- HEADLINES: Stats Canada surprises on year end wheat stocks; Additional soybeans to China/unknown; S American forecast threatening.
- Chicago futures are mixed with wheat posting gains on the Stats Canada December 31 stocks data, while corn/soybeans sag on long liquidation/risk reduction ahead of Wednesday’s USDA February Crop Report. The volume of trade is active with market volatility elevated. The February crop report does not often fan sizeable market moves, but this year could be different due to the dire drought across Southern Brazil and Argentina. Traders are expecting a slightly bearish report with their mindset to secure weakness based on heat/dryness holding across S Brazil/Argentina into the end of February. S American crop sizes are still in retreat which is the basis of the bull market that extends backwards to late November. We look for a mixed close with any selling pressure to fade by Wednesday’s Chicago open. This is not a break to be selling for producers with S American crop sizes to decline again into March.
- Chicago brokers estimate that managed money has sold 6,200 contracts of corn and 6,400 contracts of soybeans, while buying 4,100 contracts of wheat. In the soy products, funds have sold 5,400 contracts of soyoil and bought 900 contracts of soymeal. Soyoil values appear to be following crude oil.
- FAS/USDA reported that another 332,000 mt of US soybeans was sold to an unknown destination with 132,000 mt sold to China. We hear that the new crop purchase is Chinese crushers, while the old crop sales are to the Government for reserve replenishment. There have been unconfirmed rumours that the Chinese Government could release 600,000 mt of soybeans from their reserve in March to cool surging cash soymeal/oil prices, but the rumour cannot be confirmed.
- Stats Canada released their December 31 stocks estimates this morning. The big surprise was Canadian all wheat stocks at 15.5 million mt, which was down 10 million from last year and 2.0 million mt less than trade estimates. Canadian December 31 canola stocks were a record low 7.5 million mt while oat stocks were 1.65 million mt. Both were in line with pre report forecasts and considered neutral today, but bullish longer term as crush/export data shows no future sign of slowing. Canadian canola futures are mixed while Chicago oat futures are higher.
- There are world cash rumours that China has booked 1.0 million mt of Aussie wheat for June/July loadout overnight. China continues to scour the world for soybean and feedgrain supplies to quell their rising domestic prices. China has purchased a record amount of Australian wheat and Ukraine corn in the 2021/22 crop year. A US corn purchase is expected before May 1 as trade negotiations continue. The US/China are looking for ways to complete the Phase One agreement.
- The US exported a larger than expected 196.4 million bu of corn, 50 million bu of wheat and 297.9 million bu of soybeans. US Census corn exports are running 148 million bu above FGIS inspections.
- The midday GFS weather forecast is consistent with the overnight run with below to much below normal rainfall dropping across Argentina and the Southern third of Brazil for the next 10 days. Heat starts to build on Friday and persists through next week with highs in the 90s/lower 100s. Above, to much above, normal rains fall across Northern Brazil with 10-day totals in a range of 4.50-9.00”. The regular heavy rain will produce enduring mud and slow harvesting operations. The pattern is stable into February 25.
- Wheat values are catching a bid on the 10 million mt decline (vs 2021) in Dec 31 Canadian wheat stocks of 15.5 million mt. Corn/soy futures are liquidating ahead of the Feb USDA crop report and expectation that CONAB/USDA will be conservative in cutting S American crop estimates due to drought. We see key support below $6.25 May corn and $15.50 May soybeans. Demand rationing is needed and not yet surfacing. Stay bullish and secure any post USDA report break would be our considered advice.