- HEADLINES: Wheat falls as Russia won’t install a wheat export quota, just €50 tax; soybean spreads tighten on demand.
- News that the Russians were not going to be more restrictive on 2020/21 export volumes pulled Chicago futures lower from a sharply higher Chicago opening. Wheat paced the morning decline as Russia will keep exporting wheat at elevated prices.
- The €50/mt ($1.65/bu) Russian wheat export duty will be signed and applied on March 1, but this tax has largely been factored into existing Russian fob wheat offers at $302/mt. An early €25 duty will be applied on February 15.
- Importers and end users will be forced to pay for most of the Russian €50 wheat export duty. We doubt that Russian interior wheat/grain values will decline the 10% that President Putin desires. The door remains open that Russia could put a quota on its wheat exports at some point, but for now the Russian Grain industry/exporters have beaten back such harsh restrictions.
- The Russian Grain Industry and the Russian Economy Minister held an ad hock meeting this morning where it was decided to proceed with a €50 euro export tax as outlined last Friday. We look for the Russian Prime Minister to sign the wheat/corn/barley duty decree before the end of the week.
- FAS/USDA reported daily sales of 136,000 mt of 2020/21 soybeans to China and 163,290 mt to Mexico for combined sales of 300,000 mt. 138,000 mt of US HRW wheat to Nigeria and 336,500 mt of US corn to an unknown buyer (about half the sales that were rumoured yesterday to China). We hear that China continues with their February US soybean and April/May US corn interest.
- Chicago brokers estimate that managed money has sold 4,400 contracts of soybeans, 2,500 contracts corn and 3,900 contracts of wheat. In soy products, funds have bought 4,200 contracts of soyoil while selling 3,800 contracts of soymeal. China has been active in spreading the oil/meal share in their domestic markets. It appears to have carried forward to Chicago in recent days.
- The US grain analytical industry are expecting that US farmers will plant all to wall in 2021. We would mostly agree with this. But the seeding of 92 million acres of corn and 90 plus seeding of soybeans requires favourable spring weather across mid America. And crops like sorghum, cotton and even barley also offer attractive returns. Growers report that they have spent money to apply fertiliser and chemicals based on open autumn and early winter weather. We doubt that US corn seeding will push above 93 million acres, but the real struggle will be to seed record large US soybean acres above 90 plus mil acres. The point is that 2021 22 US corn, soybean, sorghum, cotton, barley and wheat balance sheets require every extra acre and a favourable spring seeding season. Chicago won’t bend or break until large 2021 US corn, soybean and wheat yields are known in June or July.
- The midday GFS weather forecast is wetter for Central and Southern Argentina than what was offered overnight by either the EU or GFS model runs. Mostly dry weather holds across NE and EC Brazil for at least the next 10 days while consistent rains continue to fall across Parana and S Mato Grosso do Sul where low lying flooding is now occurring. The GFS midday model has been the wettest for days on end, and our trust in its solution is less than the overnight run. However, the rain should not be dismissed, they must be confirmed in the overnight runs. No extreme heat will be lasting with 90′s expected across Argentina through Monday, before a cold front pulls northward. Pay close attention to coming forecasts to best determine confidence in additional rain in the 7-12 day Argentine forecast.
- As previously suggested there needs to be a period of technical healing following the recent sharp 3-day break. A back-and-forth process is required with support noted $13.50 basis Marchs soybeans, $ 3.20 March corn and $6.50 March Chicago wheat. However, the weekly FAS export sales report should be supportive on Friday. We sees no statistical evidence of demand rationing or a top in US corn or soybeans.