- HEADLINES: Chicago declines as China corn sales announcement was not offered; January US soybean exports record large; no sign of us soybean/corn rationing.
- Chicago futures are lower at midday as China did not show up as securing additional US corn which left the market in profit taking mode. Corn, soy and wheat futures have retreated as bulls need to be fed every day and the market was in need of a correction (following last week’s gain). The bears cite the coming Lunar New Year holiday on February 12 and Brazil’s start of the soybean harvest in 2-3 weeks as reason for today’s softness. US cash basis bids are firming on the Chicago falls as end users struggle to get US or S American farmers to sell in a down market. We doubt additional weakness in either corn, soy or wheat futures. $5.35 March corn, $13.40 March soybeans and $6.15 March KC wheat should offer chart-based support. The premium of KC March wheat to corn has narrowed to just $0.76/bu. US cash HRW wheat cannot afford to be included in US feed rations into the new crop.
- Chicago brokers estimate that funds have sold 9,000 contracts of corn, 5,500 contracts of wheat, and 6,400 contracts of soybeans. In soy products, funds have sold 3,300 contracts of soymeal and bought 2,100 contracts of soyoil.
- The USDA/FGIS reported that for the week ending January 28 the US exported 43.4 million bu of corn, 65.8 million bu of soybeans, and 14.6 million bu of wheat. Last week’s US soybean inspections were revised upwards by 4.6 million bu to 77.3 million bu, a revision trend that extends way back to September. US grain inspectors are having trouble catching all the weekly US soybean trade.
- For their respective crop years to date, the US has exported 782 million bu of corn (up 357 million or 84%), 1,736 million bu of soybeans (up 757 million or 77%) and 608 million bu of wheat (down 4 million or 1%). Both US soybean/corn exports are record large for their crop years to date. China exported 36.4 million bu of US soybeans or 54% of the weekly total. We look for another upward revision of last week’s US soybean exports of 4-6 million bu such that US January soybean exports will equate to a record large 342-348 million bu. We estimate that through January the US will have exported 1,765-1,775 million bu of US soybeans for a 355 million bu average in the first 5 months of the crop year. Through February, we look for US soybean exports to reach 1,900-1,920 million bu. There is no evidence of any slowing of US export demand with China likely to switch additional cargoes to the US based on the latent Brazilian harvest. There is near 10 million mt of vessels waiting to load soybeans in Brazil!
- World wheat futures have declined on rumours of an increase in Russian farm sales. Yet, the selling had to occur basis late in the Moscow day and is not confirmed by any cash connected sources. We suspect that the break is more related to fund selling. Russian farmers may have decided to sell some cash wheat prior to the February 15 tax increase, but most suggest that they will wait until April/May to determine new crop conditions. There is just one offer in the Russian fob paper market at $300/mt. All other offers are pulled surrounding the planned hike in the export tax. And if Moscow decides to place a formula tax on new crop wheat, it throws into question new crop offers and planting. The entire Russian wheat market is up in the air on export tax hikes which creates tremendous future uncertainty. We doubt that any Russian exporter would offer to Egypt’s GASC should a tender develop early this week.
- There are also rumours that China has turned to booking US DDG’s and ethanol on the break this morning. China remains active in seeking US grains on weakness. Their demand tells us that one has to be very careful about selling into any Chicago decline.
- The midday GFS weather forecast is wetter in Mato Grosso and EC Brazil into Feb 11, a time when dry weather is wanted for the harvest. A dry forecast is offered for the entirety of Argentina and most of RGDS in Southern Brazil. Parana and Mato Grosso do Sul will see near average rainfall totals. The new drying trend must be watched closely as La Niña tends to produce mid to late season droughts across Argentina/S Brazil.
- Parana’s Deral (Dep’t of Rural Economics) will be out with their crop condition ratings on Tuesday which is expected to show deterioration due to weeks of rain/cloud cover. Some private analysts fear the Parana soy yield could decline more than 10% on rust and rain. Pod droppage reports in W Parana are widespread. Research calls for $6.00-6.25 May corn futures which argues that the break in wheat is overdone. Another 1.5-2.0 million mt of Chinese demand for US corn could well be announced this week. Chicago needed a break, but there is no evidence of demand rationing either domestically or in trade. China’s interest in US DDGs and ethanol argue for a bigger import program that is in the offing.