5 March 2021

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  • HEADLINES: Chicago rallies on adverse S American weather; US January census soybean exports record large at 324 million bu; Midday weather forecast holds dry Argentine trend.
  • Rising Chicago prices amid concern for S American weather is the theme at midday with corn, soybean, and wheat futures all in the green. US non-farm payrolls jumped 379,000 in February, a larger than expected gain showing strength to the US economic outlook. As a larger share of the US population is vaccinated, confidence in spending/jobs will elevate the US GDP rate well into year-end. The reflation trade is the right investing theme heading into April.
  • Chicago May soybeans tested key resistance above $14.30/bu but were unable to score new contract highs. Research doubts that such highs will be seen until it is clear (early next week) that excessive rain stays focused on Northern Brazil while Argentina/RGDS hold in an arid weather trend.
  • Sunday’s overnight trade will be volatile because of S American weather pattern confirmation or denial. It will not be a weekly start where soybean futures are up or down 1-3 cents. Corn/wheat will be followers of the complex, but there could be some real fireworks on Sunday’s opening. Soybeans will be the upside leader, but corn will follow in a close second place. It can be argued that the impact on Argentine/Brazilian corn could be more important than soybeans.
  • Chicago brokers estimate that funds have bought 7,000 contracts of corn, 6,500 contracts of soybeans, and 1,200 contracts of wheat. In soy products, funds have bought 4,400 contracts of soyoil and sold 800 contracts of soymeal. Traders are looking for soyoil net length to be near record large while funds have cut their net long corn, soybean, and soymeal length.
  • Census reported February Trade data this morning. The US exported a record large 324.4 million bu of soybeans in February. This marked the fifth consecutive month of record large US soybean exports. However, the February Census total was 3 million bu under FGIS inspection data which narrows the Census to FGIS inspection gain. Census soybean exports were running well above FGIS for months. The US also exported 328 million pounds of soyoil {up 203 million pounds or 162% from last year. US soymeal exports were 1,147 thousand short tons vs 782 thousand short tons last year. January US soy exports from all angles, soybeans and producers were stellar.
  • The US exported 229 million bu of corn during February, up 47 million bu from December and up 131 million bu or 134% from last year. The US corn export pace is gathering steam as China looks to export 17-24 million bu/week on average into the end of the crop year. US weekly corn exports are forecast to average 70 million bu with there being some weeks where exports reach nearly 100 million bu. It is the export pace of US corn that will pull US cash basis levels higher along the river and a good reason why March corn futures are trading at a 15-cent premium to May, and a massive 26 cent premium to July.
  • US January Census wheat exports were 73 million bu, equal to December but 3 million bu better than last year. The US wheat export pace has been regular but could improve amid EU shortfalls and the €50 Russian export tax.
  • The midday GFS weather forecast is like the overnight solution with seasonal Argentine temperatures following a hot weekend. Rain will be limited for Argentina and S Brazil into March 16. And near to above normal rain will fall for N Brazil. The considerable Mato Grosso wetness is causing 25% quality discounts on soybeans and replant for corn. Very few years in history do Brazilian farmers replant corn due to excessive rain. The lack of sunshine/excessive soil moisture is slowing the establishment of Brazil’s winter corn crop. Concern is growing.
  • It all comes down to S American weather early next week (supply driven bull) with a continuation of the current dry Argentine and wet/ N Brazil pattern producing new contract highs in soybeans and a test of the February highs in corn. Wheat is a follower, but a seasonal low is being formed if the Plain’s dry weather pattern is maintained. Chicago inflows are the feature after March 15 as fund managers increase their risk on the position limit expansion. We remain bullish on S American weather.
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