- HEADLINES: Soybeans/soymeal to new contract highs; China bidding for additional US soybeans; Argentine second corn crop at risk.
- Corn/soybean futures are posting sizeable midday gains. Soybeans have scored another set of new contract highs on new potential S American crop losses. And China is behind in their soybean purchases with rumours that state buyers of COFCO/Sinograin becoming more active to secure US soybeans for the state reserve. Many Chinese watchers expect that China will also secure 5-7 million mt of US corn in the coming weeks. Wheat futures are struggling to keep up with the row crops, but with US winter wheat conditions in sharp decline, the supply side of the US wheat balance sheet is being questioned. A bullish outlook is maintained with corn likely to score new contract highs this week. Wheat will be the follower into mid-February. A sharply higher Chicago close is forecast.
- S American corn crop potential is in decline as the second Argentine corn crop suffers drought/extreme heat through pollination. We estimate that the first Argentine corn yield fell by 30-35% due to record heat and limited soil moisture which produced a yield fall of 7.00 million mt. We see today’s Argentine corn production at 44 million mt, down 10 million and well below the USDA Ag attaché estimate of 51.0 million mt made as of February 1.
- The world has been banking on a record large Brazilian winter corn crop of more than 90 million mt. The Mato Grosso winter corn crop is being quickly planted at 45% completed, but concern exists in Parana where corn is being replanted due to dryness. Parana accounts for 23% of the winter corn crop with S Brazil representing some 38%. It is premature to estimate Brazil’s second corn crop at a record with so many weather uncertainties ahead. It is too dry in the south and too wet across the north. Close attention should be paid to S American weather
- FAS reported that the US sold 507,000 mt of US soybeans to an unknown destination (rumoured to be China). The sale was 249,000 mt of old and 258,000 mt of new crop. US exporters report that China continues to bid for US soybeans as S American fob basis bids rally. As the harvest advances across Mato Grosso, yield data confirms pockets of problems and that it will be difficult for their final soy crop to exceed 39 million mt. Mato Grosso’s IMEA will update their 2022 total soybean harvest this afternoon. A total under 38 million mt (December estimate 38.1 million) would be bullish for Tuesday.
- US export inspections for the week ending February 3; 41.5 million bu of corn, 44.8 million bu of soybeans, and 15.3 million bu of wheat. US corn exports are running 2% behind the USDA annual forecast, but as WASDE cuts its S American corn crops, the US corn outlook will brighten. The outlook for future US corn/soy exports is robust as S American crop shortfalls (drought) are defined. We look for March forward USDA reports to raise US corn/soy exports. A 1 billion bu S American soy production loss lifts 2021/22 and 2022/23 exports by 800-900 million bu.
- Final Chicago open interest data for Friday showed a gain of 10,052 contracts in corn, 11,895 contracts in soybeans, and 764 contracts in Chicago wheat. Investor money continues to flood into Chicago.
- The midday GFS weather forecast is like the overnight run. Above normal rainfall occurs across Northern Brazil while Southern Brazil and Argentina see limited rainfall due to high pressure ridge aloft. Heat will become an increasing worry for the Argentine second corn crop that will soon start to pollinate. Highs in the 90’s to lower 100’s will become commonplace this weekend and persist into February 20. This is a hot/dry weather pattern that like December, shows little hint of changing. And portions of Northern Brazil will see 10-day rains of 5-11.00” adding to fertiliser leaching. Our S American weather concern is elevated.
- The weather forecast is threatening (again) for S Brazil/Argentina for the next 2-3 weeks. The main Argentine corn crop is at risk with exportable Ukraine corn supplies running low, and world feed demand shifting to the US. And the podding Argentine soy crop will also be suffering from extreme heat. Our outlook stays bullish with the next upside target in March soybeans at $16.20-16.50 and $6.50-6.70 March corn. Wheat is an upside follower for now.