- HEADLINES: Mixed as Chicago tries to bounce following Monday’s lashing; Export demand lacking to keep the rally going.
- Chicago futures are mixed at midday with the grains holding in the green while the soy complex sags on long liquidation and the coming harvest of a record large Brazilian soy crop. We look for a mixed close, but we doubt that Chicago corn futures can sustain the rally amid ongoing tepid export demand. The USDA announced the sale of US corn to an unknown buyer which is rumoured to be Japan. The window for an increase in US corn export sales has narrowed from March through mid-June. Thereafter, S America will again become the low-price seller to the world. We maintain that US 2022/23 US corn exports are overstated by 100-150 million bu which will add to old crop end stocks.
- March soyoil is back testing key support below $0.61 while soymeal has tried to rally. However, US cash basis bids for soymeal are in decline with Central IL rail meal bid at even money. The weakening cash meal basis is narrowing the premium of March/May soymeal spreads. The soymeal and soybean markets have scored a longer-term top and oil share spreads should again start to perform. We would sell rallies as the supply bull market fades.
- Chicago brokers estimate that funds have bought 6,100 contracts of wheat, 8,200 contracts of corn, and 3,200 contracts of soybeans. In the products, funds have bought 1,900 contracts of soymeal and sold 4,400 contracts of soyoil.
- March soybean futures rallied and filled an open chart gap left from Sunday’s lower open due to better than expected Argentine/Southern Brazilian rainfall. That gap was at $15.04-15.06 March with a lower close today suggesting that further weakness lies ahead into the weekend. The downside price target is $14.45-14.65 nearby.
- The economic outlook for the world economy is gloomy on rising rates in the Central Bank’s war against inflation. Rumours of Pakistan defaulting on palmoil cargoes while the private sector in Egypt struggles amid the falling Egyptian pound swirl. The sharp fall in world freight costs is due to slow charter bookings. World consumers are struggling on cost and diminished financing opportunity which is hitting commodity demand. USDA is forecasting no growth in 2022/23 corn trade for the first time since 2012/13. The data suggests that USDA will continue to trim 2022/23 world grain trade.
- We have no way of knowing if China will return from their weeklong holiday with improved commodity demand due to its reopening. That is a bet being made. China was a sizeable buyer of US/S American soybeans in the first half of January, but since the weather is improving in Argentina/S Brazil, Chinese crushers may wait for cheaper prices amid the added supply potential.
- The midday GFS weather model is coming around to the wetter thinking of the EU model solution. Moderate to at times heavy rain will fall across Argentina from late Wednesday into the weekend from a slow-moving storm system with rain totals of 0.4-2.50”. A few dry days follow with another system noted for the northern half of Argentina in the closing days of January and the first day of February. Additional rain will fall.
- Near normal rain will drop across N and C Brazil which is ideal for late podding soybeans. And there are enough dry slots for N Brazilian farmers to advance their harvest. The forecast for leans favourable for S American crop yield/production.
- It is a turnaround Tuesday with the supply bull market of recent weeks trying to fight for its existence. The supply bull will struggle against a lack of demand. The only positive of export demand is for renewable diesel, and soyoil is selling off on speculative liquidation. We doubt that corn, soybean, or meal markets can sustain a lasting recovery with another 2 rounds of rain to drop across Argentina. A seasonal price high was scored last week. This no place to chase a rally and with March corn at resistance at $6.77-6.83.