- Chicago futures are mixed at midday with soybean futures turning back higher as the early morning break uncovered limited speculative selling. US and S American farmers have virtually shut down their cash selling over the past 2 weeks. And if Chicago futures are to weaken, it must be based on speculative liquidation. We note that cash corn/soy markets in the Midwest, Central Brazil and Argentina are strengthening on the need for supply. The basis gains are being noticed by sold out futures traders.
- End users/importers are using breaks to extend their forward coverage while US farmers have already sold more than 85% of their soybeans and at least 70% of their corn. Brazilian farmers have also parted with record sales of soybeans which is nearing 68% of their soy crop. The point is that on Chicago rallies, limited selling rests above the market which makes a close above last week’s USDA December Crop Report high ($11.78 basis January soybeans) important. Moreover, January soyoil futures are perched just below its contract high.
- Wheat futures are higher as GASC faces purchasing their highest cost wheat in over 5 years while the corn market is awaiting Chinese demand and clarity on Argentine weather as the first crop has started pollinating. Brazilian and Argentine corn crops both have a downward bias with the persistence of below normal rainfall. We would argue the same based on the coming heat to Northern Brazil including Mato Grosso.
- The FAS/USDA daily sales report did not report any new purchases.
- Egypt’s GASC secured 235,000 mt of non-Russian wheat in a first half February shipment tender. The sales consisted of 120,000 mt of Romanian and 115,000 mt of Ukraine wheat. The prices ranged from $269-271/mt basis fob with $12.37-14.35/mt for freight. The paid fob wheat price was the highest since 2015. Russian wheat offers added the $30/mt due to the tax which made their offers non-competitive.
- The November NOPA crush was a record large 181 million bu with member soyoil stocks rising to 1,558 million pounds. The NOPA crush was slightly above industry estimates of 180 million bu and works back to a daily processing rate of 6.03 million bu /day. NOPA November soyoil stocks were 71 million pounds larger than October and 110 million pounds above last year. The November soyoil yield was 11.63lbs/bu, down 0.04lbs from October. The US soyoil industry feared larger US soyoil stocks which produced early day Chicago selling. We see the NOPA November Crush Report as reconfirming that the US is utilising the 2020 soybean crop too quickly. Demand rationing via price will be required in early 2021.
- The midday GFS weather forecast has reduced rainfall totals for Argentina and looks to be coming more in line with EU model. The GFS forecast still has rain of 0.25-1.25″ with totals above 1.00″ forecast for La Pampa and Buenos Aires. The Northern Brazilian forecast shows no change with another 6-7 days of dry weather with rising temperatures. Highs are forecast to rise to the 90′s to lower 100′s which will add to crop stress. Argentine high temperatures will range from the 80′s to middle 90′s. Both N Brazil and Argentina will endure well below normal rainfall, extending a trend that goes back to early September. Subsoil moisture levels are limited, which provides no water reserves for crops should new periods of heat/dryness emerge.
- The industry is expecting that Chicago markets will be choppy /sideways into the holidays on a lack of cash leadership. Yet, record large US soybean demand and tightening us corn stocks will produce short covering and end user pricing on breaks. And potentially bullish January WASDE reports loom with potential new cuts in US corn/soybean yields. Amid a lack of selling on the breaks, the path of least resistance is higher for the Chicago. It is just a question of day-to-day timing.