- HEADLINES: Markets continue shedding of risk premium; NOPA crush falls short of expectations.
- Chicago futures are sharply lower in thin volume at midday as grain and energy market shed geopolitical risk premium. Russia’s decision to reduced troop numbers in Belarus has eased concerns over regional grain flows, and amid tight wheat, corn and crude balance sheets any small change in market perception will have an outsized impact on price. This will be a feature of markets well into late 2022. Wheat futures have fallen to major chart-based support, which is expected to hold amid threatening S American weather and as the US climate likely stagnates into spring. Spot WTI crude is down $3.40/barrel at $92.00.
- The soy complex has been the best relative performer today following a massive trimming of yield in Rio Grande do Sul. The government there now pegs RGDS’s soybean harvest at 11 million mt, which compares to CONAB’s mid-February estimate of 13.8 million. This downward revision more than offsets IMEA’s hike in Mato Grosso’s yield in early Feb, and assuming all else equal reduces S American’s soybean harvest 123 million mt.
- More yield data is needed, but it is suspected that CONAB’s Feb number will not be the lowest of the season. Further soybean and summer corn crop reductions in the south of Brazil are anticipated.
- NOPA member soybean crush in January totalled 182.2 million bu, down 2.4 million from Jan 2021 and 4.5 million short of the trade’s estimate. US soyoil stocks on Jan 31 totalled 2.03 billion lbs, slightly below expectations. Jan soyoil stocks data suggests total consumption is not being slowed by elevated prices, and soyoil production in January fell 5 million lbs short of total disappearance. The spot futures-based crush margin is calculated this morning at $1.35/bu, vs. $0.80 a year ago in mid-Feb.
- US exporters sold 101,000 mt of soybeans to Mexico, with 53,500 mt executed in an old crop position.
- Other fresh input is lacking, but we are beginning to pay closer attention to the US Plains short, and long-term climate outlooks. Moderate rain/snow will reach into portions of KS, OK and TX in the next 10 days, but frigid air is forecast to blanket the Southern and Central Plains Feb 22-25, with minimum lows pegged in the single digits in CO, KS and NE. Freeze damage is impossible to quantify but adverse conditions remain probable across the primary HRW Belt into at least early spring.
- The midday GFS weather forecast operational model is wetter in Argentina Feb 24-28 as high-pressure ridging moves briefly northward late next week. There is general model agreement that moderate showers will impact southern and western Argentine crop areas in the 8–10-day period, but confidence in midday GFS output is low. We note that neither the GFS ensemble nor the midday Canadian model features widespread heavy Argentine precipitation outside of La Pampa and portions of western Cordoba into Feb 28. Close attention will be paid to this afternoon’s EU model run, but ongoing net soil moisture loss remains probable across Central and Northern Argentina.
- Today’s market is defined by geopolitics, but overall, we must expect similar volatility throughout the coming N Hemisphere growing season. The outlook stays bullish as focus shifts from S American supply loss to US demand. Note also that regular soaking rain will be needed in Southern Brazil March 1 onward to maintain trend safrinha yield potential.