- HEADLINES: Chicago falls on March 17-20 Argentine rain prospect; CONAB out Thursday morning with March Brazilian crop estimates; US ethanol demand solid/improving.
- Chicago futures are sharply lower at midday based on long liquidation in thinning volume. Improving rain potential for Argentina and the Central US Plains has pushed all Chicago values sharply lower. May corn, soybean and KC May wheat have declined to their key chart-based support areas at; $5.30-5.35, $13.90-14.10, and $6.00-6.10, respectively. Cash connected end user pricing is noted on the decline, especially in summer soymeal futures.
- May soymeal futures are getting close to a major buy point at $401-406/ton, a test of the November highs. May soymeal from the January high is down $56/ton and end users see May and forward soymeal futures as an enticing purchase ahead of a new Northern Hemisphere growing season. Soymeal has been used as the short leg of most Chicago spreads for the past 6 weeks as vegoil prices rocketed to a litany of fresh contract highs. The oil/meal spread is out to historical resistance.
- Chicago should be close to forging a trading bottom. As we have been suggesting for some time now, this is a supply driven/commercial market as fund positions have moved very little since November and Chinese buying slowed. Commercial/supply driven markets imply that rallies nor breaks carry-through. Therefore, we have advised against buying sharp rallies or selling sharp declines as Chicago valuations hold in a broad range trade.
- Chicago brokers report that funds have sold 21-23,000 contracts of corn, 14,000 contracts of soybeans, and 6,700 contracts of wheat. In soy products, funds have sold 1,900 contracts of soyoil and 5,400 contracts of soymeal.
- Brazil must be closely monitored as a new variant of Covid-19 is spreading rapidly and straining hospitals. The BBC is reporting that social unrest could worsen in the weeks ahead if unchecked, which could impact trucking, ports and logistics. No such worry is noted today, but it is a rapidly developing issue.
- US weekly ethanol production was impressive with a weekly gain of 26 million gallons to 276 million. This is well above the weekly total needed to reach the USDA annual US ethanol demand forecast of 4,950. The US consumed 873 million gallons of gasoline last week, the best in a year as pandemic worry subsides. Summer gasoline consumption should be close to 2019, a big change from last year, which would boost the US corn grind by 200 million bu to 5,150 million bu.
- The midday GFS weather forecast is following the overnight forecast with a wetter solution for Argentina. The forecast offers no rain with high temperatures in the 80′s to lower 90′s into March 17. Thereafter, the GFS forecast upped rain totals to 1-2″ for Argentina in the March 18-20 period. Dry weather follows in the 11-15 day forecast with seasonal temperatures. The arrival of 1-2.00″ of Argentine rainfall will help stabilise crop yields.
- The GFS forecast is wet for Northern Brazil with rains of 3-6.50″. And the 10–15-day period is especially wet for N Brazil with another round of heavy rain of 2.50-6.00″. Such heavy rains will further slow harvest and the seeding of winter corn. Such a wet finish is highly unusual and detrimental to yield!
- The prospect of an Argentine rain in the 7–10-day period is pressuring Chicago values. Yet, 7 weeks of dry/warm weather and excessive rain across N Brazil have not aided crop yields. CONAB will be out Thursday with an update on Brazilian corn/soy production (We look for a modest crop cut from their February forecast). And on Monday, funds can expand their net position, which will produce new buying. A Chicago trading low is close at hand on tightening US cash corn/soybean supplies.