• Interior US soybean cash  basis has been somewhat seasonal, and has been reluctant to follow rallies in Chicago futures, which is interesting. Changes in basis still hinge upon export potential in the final third of the marketing year, which in turn, still hinges upon S American crop size, but at some point bullish momentum will require better performance from the cash market. Recall a year ago that S American weather turned adverse in late Feb/early March, and so weather in the next 3-4 weeks is critical.

• Market one liners:

Soybeans: Demand from China could very soon switch to Brazil.
Corn: We are at the top of the October-February range and require bullish supply news for a breakout higher.
Wheat: Spread trade unwinding and a large fund net short position support a bounce in prices.

• Today has seen Chicago soybean prices maintain their rally whilst the grains are modestly unchanged to either side of unchanged as we approach the close. Rising S American fob basis and active Chinese demand post Lunar New Year holiday have supported the soybean complex today whilst slowing US export demand has seen the grains languish, particularly as corn bumps its head on key chart price resistance levels. Markets are awaiting Thursday’s USDA report and unlikely to swing wildly in the absence of fresh news input.

• It is interesting to note the discount of US fob soybeans to Brazilian prices through to April. Normally, Brazilian soybeans hold a 10-15 cent/bu quality premium for their extra oil content, so this does not mean that China will move their demand northward. However, the fact that the US is in the hunt for world soybean trade has underpinned Chicago futures with US soybean export sales already reaching 91% of the USDA’s annual forecast with nearly 6½  months remaining in the crop year.

• China has been an active Brazilian soybean buyer taking some 12 to15 cargoes (according to our information) in the past few days. This has rallied Brazilian export premiums and allowed the US Gulf to become competitive again. Funds are likely to be big buyers (again) at the close in corn if March is above its 200 day moving average of $3.68. Wheat will likely be in tow. Funds continue to secure the entire Chicago market, even in the face of bearish fundamentals. It is possible that spot Chicago soybeans could retest $10.80-11.00 resistance with March corn targeting $3.75-3.80.

• We cannot help but notice that Russia’s forward wheat market is offered below spot, and we maintain our view that Russian exporters have work to do to alleviate current massive stock levels. Snow cover in key areas of S Russia continues to ebb and flow, with pockets of the region now bare. Europe since Jan 1 has been much drier than normal, and of course moderate drought lingers, and will continue to linger, across the W US Plains. Crop conditions in TX, which will be published weekly from here forward, were pegged at 31% good/excellent, vs. 29% a week ago but vs. 44% a year ago. Wheat will be increasingly exiting dormancy in TX and parts of OK amid abnormal warmth, and the point is that a new N Hemisphere growing season lies just ahead. Structurally, rallies above $4.50 (basis spot Chicago futures) will be difficult without widespread confirmed crop loss, (which is not on the cards today) and consequently we remain sellers of rallies.