- HEADLINES: Soybean futures to new contract highs with March at $14.29; Russian worry to dominate into the weekend; US ethanol grind recovery.
- Chicago summer row crop futures are sharply higher heading into the midday hour with soyoil, corn and soybeans providing the bullish leadership. Early wheat selling uncovered new speculative buying with few traders wanting to be short heading into the weekend with Russia threatening to invade Ukraine. March soybeans have forged a new contract high at $14.295, while March corn is back near chart resistance at $6.14-6.17. And a close above $8.00 KC wheat and March corn at $6.17 will turn all chart trends higher. We see new crop soybeans, soyoil and corn as being the best bull value. November soybeans below $13.00 are too cheap (in our opinion) based on coming US demand next Sept-December.
- Brokers estimate that funds have bought 7,400 contracts of corn, 12,900 contracts of soybeans, while being net flat in wheat. Funds were early wheat sellers and then bought 4,000 contracts back. In soy products, funds bought 3,200 contracts of soymeal and 5,400 contracts of soyoil. March soyoil futures has a new upside price target of $.65, or a test of the summer price highs. By way of note it took just one minute to rally March soybeans $0.14/bu on order flow of just 3,000 contracts. There are no resting orders above the market.
- Geopolitics has become important to world grain pricing this week. Russia invaded Crimea back in February/March of 2014 as soils froze and the world had their focus on the Winter Olympics in Sochi, Russia. World politicians fear that a similar invasion of Ukraine could occur as China’s hosts the Olympics this year. Russia continues to amass troops along Ukraine borders including Belorussia which is causing a sharp escalation of political fear. We have been asked if there is any economic indicator that would hint at Putin’s future Ukraine plan. Our response is the weakening Russian Ruble is one, but Putin will do what Putin wants as he sees reuniting the USSR territories as his legacy.
- Few Russian grain exporters want to sell fob/cif corn/wheat too far in the future amid the uncertain geopolitical situation. This is creating a defacto Russian grain embargo. Importers wish to secure Black Sea grain only on an optional origin basis which forces sellers to secure from others, namely the EU or US. Australia has sold its grain export elevations through May with Asia active in booking June/July. Argentina has nearly sold its recent wheat harvest with the Government capping exports at 12.5 million mt, some 2 million below issued export licenses. The point is that Russian 2021/22 wheat exports could be below 30 million mt which implies the US will enjoy world wheat demand in March-May.
- World cash corn markets are firm and rising. Brazilian cash corn is trading at $8.20-8.40 throughout the south, with Chinese cash corn prices rising above $11/bu. EU corn values are nearly $9/bu as Ukraine actively exports corn to China. Chicago spot corn below $6.00 is too cheap as world feedgrain prices rally.
- US weekly ethanol data showed a recovery from last week with a corn grind of 310 million bu vs. the USDA weekly average needed of 296 million bu. The US corn ethanol grind is running hotter than the USDA forecast and further upward revision of 50-75 million bu in demand is required which would drop US 2021/22 corn stocks to 1,425-1,450 million bu in round figures.
- The midday GFS weather forecast is similar/consistent with the overnight run with any meaningful rain persisting across Central/Southern Argentina with 1-3.50” totals over the next 10 days. Rains will be limited across the Southern 2/3’s of Brazil with totals of 0.25-1.50” into Jan 30. Extreme heat will batter S Brazil, N Argentina with highs in the 100’s. The heat/dryness is pulling S American corn/soy crop further downward.
- March/May Chicago corn is trading at a premium which reflects strong demand and tight cash supplies, just like last year. The upside price target for March soybeans rests at $14.75 as private reports of a Brazilian soybean crop under 130 million mt flourish. Short covering in wheat will persist on the Russian invasion worry. This is no place to be making new sales.