- HEADLINES: Soybeans push to another contract high; Midday weather forecast has Argentine rains further north; Rebalance at tonight’s close.
- Midday Chicago soybean/corn futures are higher with wheat holding in the red. Early selling was based on the fear of the index fund rebalance and that includes the selling of Chicago futures and buying energies to rebalance commodity allocations on the close over the next 5 days. Traders are looking for selling pressure, but it is unknown how much new investment is pouring into the raw material space. Normally, these index fund traders not only rebalance, but also put new money to work. The new investment helps mollify the rebalance selling pressure. Watch the Chicago close as a measure of what will be occurring over the four trading days on the rebalance programs from index funds.
- We have been asked if there is any fresh news that pushed soybean/soymeal futures to new contract highs this morning. We know of no specific bull news that spurred the +20-cent rally in March soybeans. Buying of 6,000 contracts in 90 seconds lifted March soybeans to a new contract high of $13.86. Soybean futures have come off their highs but are able onto hold double digit gains at midday. The soybean rally has pulled corn and wheat futures higher. The next upside price target is $14.00 in March soybeans and $5.10 in March corn.
- The point of this week’s strong soybean rally is a lack of selling resting above the market amid the hefty sales position of US and S American farmers. Any cash connected hedge selling in Chicago futures will be limited. Some are questioning whether Brazilian farmers will start to default on sales that were made at $9.00 or lower against March soybean futures.
- The USDA announced the sale of 204,000 mt US soybeans for the 2020/21 crop year to China. We hear that the sales are for July/August and that China has additional interest working which includes US corn. In total, it is reported that China has booked 7-9 cargoes of US soybeans for July-August so far. The new demand will likely push China to import 40-41 million mt of US soybeans in 2020/21
- Research was expecting that the US would be a net importer of Brazilian soybeans during the late summer to avert negative US old crop end stocks. Now that China is securing US soybeans for late summer, it is exacerbating the extreme US soybean supply tightness. If China books 2 million mt of US soybeans for late summer, US 2020/21 soybean exports will exceed 2,425 million bu, some 225 million above the December USDA forecast. This just can’t happen with the market needing to reach higher and higher prices to ration. Brazil is offering FOB August soybeans at a hefty $1.47 over at midday.
- Tuesday’s January USDA report is going to produce acute market volatility. An update on US 2020 production, December 1 Stocks and US winter wheat seeding estimates will combine to jolt Chicago sharply. The market volatility that was seen this week will likely be more extreme on Tuesday. The report will offer longer term direction with end users hoping for a bearish report to extend their forward coverage. (Remember, hope is NOT a sensible strategy!) A bullish USDA report would produce a quick run at $14.50-15.00 March soybeans and $5.25-5.50 March corn.
- The midday S American GFS weather forecast is further north with Argentine rainfall early next week. The forecast offers needed +1.00″ rain for Northern Santa Fe and Corrientes while other provinces to pick up 0.1-0.8″. Such rain is not enough to replace lost soil moisture and regular rainfall is required into March. There is a second chance of rain offered in the 7-8 day period holding less rain of 0.1-o.75″. A drier and warmer period follows longer term. Near to below normal rain falls across N and W Brazil into Jan 20. The S Brazil/ Argentine forecast stays concerning.
- New Chinese demand for US soybeans cannot continue or the US will run out. Price rationing is needed and not yet occurring. Corn will follow soy to the upside on record high Chinese corn values as their hog herd rapidly expands. The Chicago bull market will continue, it is just a question of speed and degree which will !be determined by the USDA January Report.