• HEADLINES: Slow volume Chicago midday trade; Wheat bounces on bitter cold Plains weather while corn/soy stagnates awaiting S American harvest data.

• Chicago values are mixed at midday in a reversal of Thursday’s trade with wheat futures higher while corn/soybeans sag on profit taking ahead of a long US weekend. Traders are loath to take on new risk ahead of the 3-day US weekend with Chinese buyers off on their Lunar New Year Holiday and cash trade diminished throughout Latin America by Carnival.

• It is the Monday following the USDA Outlook Forum when risk taking will return (along with volume). Until then, Research doubts that either Chicago rallies or breaks can be sustained. Be careful in buying a bulge or selling a sharp break, the market will have air pockets amid the diminished volume trend.

• Friday’s market tone is one of weekly “exhaustion” following this week’s big price moves and the statistical apathy that USDA showed in its February crop report to record large US corn/soybean export sales. We look for a mixed close with Argentine/Brazilian fob export offers below the US Gulf. The rising competition from S American exporters has put Chicago into a neutral phase, as traders and producers await Brazilian soybean yield data and Argentine weather into late February/March.

• Chicago brokers estimate that funds have been on both sides of Chicago to date. Funds are estimated to have sold 3,200 contracts of corn and 3,700 contracts of soybeans, while buying 4,100 contracts of wheat. In soy products, funds have sold 2,300 contracts of soymeal and bought 1,900 contracts of soyoil.

• Discussions continue in Moscow on Russia’s pending variable rate export tax that will start on June 2. Multinational exporters tell the Russian Government of their difficulty in pricing wheat more than a week in advance staring in May. New crop bids are (and will be) impossible to find amid tax/price uncertainty. The way the tax works is that once a week based on the Moscow Commodity Exchange delivery Novorossiysk (Novo), a fob price will be set. The tax will set in when Russian Novo fob offers are above $200/mt. The Russian Government will place a 70% tax on any price above $200/mt fob.

• The Brazilian soybean harvest is slowly pushing ahead, and yields remain disappointing with Mato Grosso being down 3-15% and Parana down 5-20%. Harvest progress will be slow and has yet to start across Mato Grosso Du Sol, Sao Paulo, and Santa Caterina. The harvest results will become important to Chicago in confirming or denying a Brazilian soybean crop of 133-134 million mt which has been bantered around Chicago in recent days. The looming large Brazilian harvest has pressured the paper fob market in the Paranagua corridor and created some trade anxiousness of soybean imports into the SE US. The US cash market will be strengthening on looming supply shortages and some measure of imports will be required in June and July.

• The USDA’s Outlook Forum will be releasing US 2021 corn, soybean, cotton, and wheat seeding estimates. The USDA has a solid track record of forecasting US seedings in February for the final June NASS report. Traders doubt that USDA will provide bullish 2021 seeding estimates with US farmers to make $100-150/acre over costs. US 2021 Seeding will be expanding, it is a question of how many acres that WASDE wants to pull from last year’s 10 million acre Prevent Plant pool. Normally, US farmers only enrol 2-3 million acres in Prevent Plant.

• The midday GFS weather forecast is consistent with the overnight model (and prior day runs) in that a trend of below normal rainfall will continue across the southern third of Brazil and the entirety of Argentina. The S America’s upper air flow blocks meaningful rain from flowing across Argentina and S Brazil and funnels regular rain into Mato Grosso, Goias, and NE Brazil. No extreme heat is noted into late February.

• There is not much to say with trading volume curtailed by the coming holidays. It is S American weather, Brazilian soy yields and the USDA Outlook Forum that will direct values into March. Our nearby vote is for a Chicago range trade into next Friday’s March option expiration. US wheat futures are higher on the Plains bitter cold forecast and short covering. But with snows slated to fall, it is doubtful that wheat’s bounce can be sustained.

To download our weekly update as a PDF file please click on the link below: