- After an opening flurry of fund buying, Chicago prices are in retreat with wheat seeing fresh selling. US/EU wheat futures are in retreat based on the less restrictive export quota announcement by the Russian Government. The ability of Russia to keep freely exporting wheat into mid-February was bearish. The decline in wheat pulled corn lower with soy edging back to unchanged. Profit taking is noted. And traders are buying the summer row crops (corn/soybeans) and selling wheat on spreads. Volume has subsided at midday from an active opening. A mixed Chicago close is forecast on the bearish tug of wheat. However, don’t be fooled into thinking that the rallies in corn/soybeans have ended.
- Chicago brokers estimate that funds have sold 6,000 contracts of wheat and 7,000 contracts of corn, while buying a net 1,500 contracts of soybeans. Funds were early buyers of 6,000 contracts of soybeans but have sold back close to 4,500 of those purchases by midday. In soy products, funds have sold 2,600 contracts of soymeal and bought 4,500 contracts of soyoil. End users are adding to future cash coverage in vegoil markets. The rationing of US soybean crush must occur with China likely to export virtually all its current purchases.
- Russia announced that it will place a quota on wheat exports from February 15 through the end of June of 15 million mt. Research estimates that Russia will export 23.5-24.5 million mt into February 15 with crop year exports pegged at 39.0 million mt. This is in line with USDA and private export forecasts, so the impact on the marketplace is mute. However, traders were fearful of a more restrictive Russian export quota starting on January 1. This is what has produced selling in world wheat futures. The Russian Government appears that it wants to maintain its position as the world’s largest wheat exporter while making sure that it does not over-export supplies that would create a domestic shortage. Russian domestic wheat and flour prices are at record highs this morning.
- We understand that farmers across 30% of Northern Brazil have soybean seed that has been sitting in dry soil for weeks. Although soybean planting dates are equal to last year, don’t be fooled into thinking that all is normal. The extremely erratic rainfall pattern of the past month has left fields with depleted soil moisture. Some Brazilian farmers are reseeding soybeans for the third time and hoping for improved rainfall. Soybeans that were seeded in September are short and under stress. This is not the start that N Brazilian farmers desired and the impact on Brazil’s winter corn production will be important with the seeding window pushed back by 3 weeks. This means that at least half of the Brazilian corn crop will be planted beyond the optimal seeding window of Feb 15-March 10 Late planted corn will pollinate in a seasonal period of declining rainfall/soil moisture of May and early June.
- The midday GFS weather model is slightly drier for Southern Brazil with similar rains for N Brazil and Argentina over the next 10 days. The best chance for N and C Brazilian rainfall is during the 6-10 day period with limited totals into Sunday. The drying trend for S Brazil and all of Argentina is worrisome with another 2 weeks of below normal rainfall and variable temperatures expected. Heat with highs in the 80′s to 90′s will be evident over the next 4-5 days with cooling across Argentina and Southern Brazil next week. The 11-15 day forecast maintains the dry trend across Argentina and RGDS with some rainfall seeping into Parana.
- The fall in grain prices appears to be corrective with selling in wheat due to the Russian Government’s announcement that it will not be overly restrictive of their exports during 2021. The news pressured wheat and started a profit taking break in corn. However, bullish price trends remain and we doubt that Dec corn slides too far below $4.14 or Jan soybeans below $11.35. No one is going to be overly bearish amid concerning S American weather with soybeans sitting in dry soils across N Brazil.