- HEADLINES: Corn scores fresh contract high at $5.6575 basis March; soybeans rise on disappointing Brazilian soybean yields; Argentine/S Brazilian weather is parched
- Corn futures have soared to new contract highs with soybeans finding independent strength on lower than expected soybean yield data from Mato Grosso, Goias and Parana in Brazil. And in the background is the bullish tailwind from the dry Argentine weather forecasts over the next two weeks. Chicago has been unable to rally since the January Crop Report based on the hope for record large S American soy/corn crops. This “hope” is being deflated by early harvest yields with world consumers adding to their “buy” coverage ahead of the USDA February Crop report. Chicago has a bullish feel at midday with March corn futures able to score a new contract high at $5.6475. Wheat has tagged along on cold weather forecasts for the Central US Plains and the Black Sea. Winterkill is the worry amid bitter cold air masses for each region. End users and farmers are not sellers on the rally ahead of what they see as a bullish February USDA crop report. A close above $13.915 turns the price trend back bullish for March soybean futures.
- Chicago brokers estimate that funds have bought 5,600 contracts of wheat, 9,100 contracts of corn, and 7,200 contracts of soybeans. In soy products, funds have bought 4,100 of soymeal and 2,300 contracts of soymeal. There was an order that bought 9,000 contracts of the $17-18.00 May soybean call spread.
- No new US export sales were reported by FAS this morning, but rumours abound that China continues to seek cash offers on May-June US corn.
- As reported Friday, we hear that China has booked 1-1.5 million mt of Canadian and upwards of 500,000 mt of Australian wheat We guess that when China needs foodstuffs, it eases or drops retaliatory trade issues.
- FGIS reported that for the week ending February 4, the US shipped out 62.0 million bu of corn, 66.2 million bu of soybeans, and 16.2 million bu of wheat. All were on the high end of trade expectations. Last week’s soybean exports were revised upwards by 4.1 million bu. China shipped out 30.9 million bu last week or 47% of all US exports. Open Chinese purchases are now estimated at less than 3 million mt.
- For their respective crop years to date, the US has exported 1,806 million bu of soybeans (up 805 million or 81%), 844.5 million bu of corn (up 388 million or 86%), and 624 million bu of wheat (up 7 million or 1%). We had expected that the US would export around 122 million bu of US soybeans during February, but today’s weekly soybean shipping total argues that such an estimate is far too low.
- We are hearing of disappointing early soybean yields in Mato Grosso, Goias, and Bahia. These are from soybeans that did not endure the September/October acute dryness. The Mato Grosso yields are running 48-69 sacks/ha, well under last year’s average of 72 sacks/ha. The Mato Grosso harvest is nearing 20% completed and yields are disappointing.
- We also hear that Brazilian farmers are considering using Brazilian law to declare short term bankruptcy which would break existing soybean sales contracts. Brazilian farmers are finding that they sold too many soybeans relative to the crop yield to date. They are hopeful that yield trends improve in coming harvest activity.
- A near to above normal rainfall pattern is forecast to continue across N Brazil with the midday forecast being further south than what was offered overnight. Argentina holds in a dry weather trend except for a few isolated showers. The 11-15 day forecast maintains the dry Argentine/S Brazilian trend which will start to have an important adverse impact on soy/corn yield. Close attention to the forecast is warranted.
- It has been a one way/bulldozer trade today amid end user/fund buying. There are few resting sell orders over the market as US farmers are virtually sold out, while Brazilian/Argentine farmers have sold too much crop relative to yield. The shortfall in the Brazilian soy crop (poor yield) would be exceedingly bullish amid dry Argentine weather. It is all about S American crop sizes following the USDA Report. The Argentine/S Brazilian forecast is threatening.