• HEADLINES: Chicago mixed at midday; S American crop size debate continues; Brazil’s ag minister concerned about winter corn production.

•  Chicago futures are mixed at midday after an early bout of tired long liquidation. May soymeal futures fell below the 100-day moving average which triggered aggressive fund selling following the close below the 50-day average yesterday. Soybeans followed meal lower until cash connected buying pulled May futures back above $400/ton. The RSI on soymeal reached 31%, the most oversold position of any of the Chicago grains since late last summer. US crushers have been processing soybeans for soyoil, but as US soybean supplies tighten and soymeal production declines, a seasonal bottom should be forming in soymeal. Soybeans cannot move too much higher without forming a soymeal futures bottom.

• Corn, wheat and soyoil futures have all recovered with soyoil futures scoring new contract highs. The next upside price target for May soyoil is $0.60/pound as world tropical oil prices flirt with historic highs. We note that there has been active spreading today of corn vs wheat and corn vs soybeans. The corn market should become the next upside leader on S American crop concern (Brazil) and a quick bottoming of FOB basis in Argentina. US farmers are unwilling to sell cash corn or soybeans on a Chicago decline.

• Chicago brokers report that funds have sold 4,200 contracts of corn and 11,100 contracts of soybeans and 1,200 contracts of wheat. In the products, funds have sold 7,900 contracts of meal and bought 3,200 soyoil.

• Harvest operations continue to push ahead throughout Brazil with varied, but often disappointing reports on soybean yield. And now The Brazilian Government is concerned that heavy rainfall is disrupting the planting of winter corn to the detriment of yield. Brazil’s ag minister Dias indicated that domestic corn supplies are already tight but suggested that commodity prices could take another leap without highly favourable weather. Already too much rain has fallen across Mato Grosso which accounts for 54% of the winter corn crop, sunshine and drier weather to root the developing corn crop down is desired.

• The industry expects that NOPA members crushed a record 166-169 million buv of soybeans in February. The unknown in the report is whether Midwest crush was slowed during the Arctic cold onslaught early in the month. February soyoil stocks are forecast to increase to 1.839 billion pounds compared to 1,799 billion at the end of January. The report is expected to once again confirm that price is not rationing demand. US soybean processors report that their cash crush margins are holding above $0.95 cents/bu and that raising basis bids is not stimulating new farm sales.

• We anticipate another week where US soybean exports top 20 million bu while corn is 74-82 million. Vessel counts show an aggressive corn program is underway.

• The midday GFS weather forecast is wetter for Northern Brazil and drier for Argentina. Rainfall totals are estimated in a range of 0.2-1.25″ with a few locally heavier amounts. The best rains fall late next week when a low-pressure vortex pulls through the area. The forecast is generally wet for Northern Brazil with 3.50-6.50″ of additional rainfall. The GFS forecast stays wet for Northern Brazil with 10-day rains of 3-6.50″. And the 10–15-day period is especially wet for N Brazil with another round of heavy rain. Winter corn needs sunshine and less rain to promote root growth. Our concern for the winter corn crop is growing amid ongoing heavy Northern Brazilian rainfall.

• Chicago futures felt extremely heavy this morning with soymeal busting below the 100-day moving average. However, cash connected buying developed on the break and with a new Northern Hemisphere growing season ahead, the downside price risks are limited as the market must building new premium in price. We doubt that few want to be overly bearish heading into the March 31sStocks and Seeding report. A record large first quarter feed use should also produce like demand in the second quarter. The acre risk is that US farmers will plant less than 90 million acres of soybeans. Buy sharp breaks would be our advice.

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