- HEADLINES: Chicago soybeans/soymeal rise on dry Argentine weather forecast; Soymeal reaches upside price target; China buys Ukraine corn.
- Chicago values are mixed at midday with corn/wheat futures lower while the soy complex hangs in the green, despite the rain that is falling across some of the drier areas of Central Argentina. Initial profit taking was absorbed as traders well understand that Argentina will need to see a weather pattern of regular rainfall if there is any chance of trendline corn/soybean yields in 2023. Moreover, traders are bracing for crop updates from the various Argentine commodity exchanges this afternoon which are expected to reflect slow seeding progress amid the deepening drought.
- The selling in the grains is related to the expectation that WASDE will raise its US 2022/23 corn end stocks amid a reduction of 50-150 million bu in exports. S America and Ukraine remain aggressive in corn export offers, with the US Gulf non-competitive in world feedgrain trade. Brazil is offering fob corn into April, which will not aid the US corn export outlook. It is US soybeans where Chinese import interest prevails with new sales announced this morning.
- The USDA announced the sale of 718,000 mt of US soybeans to China with another 118,000 mt to an unknown destination. The 836,000 mt sale was thought to have been done in the break late last week. We note that cash market basis is unaffected by the purchase. China has now secured 23.4 million mt of US soybeans with another 4.8 million mt of soybeans that are classified as an unknown destination. If China is half of the unknown sales, then total purchases would reach 26.8 million mt including the purchase announced in recent days. We have China taking 30-31 million mt of US soybeans in 2022/23 and 92.5 million mt in the international crop year ending on September 30.
- China booked 71,400 mt of sorghum from the US last week, the first US purchase in weeks. China has now booked 2 cargoes of US new crop sorghum with sales down 157 million bu or 92% from last year. If China books additional US sorghum it could be a sign that China is returning to the world feedgrain market. We look for China to secure corn from Brazil and Ukraine on price, and not from the US. There are European rumours that China has now booked 1.5 million mt of Ukraine corn and 1.0 million mt of Brazilian corn for 2023 shipment. China is expected to release TRQs in early 2023 for corn imports by private firms.
- Chicago brokers estimate that the managed money has bought 8,400 contracts of soybeans, 2,100 contracts of soyoil and 3,200 contracts of soymeal. In the grains, funds have sold 400 contracts of wheat and 1,100 contracts of corn. The trade is positioning long soybeans and short grain for tomorrow’s USDA report.
- The midday S American GFS weather forecast offers rain through the weekend across the northern 2/3’s of Argentina. The GFS forecast has been too dry and we fear that rainfall totals could be larger than the 0.1-0.8” that are being forecast for the dry areas of Central Argentina. The rain also pushes into Paraguay/RGDS in Southern Brazil. Thereafter, the forecast returns to an arid upper air flow with heat returning by the middle of next week (highs rising the mid 90’s to lower 100’s across Argentina). Near to above normal rain falls across N and C Brazil with near normal totals for S Brazil with no extreme heat. Brazil is in the early throes of producing a record soy crop more than 154 million mt which will offset some of the Argentine yield losses.
- Argentine weather remains the big bullish factor with but the sheer size of the Brazilian soybean crop caps Chicago rallies above $15.00. A major low in soyoil looms as renewable diesel demand steps in with 2-3 new plants starting operations in early 2023. Soymeal has reached our upside price target while soyoil is close to a bottom. US wheat values have also forged a contra seasonal low on Australian hedge pressure. This is no place to be selling wheat in our opinion.