- HEADLINES: Midwest cash corn movement best since 2020 harvest: Funds bank profits after reopening; Russia & NOPA on tap.
- The USDA January Crop Report has passed, and the entire world has now been able to react to its bullish data. This produced a short-term hangover as the market awaits new evidence that higher prices are rationing demand. Demand led bull markets often consolidate large gains for a few days before pushing to new highs. This appears to be occurring at midday with diminished volume and long profit taking producing a mixed midday trade. We now look for a mixed Chicago close with a turn to higher prices into the weekend. NOPA will be out with its December soybean crush data on Friday (expected to be record large) while the Russians are expected to raise duties on wheat, corn and barley exports from mid-February onward before the weekend. Remember the old trader’s adage, “The trend is your friend”.
- Chicago brokers report that fund managers have sold 9,400 contracts of corn, 10,400 contacts of soybeans, and 4,100 contracts of wheat. In soy products, funds have sold 4,200 contracts of soymeal and 3,100 contracts of soyoil.
- Cash corn movement increased sharply along with a few soybeans from US farmers. It is the first significant cash movement in 2021 as farmers are see cash corn bids exceeding $5.00. Moreover, farmers are also selling new crop corn/soybeans based on profitable margins. This capped the early Chicago rally.
- Questions are being asked about new crop 2021 sales and it always makes economic sense to sell a modest portion of new crop corn/soybean crops at multi year highs. But research is nearly as bullish for new crop as it is for old crop and Chicago can have corrections on profit taking, but a lasting bearish trend is unlikely until above trendline yields can be confirmed in mid-summer. We are forecasting 2021/22 US soybean end stocks at just 99 million bu and corn at 1,285 million bu with increased acres and trendline yield. The point is that the current Chicago rally appears to be a multiyear bull market, not a one and done.
- The Russian Government is likely to release a more restrictive export policy in the next couple of days following meetings between traders and the ag ministry and then the ag/economic ministers. The result will be a rising duty structure that extends into new crop. And Russian corn, barley/sunseed and sunoil appear to be included in the duty plans to cap raising domestic food inflation. The news could spur another rally leg in world and US wheat prices.
- US ethanol production rose to 277 million gallons, up 2 million gallons from last week, but down 14% from last year. US ethanol stocks rose to 996 million gallons up 3% on last year. The data was supportive to US corn demand.
- The midday GFS weather forecast is drier for Argentina and Southern Brazil compared to what was offered overnight. A front will cross Argentina on Thursday/Friday producing 0.1-0.85″ of rain before a lengthy period of dry weather follows. Near to above normal rainfall will drop across N and C Brazil which will help restore lost soil moisture.
- Amid La Niña, the coming weather worry is below normal Argentine and Southern Brazilian rainfall. The lack of rain will deepen the drought that prevails. And Argentine and S Brazilian temperatures look to warm to the 90′s to lower 100′s next Tuesday. Crop stress will return again to build next week.
- Chicago is holding reasonably well following a 40-cent corn rally in less than 24 hours amid large cash corn sales that are occurring across the W and C Midwest. Corn is easily absorbing the best cash movement since the autumn 2020 harvest. The USDA announced the sale of 400,000 mt of US soybeans to an unknown buyer with just 68,000 mt in new crop. We hear that this is new China buying for February with additional interest noted on the morning price break. S American selling is limited, and once US farm selling slows, the Chicago rally will resume. Additional weakness will be modest in our opinion.