- HEADLINES: Funds unleash selling on the charts; Argentine crop fall bullish for months to come; World ocean freight rates rising on demand.
- Chicago ag markets are sharply lower with the grains pacing the decline. The soybean market is lower but trying to hold on the Rosario Exchange shockingly lower Argentine soy crop estimate of 27.0 million mt. The Buenos Aries Grain Exchange (BAGE) is expected to lower their corn/soybean crop estimates later today. A 27 million mt Argentine soybean and 35 million mt corn estimate has produced a crop season loss of both crops of 43-44 million mt of grain.
- The Chicago selling is fund liquidation based on the breaking of last week’s low and the sinking of US wheat values as funds pile into a larger short position. The charts are pointing down and will need time to heal before a recovery. End user pricing is noted as Chicago open interest keeps rising. The Chicago break has taken December corn futures down to support at $5.50 while July Chicago wheat has fallen to $6.80. Chicago spot wheat at $6.60 is at its lowest price looking backwards to July of 2021. The European wheat market started the decline on the movement of Ukraine wheat into the EU and their inability to sell wheat abroad due to aggressive Russian pricing. Paris wheat futures are likely to move to a carry so that EU farmers can hold their wheat stocks into summer. Wheat must bottom for the rest of Chicago to rally.
- Chicago brokers estimate that funds have sold 15,100 contracts of corn, 5,900 contracts of wheat, and 2,200 contracts of soybeans. In soy products, funds have sold 3,100 contracts of soymeal and 5,300 contracts of soyoil. Fund managers are cutting their corn/soymeal/soybean length while entering a modest net short position in soyoil.
- FAS reported that for the week ending March 2 the US sold 9.8 million bu of wheat and 55.6 million bu of corn with net cancelations of 900,000 bu of soybeans. The US also sold 319,000 short tons of soymeal and 7,300 short tons of soyoil.
- For their respective crop years to date, the US has sold 639 million bu of wheat (down 44.0 million or 6%), 1,206 million bu of corn (down 770 million or 39%), and 1,790 million bu of soybeans (down 134 million or 7%). US soy product sales are also below last year as the record Brazilian soybean crop weighs on demand.
- World freight rates have been soaring on improving demand for S American soybeans with the backlog of vessels worsening in Black Sea. There are over 14 million mt of vessels waiting to load Brazilian soybeans, a record high. Brazil is running full tilt to meet world oilseed demand. The rise in world freight rates argues for improving grain demand with China to import a record tonnage of soybeans in March/April. This could boost their total crop year import program to 99-100 million mt. Regionally, Russia continues to load out a record tonnage of wheat while China is stepping up its imports of soybeans. China’s economy is in full recovery following the end of Covid lockdowns.
- The midday GFS weather forecast is consistent with the overnight forecast in the persistence of hot/dry weather across Argentine crop areas for another 2 weeks. There maybe a few spits of rain, but most totals will be less than 0.15” and won’t help crops that have been suffering for months of acute drought. Argentine crop sizes will continue shrink.
- Growing in importance is the excessive rain that has fallen across MGDS and Parana in Brazil. Deral estimated today that just 37% of their winter corn is planted against 69% last year. MGDS is also struggling with excessive soil moisture and delayed corn seeding rates. The planting window is closing on Central Brazilian winter corn. And RGDS will holds in a dire drought.
- The Chicago break today does not make much sense! End users should be using the weakness to make forward purchases in corn/wheat and soyoil. December corn against $5.50 and May soyoil below $0.58/pound are too cheap. Argentine/Ukraine crop losses combined produce the need for record large US corn/soy crops this summer. We were bearish until Argentine abandonment rates started to soar thereby sparking these low crop totals. This is not a place for new sales. Closely follow Brazilian winter corn seeding in Parana/Mato Grosso Du Sol. Buy this break in corn, soyoil, and soybeans. Wheat should be very close to a seasonal/annual bottom. The new crop price risks are to the upside.