- HEADLINES: Chicago rallies sharply to add war premium; NOAA extended range weather forecast warm/dry for C Plains/W Midwest.
- War off/war on. Today the war is on. Chicago futures are sharply higher on declining volume with the market adding back the war premium that was subtracted yesterday. May corn futures are back testing resistance at $7.60-7.80 while May soybeans push against $16.80-17.20 resistance. Wheat futures have lagged following yesterday’s limit down close and lack of fresh US export interest. Traders each week are using the weekly export sales report for a proxy of how much export demand is being shifted to the US due to the Russian war. There has been corn business that has shown up as evidenced by Japan’s more active purchase pace. However, China and a host of other nations do not appear ready to chase world corn/wheat values higher. We look for a higher Chicago close with the market ready to trade the next headline in the Russian war. The volume on the rally has not been large, which serves to exacerbate market volatility.
- Chicago brokers report that funds have bought 11,000 contracts of corn, 3,400 contracts of wheat, and 10,400 contracts of soybeans. In soy products, funds have bought 3,500 contracts of soyoil while selling 3,400 contracts of meal.
- FAS/USDA reported that for the week ending March 10, the US sold 5.4 million bu of wheat, 72.3 million bu of corn, and 46.0 million bu of soybeans. US corn/soybean sales were above trade expectations and considered bullish. US wheat sales were disappointing as US wheat is non-competitive in the world marketplace. US weekly wheat sales were bearish with the crop year ending in just over 11 weeks. EU wheat sales are ramping up, and until the EU sells out of its old crop supply, will US wheat exports be constrained. Wheat is becoming a new crop story- not only for supply but also demand.
- For their respective crop years to date, the US has sold 688 million bu of wheat (down 213 million or 24%), 2,049 million bu of corn (down 334 million or 14%), and 1,970 million bu of soybeans (down 255 million or 11%). 2021/22 US soybean sales were down nearly 560 million bu at one point last autumn, so the ongoing new demand from Brazil’s drought inflicted harvest is likely to cause US soybean exports to near or exceed last year.
- China has been an active buyer of Brazilian soybeans this week with their FOB market weaker than the US Gulf as the soybean harvest pushes beyond 75% completed. Brazil is said to have sold 22-26 cargoes of soybeans to China as they continue to add to forward coverage. China crush margins are deeply positive, but China will not chase Chicago rallies. US President Biden and Xi will be meeting later today as the US tries to modify or break China’s support of Russia. China corn demand is absent for now and with May corn trading at such a huge premium to July/December, China could wait to book new crop.
- The NWS/Climate Prediction Centre forecast for spring/summer offered warmer and drier than normal weather for the Plains and portions of the W Midwest. That heat/dry looks to extend into the early portions of summer which could pose a problem for US HRW wheat. The good news is that the nearby forecast has excessively wet weather as a potent storm system moves across the Plains, Delta, and most of the Midwest.
- The midday GFS weather forecast is wetter for the Central US Plains with a broad area of 1-3.00″ of rain across Kansas/Nebraska early next week as a strong system pulls westward from the Rockies. The system also produces soaking rain for the Upper Lake States and the Delta. The S American forecast is wetter across South Central with just a few widely scattered showers for Argentina.
- Fund flows are pushing Chicago values upwards at midday to technical resistance at $7.60 May corn and $16.90 May soybeans. Daily wheat price ranges are exacerbated by the lack of resting orders. We see Chicago grain values as range-bound until after the NASS March 31 US Stocks/ Seeding Report. The report could reflect more than expected corn/soy acres based on margin. Our advice remains not to chase Chicago rallies. Someday soon the war will be off (or at least rumoured to be off).