- The month of March will end in a few days and the CRB Index is breaking out to the upside (likely to finish above a downtrend line that extends back to 2011). This is an important signal the CRB bear market has likely ended. Inflationary concern is growing as the US budget deficit is likely to annually grow at $1 trillion in the years ahead. This produces a more bullish macro background. The CRB rally has been led by energies, but the metal markets have started to follow. Key will be whether the ag markets get involved in the macro recovery this summer, and add to momentum.
- Soybean and meal prices eased through Tuesday’s trading, with reduced volume totals noted. Market news so far this week has been limited, though traders are anxious to see the USDA’s quarterly stocks and new crop acreage data. US and S American soybean meal prices have rallied since the start of the year, but so far spot and forward offers are not suggesting a significant shift in world demand. Note that US soybean meal is almost always priced higher than Brazil and Argentina, and that prices spreads on quoted offers this week are not significantly different from a year ago. So far Argentina continues to export meal at a good pace, with the latest vessel lineup showing March exports unchanged from a year ago at 2.5 million mt. Jan-Mar exports are estimated at 6.7 million mt, or slightly better than last year. Quieter trading is expected to continue into the USDA reports on Thursday. Record large March 1 stocks and new crop acreage is expected, and an acreage number below 91 million acres would likely be seen as bullish.
- Chicago corn futures traded mixed and in mediocre volume ahead of Thursday’s highly anticipated USDA data. The spec community is likely to square positions up ahead of the reports, but large new positions are unlikely. Ethanol blend margins are again at the levels caused by Hurricane Harvey last summer, which is noteworthy, and Wednesday’s EIA report is expected to feature steady production and a modest decline in ethanol stocks. Also key will be whether US crude stocks rebound following last week’s surprising correction. Estimates on Brazil’s safrinha crop have centered at 62-63 million mt, implying a total Brazilian corn crop of 87-88, vs. the USDA’s 94.5. Weather in C Brazil looks to be non-threatening into mid-April, but it is acreage that is capping crop forecasts. Recent dryness in Goias and Mato Grosso do Sul needs watching, but overall there is still no indication that Brazil’s wet season will end prematurely. Corn looks to be most supported in the weeks ahead amid ongoing US export demand, coming excessive rainfall in the Delta, and what looks to be another round of snow across the Dakotas, MN, IA and WI next week.
- US wheat futures fell another 3-5 cents amid a lack of fresh news, and as the trade debates Plains weather potential during the first half of April. The evening’s model guidance suggests that perhaps light precipitation will be more widespread moving forward, but drought improvement is unlikely without a more pronounced, and sustained, pattern shift. Long term moisture deficits remain. We caution against turning bearish below $4.60, basis May Kansas futures, and $4.50, May Chicago, as US cash prices are now much better in line with values elsewhere. The world cash market continues to inch higher, albeit very slowly, and Gulf HRW’s premium for June arrival rests at just $1-7/mt over comparable EU/Black Sea origin. It is our belief that the February rally was unsustainable but at current prices downside is limited. Argentina’s crippling drought does not look likely to end in the next 30 days, when wheat is typically planted, and a close eye will be kept on soil moisture in eastern Australia, where longer term dryness also lingers.