- HEADLINES: US corn exports a bullish surprise for February; Plains and Central Brazilian weather forecasts arid; Yield concern rising.
- Chicago values are higher with KC wheat the upside leader as traders discuss a US 2022 all wheat yield of 45-46.5 bushels/acre due to the disappointing US winter wheat crop ratings released yesterday. Moreover, the EU monthly weather forecasts were just released, and they show a deepening Central US drought from June through August from the Great Plains eastward to the Mississippi River. We note that the EU monthly forecast helped call the S American drought well in advance and should not be dismissed. Political and war risks collide in the marketplace heading into summer. Chicago will be unable to sustain a break (other than on a few days) due to profit taking or headlines that suggest that Russia/Ukraine are making progress in cease fire talks. Chicago values need to keep encouraging US farmers to seed every available acre. A higher Chicago close is forecast based on the demand rationing need of US wheat.
- Chicago brokers estimate that funds have bought 2,900 contracts of wheat, 6,200 contracts of corn, and 5,700 contracts of soybeans. In the products, funds have bought 200 soyoil and 4,400 contracts of soymeal. The Goldman roll starts Thursday and runs for 5 business days. We expect that Goldman will be putting additional funds to work in the commodity space via diversification.
- You can tell that new money is being pushed into Chicago when large volume occurs in the first 10-15 minutes of the day. This volume is tied to fund managers that are adding grain exposure to their portfolios. And ETF in corn, soybeans and wheat are balancing purchases and the needed purchases in futures to cover the risk. Inflows are expected to persist with the US inflation report due April 12. We fear that the March US inflation rate could reach upwards of 9%.
- The USDA did not release any fresh export sales this morning. China is still on holiday but will likely return with their buying shoes on in soybeans and potentially corn. A US domestic grain merchandiser named COFCO has likely already purchased the US cash corn, but the sale does not get announced until it is transferred to Sinograin, a Chinese Government grain importer.
- The Monthly US merchandise trade Report was released today. The report showed a February corn export rate of 261.9 million bu, wheat at 68.1 million bu and soybeans at 139.3 million bu. The February corn export rate was 18% above FGIS or 40 million bu based on ongoing record large US corn exports to Canada. September-February (half the crop year) US Census corn exports are 217 million bu above FGIS inspections, and 13 million bu ahead of last year’s export pace. In 2020/21, US corn exports were 2,753 million bu and a similar or higher rate appears likely in 2021/22. WASDE’s 2021/22 March US corn export estimates of 2,500 million bu is too low by 200-250 which will drop end stocks close to 1,200-1,250 million bu without a 50 million bu increase in the US ethanol grind. Old crop corn will be tight!
- Russian President Putin’s approval rating reached above 70% this week as the Russian population is embracing his “special operation” within the Ukraine. The surge of Putin’s popularity will push him and his military leadership to “fight on”. We would like nothing more than the Russian war to end, but Russia sees the war as their strategic battle against the west and to place land boundaries around Russia in case of an invasion. Unfortunately, the war could persist for longer than many of us in world agriculture imagined.
- The midday Central US GFS weather forecast is consistent with limited rainfall for Southern and US Central Plains over the next 10 days. Temperatures warm dramatically in the 6–10-day period with 80’s/low 90s across the S Plains. The lack of rain, strong winds and warming temperatures will add further stress to HRW wheat. And 12-18” of snow will fall across South Dakota/Minnesota next week, adding to what is becoming an extended winter.
- WASDE should lower US corn/soy end stocks on Friday with S American crops to fall again. US 2021/22 wheat end stocks could ease on enlarged feed use. Bullish Chicago price trends prevail with US and S American weather gaining in market prominence. Stay bullish. New rally highs could be formed next week.