- HEADLINES: Chicago grains retreat in pre USDA crop report liquidation; Soybeans hold strong on rising world vegoil values; Too much rain for northern Brazil.
- Chicago corn/wheat futures are weaker at midday with the soy complex higher on tightening US supplies amid the fear of Brazilian crop losses. The Northern Brazilian weather forecast stays too wet while Argentina and S Brazil are too dry. S American crops are in retreat which underpins Chicago values on breaks.
- We have to admit that we are a surprised by the veracity of the Chicago morning corn/wheat decline with May corn futures back under $5.40 and May KC wheat sliding to longer term support at $6.00-6.10. The point is that neither corn nor wheat has much additional downside risk as measured by stock/use ratios relative to price. Post the USDA March report, we will look at both KC wheat and corn as new purchasing opportunities.
- This week’s USDA nor CONAB reports will show much of a decline in Brazilian corn/soy production. The stage is set for falls in coming monthly USDA reports. Remember, the USDA is to reflect crop sizes as of March 1. We looks for a mixed Chicago close following the midday price trend. The risk vs. reward in the grain markets is turning back in favour of the bulls. Grain futures selling is due to risk reduction ahead of Tuesday’s USDA reports.
- Chicago brokers estimate that funds have bought 5,400 contracts of soybeans, while selling 3,200 contracts of wheat and 7,600 contracts of corn. In soy products, funds have bought 3,100 contracts of soyoil and 1,900 contracts of soymeal. We note that on the morning decline, the March/May corn spread pushed out to new high with March trading at a $0.19 premium. March soybeans are also trading at a 3-cent premium to May. The premiums of March to May corn/soybeans does not argue for lasting bearish price trends on tightening cash supplies.
- US weekly export inspections for the week ending March 4 were; 60.8 million bu of corn, 21.6 million bu of soybeans, and 17.7 million bu of wheat. Last week’s soybean inspection total was raised 4.6 million bu to 36.9 million bu while corn was increased a hefty 16.2 million bu to 80.6 million bu. The vessel counts show that the US corn export pace is likely to stay large for weeks to come.
- For their respective crop years to date, the US has exported 1,087 million bu of corn (up 495 million or 84% from the same week last year), 1,932 million bu of US soybeans (up 830 million or 75%), and US wheat exports are 683 million bu (down 25 million or 2.5%). China shipped out 13.7 million bu of corn and 4.8 million bu of US wheat. Exporters report that China will continue to pick up their pace of US corn exports into August. China shipped out just 7.3 million bu of US soybeans, all off the PNW last week. The US has exported a record large 1,932 million bu of soybeans (FGIS) in the first half of the crop year or 94% of the annual WASDE forecast. China has shipped out most of its purchases.
- There are rumours that Mato Grosso may declare a state of emergency as some 3 million hectares of crops struggle with excessive rain/flooding. The state of emergency will help farmers who cannot meet their contract sales obligations. And the new worry is winter corn where clouds, mud and excessive rain are causing fertiliser leaching and poor seed germination. Follow this closely.
- The midday GFS weather forecast is bone dry into March 16 (Tuesday) before a front produces some showers. What is interesting is that the forecast models keep pushing he rain chances forward. This lowers confidence beyond the next 7 days. Regular and heavy rains falls across Northern Brazil in a pattern that appears to be stuck. The 10-15 day period is especially wet with 4-8.50″ of rain. S American crops are likely to decline with Argentine crop ratings to fall farther on Thursday. The forecast is too wet for N Brazilian winter corn.
- The USDA report is not expected to show any change, but the report could raise US 2020/21 corn exports another 50 million bu based on the sales pace. March futures are strong on tight US cash corn/soy supplies, these supplies will be even tighter during May delivery. Be a buyer of wheat/corn on price breaks.