- Mixed has been the morning in Chicago, with grains higher and beans a bit weaker. There is little fresh news to discuss but world grain markets are consolidating following the recent plunge, and as funds now hold sizable net short positions. Wheat futures worldwide remain deeply oversold. Russia’s Ag Min has put 2019 wheat production at 75-78 (higher if weather is favourable), vs. 72.5 million mt this year. However, this isn’t overly insightful. Using trend yield, Russian wheat crop this year will likely reach 75-76 million mt. Black Sea weather has been rather benign during the winter months, but it is conditions during Apr-Jun that make or break yield. Heavy rain is due in W Europe into the weekend. Soil moisture in France and parts of Germany will stay well above last year.
- Chicago brokers report that funds have bought 2,500 contracts of corn, 3,000 contracts of wheat have sold 1,000-1,500 contracts of soybeans. Using daily counts, we estimate that managed funds today are net short 130,000 contracts of corn, 80,000 contracts of Chicago wheat, 55,000 contracts of soybeans and a record 43,000 contracts of KC wheat. We doubt this short position in KC wheat can be sustained as US stocks contract and as the Gulf HRW market is still in a position to boost exports between now and early summer. Otherwise, we look for EIA’s weekly report on Wednesday to feature steady US ethanol production (302-304 million gallons). Weather has caused headaches, but production and blending margins have recovered swiftly and noticeably. US gasoline stocks erode seasonally into summer while the crude market seems to be digesting another draw in US stocks.
- The midday GFS weather forecast is little changed with its Central US snow forecast. In the near term accumulation of 3-9” will impact the Dakotas, IA and MN. Additional heavy snow, upwards of 15”, will be spread across the whole of the Central Plains. And of note, the EU model’s weekly climate forecast updated late Wednesday keeps below normal temperatures intact into the end of March. Extreme US winter conditions will attract more attention if they continue beyond the next two weeks. It is the ongoing cold and lack of snow melt that’s beginning to raise concern.
- The S American GFS weather forecast is also unchanged from the morning release in S America, and so we expect EU-GFS model disagreement to continue. The GFS maintains normal/above normal rainfall across the majority of Brazil’s Ag Belt into March 19. If realised, this bodes well for safrinha corn. Corn’s moisture demands will begin rising in late March. We do note that regional floods are causing logistical issues in Brazil, with truck movement in key parts of Northern Brazil. These issues won’t be resolved for another 8-10 days. Below normal temperatures and above normal precipitation is offered to Argentina.
- World grain markets have found sellers at current prices, which validates the break. However, a very important growing season lies ahead amid the lack of exporter buffer stocks, particularly in Russia and Europe. Still no rain is offered to the driest areas of Australia in the next two weeks, with wheat planting there to begin in April. Caution is warranted following a full 12 months of extreme world weather patterns.