- HEADLINES: Slowing investor demand for Chicago grains sparks correction; Questions on Black Sea demand Shifts to US; Central US weather cool/wet.
- Chicago futures are mostly lower at midday with the fund flow of new buying diminished from prior days. Funds have been large buyers of corn/soybeans and soyoil in recent days, but that demand is showing signs of tiring. And cash wheat/meal values are weaker on cash market pressure. Brazilian soymeal basis has dropped as crush rates are being amped up while Russia continues to leak wheat into the Mideast and North African markets. We look for a weak Chicago close into the weekend, with a continuation of the war, no longer being a big surprise for Sunday’s opening. Short term, it is all about adjusting risk ahead of the USDA report next week Thursday.
- Chicago brokers estimate that funds sold 2,200 contracts of wheat, 7,300 contracts of corn, and 2,800 contracts of soybeans. In the soy products, funds have sold 3,500 contracts of soyoil while buying 1,900 contracts of soymeal. For the first time since late last week, funds are on the sell side of the marketplace. We suspect that much of the selling is related to profit taking ahead of the USDA March Stocks/Seeding report and need to bank profits before the end of the quarter.
- USDA weekly export sales for the week ending March 17 were 5.7 million bu of wheat, 38.9 million bu of corn, and 15.1 million bu of soybeans. The sales were down from prior weeks and has some wondering about the transition of unfulfilled demand from the Russian war. Are importers hoping for lower prices or have they shifted their demand to others including India in wheat and Brazil in corn. China is active in securing US soybeans, but S American is far cheaper in corn beyond late June.
- Central US weather will grow in market importance in the weeks ahead. This week’s 0.5-2.00” of rain across the Plains and Midwest/Delta has helped restore lost soil moisture, but the dryness is far from solved. Initial NASS wheat crop condition ratings will be released on April 4 and are expected to show the drought that built across the area this winter. 2022/23 US corn, soybean and wheat balance sheets have no room for weather/yield error and the focus on Central US, European and Chinese weather will be acute.
- US rail logistics are a mess and car costs are near record high at $2,600-3,000. The cost side of transporting grain is soaring whether it is truck, rail, or ocean freight. Diesel prices are priced at $5.00 across much of the Central US. If a grain filled truck is getting 5 mpg, that works out to $1.00 for every mile travelled. And because of the high costs of diesel, companies have pushed to utilise more rail. That is causing car shortages and soaring rail costs. And yes, even barge demand is soaring. The point is that the cost to get grain on a Gulf vessel is record high, and still rising.
- Cash rumours abound that Brazil is selling Spain corn upwards of 400,000 mt for April/May. Brazil is trying to push some of its first crop corn out the door amid a winter crop looking so favourable. And the Brazilian Real is expected to keep rising against the US$ which is pushing farmers to sell. We have been commenting about the big price discounts of S American corn beyond June. The US corn export window is relegated to April-May and June.
- The midday GFS weather forecast is consistent with the overnight run. The Central Plains, Midwest and Delta will be open to wet/cool air with a regular flow of moderate to heavy showers projected into April 3. The next chance of widespread/meaningful precipitation occurs next Wed-Friday.
- Chicago futures are lower on profit taking with traders questioning whether unfilled Black Sea grain demand will be pushed to the US. The weekly US export sales pace along with this week’s less than expected demand (China soybean demand excluded) has left the bulls without a story to push corn above $7.75, last year’s high. We look for choppiness into next Thursday’s report.