,100 soymeal and 3,900 contracts of soyoil.
- US export inspections for the week ending February 1 were 24.6 million bu of corn, 52.4 million bu of soybeans, and 9.7 million bu of soybeans. Last week’s corn exports were revised up to 36.5 million bu with soybeans at 33.6 million bu.
- For their respective crop years to date, the US has exported 641.2 million bu of corn (up 142 million or 29%), 1,070 million bu of soybeans (down 330 million or 23%), and 414 million bu of wheat (down 93 million or 18%). WASDE can trim the US 2023/24 soybean export estimate by 15-25 million bu while holding wheat and corn exports steady on Thursday. We anticipate that WASDE will raise Ukraine corn exports by 2-3 million mt which could cause a future decline in US corn trade.
- The USDA will be holding their Annual Outlook Meeting in Washington DC next week. It is the 100th anniversary of the USDA Ag Outlook Forum and will be well attended. As part of this meeting, WASDE will be releasing new balance sheets for the 2024/25 US crop year. Note that in November, the Baseline Report estimated 2024/25 US soybean end stocks at 300 million bu and corn at 2,616 million bu with US corn seeding pegged at 91.0 million acres and soybeans at 87.0 million acres. We expect that WASDE could raise 2024 US corn acres by 500,000 due to reduced SRW wheat seeding (January Report). This suggests that the WASDE 2024/25 US balance sheets will lean bearish of corn and neutral on soy/wheat.
- The midday GFS weather forecast is wetter across Argentina crop areas with soaking rains of 1.50-3.00” for Buenos Aires, Santa Fe and Cordoba in the 6–10-day period. Showers are expected to fall across Southern Buenos Aires starting Thursday, with the GFS forecast being more generous with rainfall for the rest of the country next week. Any dryness will be centred on Southern and South-Central Brazil where rain totals look to average less than 1.25” into February 15. Another 3-4 days of acute heat and dryness occurs across Argentine before rain chances improve. High temperatures reach the mid 90’s to the lower 100’s with moderation starting from south to north on Thursday.
- The macro crowd points to the strength of the US dollar (today) as a reason why the morning commodity rally will stumble. An early Chicago break could not gain any momentum to the downside which sparked the recovery. The coming CONAB/USDA reports on Thursday look to produce the next directional price move. Seasonal price trends offer a bottom in mid-February and a rally into spring. Flagging Russian wheat offered prices are deemed as bearish for US wheat futures. Look for choppiness into Thursday’s reports.