- HEADLINES: Chicago soymeal/corn sinks while wheat/soyoil rallies, spreading gains importance; Ukraine corn/Argentine soybeans to China, rumours abound; CONAB report starts Thursday.
- Chicago ag markets are mixed at midday with corn/soybeans lower while the wheat market bounces. A bearish February USDA report is being built into price with needed showers to fall across Argentina crop areas in the next week. The Argentine rain will help stabilise their corn/soybean crops following just over 3 weeks of acute dryness and blazing heat. Wheat futures are higher on spreading, with wheat gaining on corn/soybeans as USDA/WASDE is not expected to make any statistical changes to the US balance sheet.
- The USDA’S 100th Annual US Outlook Forum will update balance sheets from the November Baseline report. Traders are discussing that the forum will release a US 2024/25 corn end stock total between 2,500-2,700 million bu and soybean end stocks of 340-380 million bu. The USDA baseline report highlighted future bearish corn stocks, but if there is a bullish surprise it will be new crop US soybean end stocks. Outside of potential large renewable diesel demand for soyoil due to changes in California feedstock legislation and new plants coming online, it is hard to find a bullish fundamental story for soybeans, soymeal, or corn. Chicago futures have digested a large amount of bearish news, but there remains widespread uncertainty regarding S American crop sizes.
- Chicago brokers estimate that funds have sold a net 3,500 contracts of corn and 3,800 contracts of soybeans, while buying 3,900 contracts of wheat. In the soy products, funds have sold 3,600 contracts of soymeal buying a net 1,400 contracts of soyoil.
- US December Census Trade exports of US corn were 189 million bu, up 48 million from November, and up 46 million bu from last year. Soybean exports were 177 million bu, down 97 million from last year, and down 116 million bu from last year. US wheat exports at 55 million bu were up 13 million from November, and up 14 million bu from last year. The December US soybean export estimate was the disappointment relative to recent years which sparked the late month selling as rains started to return to Northern Brazil.
- US weekly ethanol production continues to expand with 1,044 thousand barrels produced this week vs 991 the prior week. US ethanol production fell sharply due to the arctic blast of mid-January. US distillate stocks fell 3.2 million barrels vs 2.5 million expected.
- The news seems to be following the market this morning. There are rumours that China is securing Ukraine corn at $169/mt though no one can pin down tonnages or shipment dates. And there are also rumours that China has bought 4-5 cargoes of Argentine soybeans for their reserve with the timing of shipment being June. Some suggest that since China is booking Argentine soybeans for June that they will cancel a like number of US soybeans. We cannot find any confirmation.
- The midday GFS weather forecast is drier than the overnight run calling for scattered showers and a moderation in temperatures across Argentina. Additional heavy rainfall of 2-3.00” will fall across the southern half of Buenos Aries but totals further north look to range from 0.5-1.50” and locally heavier. This is down some 0.5-1.50” from overnight run across the northern half of Argentina and the southern third of Brazil. Near normal rain is forecast for the Northern third of Brazil with 10-day totals of 1.50-4.00”. Heat lingers across Argentina in the week 2 forecast which will push crop maturity. Argentine highs will hold in the mid 80’s to the mid 90’s as an upper-level high pressure ridge holds across Paraguay.
- The return of Argentine rain is pressuring soymeal and corn to new lows while wheat is rallying on spreading against the row crops. The trade seems convinced that tomorrow’s CONAB and USDA reports will be bearish. Our view is one of caution with the reaction of the market more important than the data in the report itself. Bunge indicated that 1.4 billion gallons of new renewable diesel capacity would come online in the first half of 2024. Oil share spreads should continue to perform.