- Soybean futures were higher overnight and then lower through the day on Monday. Short term technical momentum is down, and funds continue to add to their net short soybean position amid limited news from Chinese trade negotiations. The latest tranche of Chinese purchases is filtering into the market. The USDA announced old crop soybean sales totalling 926,000 mt on Monday, which combined with last Friday’s announcement pushes the two-day sales total to China to 1.59 million mt. Additional new sales are expected in coming days. Soybean export inspections remained below recent averages through last week, totalling 32 million bu. 14 million bu (44%) of the weekly total were loaded for Chinese destinations. Cumulative inspections for one year now total of 986 million bu, 32% behind last year. Funds are bearish on technical considerations, and the lack of news from Chinese trade negotiations is fuelling the bearish sentiment. We expect long term support for spot Chicago soybeans at $8.50-8.75 and remain optimistic for a US/China trade pact.
- May corn fell another 2 cents, with harvest lows being tested. There is limited fundamental news available. Argentine basis remains $.20/bu below the US but has found stability at $.40 over futures. CONAB will update its Brazilian corn production estimate Tuesday morning and a slight hike (0.5-1.0 million mt) is expected following improvement in rainfall across C Brazil in Feb and early March. US corn export inspections through the week ending 30 million bu, down 4 million from the previous week and below the pace needed to meet the USDA’s targets. Logistical woes continue, particularly excessive river levels near the Gulf have weighed on loading and shipping. But the same issues are being watched closely as planting windows have opened across the far Southern US. Assuming the two-week forecast verifies, LA’s average temperature in March is pegged at 57 degrees, vs. 60 on average. Soil temperatures there in the last 24 hours have averaged just 50 degrees. The market awaits news on Chinese trade, but futures are undervalued amid anything less than ideal Apr-May weather.
- US wheat futures continue to reel from heavy fund selling and a lack of push back. Spot KC is now testing the levels of late 2017, when major exporter stocks/use was a seven-year high 18% (vs. 14.5% today). We estimate that managed funds this evening are net short a combined 120,000 contracts in KC and Chicago. New crop Russian offers are steady at $195/mt, and we continue to believe additional downside risk is absent until much more is known about Black Sea crop potential. 30-day rainfall in Ukraine and Russia has been mixed but generally adequate. 70-160% of normal rain has been recorded across key areas of S Russia. Crops there will exit dormancy, and a close eye will be kept on soil moisture over the next 60 days. Climate work hints of potential dryness in late March/early April. Adverse weather or a concrete US/China trade deal is needed to spark short covering the near term. Funds won’t be able to exit fast enough should lasting heat/dryness develop in major exporting country.