- HEADLINES: Chicago mostly higher at midday; Soy crush margins stabilise on rising oil market; Breaking news absent.
- Chicago ag futures are steady/higher at midday with wheat consolidating following Monday’s break and soybeans adding modest premium amid stabilising crush margins in both the futures and cash markets. Meal has been unwilling to enter a new bearish phase as the arrival of physical Argentine supplies doesn’t occur until April, US meal export disappearance will be robust nearby, and as spot soyoil finds ample support at $0.45 per pound. A more two-sided, consolidative ag market landscape lies ahead until spring, when S American soy/first crop corn production is known, and US acreage intentions are revealed. Chart momentum stays negative, but large N Hemisphere crops are still needed to guarantee structural oversupply in crop year 2024/25. Many unknowns are present.
- Macro markets have mostly reversed from Monday. The US dollar is down slightly. Spot WTI crude is up $0.90 per barrel at $73.65. The Dow at midday is up 77 points, with US equity indexes still perched near record highs.
- International ag markets, too, are adding modest premium. World rapeseed/canola values have recovered from Monday’s multi-week lows. The world awaits changes to S American/global balance sheets from USDA, CONAB and Stats Canada on Thursday, and overall, it is just tough to be overly bullish or bearish at current prices and in early February. The short side of the marketplace is crowded. Whether recently placed short bets are rewarded will ultimately be determined by Mother Nature over the next 6-7 months.
- US/Canadian temperatures stay 10-16 degrees above normal into Feb 15, and any return of cold is likely to be short-lived. Temperatures will be 10-19 degrees above normal in E Europe, Ukraine, and key areas of southern Russia’s winter wheat belt. This is not an issue today, but the extreme nature of weather patterns is acknowledged.
- Most important in the near-term is the duration of Northern Brazil’s rainy season. Recall Mato Grosso alone produces 40% of Brazil’s safrinha crop, and planting there should reach 50% complete in the next 10 days. Normal/near normal rain has been recorded in Mato Grosso since Jan 1, but the intensity/speed of withdrawal will be monitored March 1 onward.
- The midday GFS weather forecast is similar to the morning run in calling for scattered showers and a moderation in temperatures across Argentina beginning Friday. A pattern of regular rain continues in Argentina into Feb 15-16, with cumulative totals of 1-2” projected to the widespread. Heavy rain favours N Brazil into the coming weekend. The GFS forecast is drier than the EU model in Brazil thereafter, and while confidence in GFS forecast details beyond 5-7 days is low, rain is desired in Mato Grosso and Goias well into April. The S American forecast is absent of new threats currently.
- Markets will be adrift into Thursday, and even February CONAB/USDA data is unlikely to provide much in the way of fireworks. New speculative investment will likely be funnelled into equity markets, rather than ag markets, until there is a clearer threat to exporter crop production.