- Chicago corn, soybean and wheat futures have rallied heading into the midday hour with cash connected selling noted on the morning rally. Cash corn movement has been active in the past few days as bids have reached their best levels in months. However, US soybean sales have been waning as producers have likely marketed more than 70% of their 2017 soybean harvest. Funds and speculators have been on the other side of the producer selling based on their continued exodus of short positions. We estimate that funds are still short 175,000 contracts of corn, 76,000 contracts of soybeans, and 112,000 contracts of wheat. Funds may have to get to a flat position heading into spring before the market reaches a seasonal high. We are looking for a higher close, but based the producer sales of corn and soybeans, this is a market that takes two steps forward and one back. A close above $3.605 in March corn and $9.95 in March soybeans will confirm the next bullish chart signals. Our upside price target for March Chicago wheat rests at $4.60-4.65.
- The USDA announced the sale of 132,000 mt of corn to Spain. The sale helps confirm that Latin America has run out of corn and that the US will have the market to itself in coming months. Key will be the Brazilian winter corn crop amid the decline in Argentine production. Everyone is trying to guess if Chinese soybean importers are going to extend their forward coverage ahead their Lunar New Year holiday. In recent years, Chinese soybean buyers have been covering their needs prior to the holiday. However, this year it appears that Chinese buyers have missed the rally and are wating for a correction. Amid the big interior cash meal trade of recent days, crushers are getting short of stock. The pressures are building for China to make new purchases, but few want to chase Chicago. We suspect that most may wait until after the holiday hoping for improved S American weather. However, if the weather does not improve with either too much rain for N Brazil or too little for Argentina in the weeks that follow, these importers may be forced into coverage for March and April. Chinese importers are much closer bought than prior years do to the rising value of the Yuan.
- Russian wheat fob offers have stopped rallying ($193/mt) as producer sales have starting to increase. The world has an abundance of old crop wheat left to sell as the US market sees a sharp rally in prices. The goal of the US market is to price out its wheat due to potential new crop problems. A long lived bull rally is not expected without new crop Black Sea weather adversity.
- Crop loss will accelerate across Argentina in the next two weeks due to hot/dry weather and a high pressure ridge aloft. One needs to remember that Argentina plants two summer row crops, the first being in October/November and the second in December and January. Both crops are suffering under acute dryness, but it is corn that could endure a 20% yield loss or an Argentine crop if 31-33 million mt (vs USDA estimate of 42 million).