- HEADLINES: French news agency reports that Ukraine no longer desires to be NATO member, confirmation awaited; USDA report Wednesday.
- Chicago values are mixed at midday with wheat/corn and wheat/soybean spreads enduring profit taking following a series of limit up days in Chicago May wheat futures. The short pin position of May Chicago wheat has been lifted, which produced a correction in wheat, while soybeans/corn are rising on demand considerations and tightening cash supplies. US and S American farmers have dramatically slowed cash sales and basis bids are rising to reflect the growing need to spur movement. China continues to book US soybeans (daily basis), a trend that will be ongoing. US soybeans are the cheapest in the world, and as energy values rise, the demand for biofuels is also growing.
- President Biden has announced a ban Russian crude and other energy derivatives into the US. Other nations like the UK, Japan and other NATO members will follow. Rising energy prices make ethanol/biodiesel/renewable diesel more profitable. Biden is unlikely to alter the RFS in 2022. The Biden Administration needs the extra fuel supply and does not want to anger farmers ahead of the midterm elections in November.
- The March USDA Crop Report will be released on Wednesday and is expected to be slightly bearish as WASDE stays conservative in their US export estimates. Closely watched will be S American soy/corn crop estimates with us looking for WASDE to cut Brazilian/Argentine soy crops by a combined 9-11 million mt. S American corn production should be cut by a more modest 3-5 million mt. The result should be larger US exports and smaller 2021/22 end stocks. Traders look to buy Chicago wheat, corn or soyoil on a post report break.
- Historically in demand bull markets (based on the closure of Black Sea), Chicago values rally early and late in the week with profit taking occurring midweek. Risk premium is added as the Russian war is ongoing without a visible end. Russian President Putin has a track record of pounding enemies with rockets until cities are rubble. That same war plan is playing out with any cease fire solution lacking today. NATO members do not want to be ensnarled in war and will continue to ramp up sanctions on Russia.
- Chicago brokers estimate that managed money has sold 9,000 contracts of wheat while buying 7,700 contracts of corn and 4,600 contracts of soybeans. In the products, funds have bought 3,400 meal and 1,400 contracts of soyoil.
- Talk that Brazil has sold 500,000 mt of corn appear to be overstated. It is possible that Brazil could have sold a few cargoes of corn (to EU), the bet is that rising domestic corn price makes export sales unlikely until the winter corn harvest is available in July. We note that Brazilian corn is priced at $8.90/bu, a record high. On replacement, big losses would be incurred if Brazil sold corn below the US. It is possible that corn was sold as optional origin with Brazil an origin, but large-scale sales are unlikely. Brazil will continue to be a big importer of Argentine corn into mid-2022.
- The GFS weather forecast is like the overnight forecast with rains for Northern and Central Brazil over the next 10 days with drier weather for Southern Argentina. The rains for Central Brazil will aid the outlook for winter Brazilian corn. Pollination lies ahead in April, and additional rainfall and seasonal temperatures will be key.
- Headlines! News from a French news agency that Ukraine is no longer demanding it become a NATO member caused a quick sell off in commodities/rally in equities. Confirmation from Ukraine is lacking. We would doubt that the US/NATO will be willing to lift their Russian sanctions without a final peace accord. The Russian war against Ukraine is ongoing with various headlines causing acute market volatility. We are a cautious Chicago buyer on any acute headline selling. Headline trading makes Chicago trading difficult. Yet, a bear market is unlikely amid growing S American crop losses. The world is short of grain/food.