- HEADLINES: Spot soyoil soars to chart target at $0.51 March on massive 10,000 contract plus fund buying; US corn ethanol grind plummets; Brazil harvest gains speed.
- Soyoil Futures Score Fresh 9 Year Highs with March above $.SO
- Sharply higher Chicago soyoil futures have been the theme of day as the oil/meal spread pushed out to a new rally high. Soyoil’s long held upside price target of $0.51-0.52 was reached in March futures this morning. Traders will be closely monitoring how March soyoil acts going home against the $0.51 resistance. This is a key price for Chicago soyoil futures heading into first notice day.
- Chicago brokers indicate panic end user pricing of soyoil with money managers already holding a record long. Soymeal declined from strong overnight gains on active oil/meal spreading. The rally in crude oil above $63/barrel has helped underpin soyoil, but biodiesel production margins have turned negative. US soyoil export sales are needed to confirm an acceleration of the Chicago rally.
- May soybean futures are nearing the January contract highs at $14.33. The soybean rally stumbled against $14.28/bu yesterday and this morning. November soybean futures have pushed to a new contract high of $12.3775 with an upside target of $12.50. Following the USDA Outlook Forum, it is new crop corn and soybean futures that have been pulling the “bull up by its tail”.
- Chicago brokers estimate that funds have bought 5,200 contracts of soybeans, 5,300 contracts of corn, and 3,200 contracts of wheat. In soy products, funds have bought 400 contracts of soymeal and 10,700 contracts of soyoil. The fund buying of soyoil has been massive.
- US weekly ethanol production plummeted on last week’s cold Central US weather with production declining to just 193 million gallons, down 75 million gallons from the week prior or 28%. In the worst of last spring’s pandemic, the US ethanol industry was producing 160 million gallons per week, so this week’s fall was acute. The good news is that plants have returned to normal operations this week and run rates have returned with the mild temperatures.
- US ethanol stocks fell to 957 million gallons, down 63 million gallons which was down 6% from last week and 8% from last year. The seasonal expansion in US gasoline consumption is expected to keep US ethanol stocks in check into summer.
- It is reported that the Brazilian soybean harvest is hitting its stride across N and C Brazil with winter corn seeding strongly advancing. It is expected that by early March, Mato Grosso will have harvested 80% of its soybeans and planted 75% of its winter corn.
- The midday GFS weather forecast is consistent with the overnight model with limited rain across the southern third of Brazil and the entirety of Argentina. And there will be numerous days with high temperatures in the 90′s. And near to above normal rain will drop across the Northern third of Brazil with high temperatures in the 80′s to lower 90′s. The 10-15 day period forecast is volatile, but a drier solution is offered in the midday run.
- Research has been professing that it is S American weather that will drive Chicago price direction into mid to late March. China has shifted its buying to cheaper S American soy supply, the US demand led bull market has ended. The Chicago market is supply driven and closely following each S American weather forecast. US cash is not leading with March soyoil/soymeal futures liquidated with just 19,000 contracts open in each. But March corn futures still has 154,000 contracts open with covering to follow.
- We do not expect large changes from the USDA in their monthly March 9 report. Thereafter, it is the unpredictable March 31 Stocks/Seeding Report and the spring growing season. We have been a soyoil bull, but finds values stretched right now. Meal must find its bullish heart for soybeans to score new highs. Corn/ wheat stay in a volatile/rising price range.