- Soybeans continue lower on record large Brazilian crop. Fund selling and limited demand kept soybean futures lower on Thursday. New Chinese demand has not developed on the US’s premium to Brazilian offers. And traders are discussing the odds of a 127-130 million mt 2020 Brazilian soy crop, a record. In the January WASDE report, the USDA raised its forecast for the US season average cash price received by farmers by $0.15 to $9/bu. This matched the high that had been projected in the Oct/Nov WASDE reports. Chicago this week is projecting a season average cash price of $8.77. Note that for much of the year, the Chicago implied cash price has been above the USDA and has been from $8.59-$9.28 since September. We expect this wide range continues. March soybeans have closed lower in 5 of the last six trading days giving up nearly 34 cents. Technical conditions are back to oversold, with March soybeans holding just above key support at $9.00. Our view is that China’s uncertainty will support Chicago on breaks under $9, but if the Brazilian 2020 soybean crop is 127-130 million mt, rallies will be capped above $9.25 with values to decline into summer to $8.60-8.80.
- Chicago corn rallies on Argentine cash strength and US competitiveness: Spot corn futures finished at their best close since mid-October. March futures were able to close above the December/January high at $3.9375 Argentine fob basis rallied substantially since Monday and the US’s window for improved export opportunity has been extended by 30 days. There is still no word on Chinese demand, but funds are covering shorts in the anticipation of China purchases of US corn under TRQ’s. US corn is the world’s cheapest into April. And with Argentine dryness to linger into February, Argentine fob basis will stay supported into early harvest, which starts in March. US ethanol stocks last week were up another 43 million gallons to 1,009 million, the largest on record for mid-January. A declining soy/corn ratio favours expanded US corn seeding next spring. We see key resistance in March corn as resting at $3.95-4.05.
- Chicago wheat ends firm; Argentine cash market soars: US and world wheat markets ended high and similar to corn today’s attention is centered on Argentina’s cash wheat market. Funds bought 3,500 contracts in Chicago. Sources indicate that the Argentine exporter has been much more active in securing this year’s crop. It is likely that the whole of Argentina’s exportable surplus has been priced. This has rallied domestic prices substantially in recent days as rumours swirl that cash stocks are spoken for. Argentine wheat is seasonally the world’s cheapest origin in January. Yet, the rationing mechanism is the duration of Argentina’s discounts. Argentina’s discount to other origins, which was steep in late 2019, has evaporated entirely. Argentina’s catch-up rally has come a bit earlier than last year. Global fob offers are now clustered at $224-230/mt. This is comparable to $4.70-4.90, basis spot KC. A lasting break in wheat hinges upon favourable early-season crop development in the N Hemisphere. Without adverse N Hemisphere weather, July Chicago futures look to test $5.00 by late spring.