- HEADLINES: Chicago retreats after bull run; market holding better than bears expected; China bidding for US July/August soybeans.
- Chicago soybean/corn/wheat futures are taking a pause from their recent rally on profit taking ahead of Tuesday’s USDA January Crop Report. The Chicago correction was needed following a nonstop rally that started in late 2020 with March soybeans racing to $13.73 (highest price in 7 years) yesterday.
- Today’s weaker Chicago trade is being called a correction as US demand stays strong. FAS reported new buying of US 2020/21 soybeans emerging from an unknown destination (rumoured to be China). The US cannot afford to sell additional soybeans to China with their 2020/21 annual purchase pace estimated 36 million mt (1,323 million bu) on a known/unknown basis. China has already exported a record 27.3 million mt with an estimated 8.8 million mt of US soybeans left to ship. China is exporting 1.1-1.4 million mt of US soybeans weekly which will exhaust their purchase commitments by March. Chicago soy must reach prices that ration this demand.
- Chicago corn/wheat markets are following the weakness in soy. Here too, both grains required a correction following the recent nonstop rallies.
- Chicago brokers estimate that funds have sold 3,500 contracts of wheat, 6,900 contracts of corn and 9,500 contracts of soybeans.
- The USDA announced the sale of 213,000 mt US soybeans for the 2020/21 crop year and 130,000 mt for 2021/22 to unknown buyers. Both sales are rumoured to be to China with the old crop sale shipping in the July/August timeframe. We understand that China is working additional cargoes in July/August due to the sharp rise in Brazilian fob premiums. Brazil is offering soybeans for June at $0.70 over, with July at $0.85 over, and August at $1.30 over. The US Gulf is competitive in the July/August timeframe which is why China is taking additional US old crop soybeans. Research argues that China will secure a at least a record 40 million mt of US soybeans in 2020/21, or 1,475 million bu. This massive purchase pace by China suggests a US 2020/21 soybean export pace of 2,375 million bu or 175 million bu above the December WASDE forecast.
- For the week ending December 31 US export sales were; 10.1 million bu of wheat, 29.5 million bu of corn, and a marketing year low of 1.4 million bu of soybeans. For their respective crop years to date, the US has sold 765.7 million bu of wheat (up 70 million or 10%), 1,730 million bu of corn (up 1,001 million or up 137%), and 2,012 million bu of soybeans (up 918 million or 84%). This was a holiday week and the slower than expected US corn and soybean sales are not a developing trend as far as we are concerned.
- The US Census Bureau reported that the US exported a record a record 408 million bu of soybeans in November (record US soybean exports of 1,115 million bu for Sept 1-Nov 30). The US has exported record monthly amounts of soybeans since September and will include December. US November corn exports were 150.5 million bu with wheat at 69.6 million bu. Both were slightly above FGIS (Federal Grain Inspection Service) November estimates.
- The Argentine Grain Inspectors Union ended their month-long strike. Private inspectors were helping in the certification of cargoes, but following recent wage hikes, everyone along the Argentine food chain will be seeking a higher wage amid growing domestic inflationary pressures.
- Chicago reported an EFR for 10,000 contracts of November soybeans today. This takes the running total since late December to 47,000 contracts or some 6.4 million mt of soybeans. Research suspects this is China bidding for US new crop soybeans on a swap program.
- The S American GFS midday weather forecast is drier for Argentina with the two storm systems being weaker and more in line with the overnight EU model. The midday GFS prints out rains of 0.4-1.25″ with locally heavier totals between January 12-14. A second chance of rain is offered in the 9-12 day period holds less rain of 0.15-0.75″. A drier and warmer period follows longer term. Near to below normal rain falls across N Brazil into Jan 20. The S Brazilian/Argentine forecast is concerning.
- Corrections are needed/normal in any demand led bull. We stay bullish on weakness.