- HEADLINES: Brazilian soy production talk is big as farmers sell newly cut supply; World grain trade shifting south; Egypt cancels corn tender.
- Chicago futures are lower at midday with selling noted from sagging S American soybean/corn premiums, and the ongoing shift in world trade from the US to Brazil/Argentina. The US is in the cusp of seeing its export book languish as cheaper price offers from the Southern Hemisphere curtails new nearby US corn, soybean, and wheat export sales.
- The bulls are hopeful for another large week of US corn, soybean, and soymeal sales tomorrow, but with much of Asia on holiday last week, we are doubtful.
- The slowing of US export sales and shipments has now arrived. US export sales will be slow from February through July while shipments are likely to stay tepid well into the new crop position if Brazil’s weather is normal for winter corn yield/production. Brazil still has vessels to load corn during February and early March, which suggests strongly that last year’s Brazil winter corn crop is understated by as much as 4-5 million mt. The price of feed wheat and the ongoing export of corn by Brazil looks to curtail US 2022/23 corn exports. We fear that USDA/WASDE will further cut US corn exports in coming monthly reports. The competition in the world grain export market is acute.
- Chicago brokers estimate that funds have sold 2,300 contracts of wheat, 4,200 contracts of corn and 2,900 contracts of soybeans. In the soy products, funds have sold 2,200 contracts of soyoil and 900 contracts of soymeal. The fund buying of recent trading sessions has slowed.
- The USDA/FAS did not announce any new purchases of US corn, soybeans, soy products or wheat in its daily reporting system. China is said to be bidding for May soybeans out of Brazil this morning.
- The USDA ag attaché estimated the 2023 Argentine soybean crop at 36.0 million mt, 9.5 million below the USDA. The attaché estimate is just below the Rosario exchange forecast at 37.7 million mt but well below other private estimates that range from 38-42 million. No estimate was provided for 2023 Argentine corn. The world market has heard Argentine soy crop estimates of 36-41 million mt for several weeks now and is likely trading a crop of 38-40 million mt. To take the crop lower will demand the return of acute heat/dryness in the last half of February and March. Argentine weather will be closely watched, but Chicago appears to have digested a significant Argentine soy crop loss at this point.
- Northern Brazilian soy yields are reported to be massive and are slowing the harvest but will likely cause an upward adjustment the crop in coming CONAB monthly reports. RGDS is too dry, and crop losses of 3-4 million mt are expected, but RGDS produces 21-22 million mt of soybeans while Mato Grosso produces 44-46 million mt (larger than Argentina)
- The midday GFS weather forecast is slightly drier than the overnight solution, but our confidence in the GFS model stays low. Widely scattered showers will continue for another 12 hours, but the GFS forecast is once again under forecasting rain amounts/coverage. Showers are continuing across Central Argentina at noon. Following this rain, 8-9 days of dry weather follows. Near to above normal rain is forecast in the 10–14-day period, and we doubt that Argentina is slipping back into any dire drought.
- The Brazilian weather forecast offers near to below normal rainfall across the North and improving rain chances for RGDS in Southern Brazil. An improvement in the harvest pace lies ahead.
- The Argentine dryness is becoming too well known to be much of future bullish factor. More important is that Brazilian cash selling from recently harvested soybeans is active. Farmers are harvesting record soybean yields in the north and pushing that supply across the weigh scales. Today’s Chicago drop has not altered Brazilian farm sales. A bounce into the Chicago close is expected as the bulls hope for strong weekly sales totals from USDA on Thursday. As the Brazilian harvest advances, a liquidation break should occur by mid-February. We understand that Egypt has cancelled a corn tender on price.