- It has been a corrective morning in Chicago as corn, soybean and wheat futures decline following days of rally. The market had become technically overbought with the RSI (Relative Strength Index) in soybeans reached 62%, the highest since July. The market needed a rest and a correction which is occurring this morning. We note that some argue that Argentina received rain overnight, and it did in the far NW provinces that produce less than 4% of their corn/soybean crop. This rain will have virtually no impact on 2018 Argentine soy/corn production. If a soaking rain DOES NOT appear by February 10, a host of private Argentine soy production estimates will slip to 48-51 million mt. Most Argentine crop sources are pegging their current corn crop at 36.5 million mt with a lack of rain in the first ten days of February pushing that 34-35 million mt. The USDA pegged the Argentine soybean crop at 56 million mt and corn crop at 42 million mt back in early January. Those crop estimates will likely be revised lower in February. We see the morning Chicago lower price action as corrective, not a new bear trend.
- Chicago floor brokers report that funds have sold 6,300 contracts of soybeans, 2,500 contracts of corn, and 5,700 contracts of wheat. In soy products, funds have sold 4,500 contracts of soymeal and 500 contracts of soyoil.
- The EIA weekly report showed that US ethanol production fell to 1,040 barrels/day from 1,062 last week. The grind consumed 306 million bu of corn for the week compared to 312 million bu in the week prior. US ethanol stocks fell to 968 million gallons, up 5% from last year. The ethanol data was seen as neutral to slightly bearish amid the decline from last week.
- World wheat fob offers vary more widely depening on the producer wheat sales. To the surprise of many in the EU, Frech farmers are still clutching onto their wheat store based upon an €8 premium offered by the March-September Paris wheat futures spread. Also, Argentine wheat offers are nearly exhausted by strong exports which has underpinned Russian wheat amid the rally to $196-197. US wheat fob prices will not attract demand due to their stiff premiums.
- The fund short covering has paused with new selling evident overnight. However, US nor S American farmers are selling cash corn or soybeans on the break. Argentine farmers are outright bulls as they watch crop prospects wither. It is the end of the month and short funds are being protective of their profits. Yet, monthly gains are being notched in Chicago corn, soybeans and wheat futures.