- HEADLINES: Chicago wheat stays limit bid; US corn export inspections surge; CONAB out Thursday; Russian war worry-could be extended.
- Chicago values are mixed at midday with Chicago wheat limit up for the sixth day (expanded limit $0.85/bu) while corn/soy trade either side of unchanged. Soyoil sold off along with crude oil while soybeans have rallied on tightening cash supplies and ongoing Chinese demand. China is back bidding for US and Brazilian soybeans for June/July with the US Gulf being the cheapest option. We look for a mixed Chicago close with strong cash markets maintaining firm wheat/soy futures while corn endures bear spreading on profit taking. We doubts that any Chicago selling will be long lived or lasting, however profit taking ahead of the USDA report is expected on Tuesday.
- We believe that May Chicago wheat came close to coming off limit but is trading 11 cents above limit based on the current futures and options spreads. If May wheat settles the $0.85/bu limit, the daily limit will expand to $1.35/bu on Tuesday. We look for the bullish pin of wheat to soon be released, which could cause long liquidation in other Chicago markets. Traders are fearful that the USDA will stay conservative in their assessment of S American crops and US balance sheets. No new crop US balance sheets are now offered until May, so the USDA will keep the industry guessing on the Black Sea impact.
- Chicago brokers estimate that managed money has sold 2,000 contracts of wheat, 11,100 contracts of corn, and 3,000 contracts of soybeans. In the products, funds bought 1,000 contracts of soymeal and sold 3,000 contracts of soyoil. The morning aggressive fund selling in corn is somewhat surprising, but largely tied to the drop in energy futures.
- US export inspections for the week ending March 3 were 62,287 million bu of corn, 28.1 million bu of soybeans, and 12.6 million bu of wheat. For their respective crop years to date, the US has shipped out 975 million bu of corn (124 million behind last year or 11%), 1,520 million bu of soybeans (down 419 million or 21%), and 582 million bu of wheat (down 103.5 million or 15%). The weekly US export pace for corn was the largest of the crop year to date, while soybeans are making up their big losses vs last year on soybeans.
- We have highlighted several times that it is the duration of the Russian war against Ukraine that produces the upside price potential in world corn/wheat and vegoil values. The longer the war goes on, the greater the new crop losses in both Russia and Ukraine. We doubt that even if Ukraine surrendered to Russia, that the world would drop aggressive sanctions on both countries if Putin stayed as President. Only if another Russia President took over that was more moderate, would the world being willing to forgive/forget. By that measure, the impact on energy/ag availability from the Black Sea could be extended well beyond current expectations. Short of a structured settlement or Ukraine winning the war, it is difficult to find a scenario that the end is near.
- CONAB will release their Brazilian soy crop estimate on Thursday morning. The trade will look forward to the CONAB estimate more than the USDA’s update. Ag Rural dropped their soybean crop estimate to 122 million mt. We would estimate the final soybean crop estimate of 119.5 million mt.
- The midday GFS weather forecast is slightly wetter across Central Argentina than what was indicated overnight. And the winter corn crop in Brazil will see enough rain for early vegetive growth, but better amounts will be needed in the last half of March and April as reproduction nears. Close attention must be paid to Central Brazilian weather in April.
- Corn futures have declined on liquidation. The political will to change the RFS is waning as rural US Congressmen speak out against any change ahead of the midterm US election. WTI crude oil has rallied strongly, and future inflation data is expected to show a widening spread to US interest rates. Chicago will raise margins (again) on Tuesday with wheat rising $1,000 contract to $5,200. Corn and soyoil margins are also increasing.