- HEADLINES: Corn/wheat fail on early day rally; Funds add to length in soymeal; GACS gets cheap Russian wheat offers.
- Chicago grain futures are mixed at midday with the fund order flow being the dominate feature (once again). Chicago has all been about the flow of money since the start of the year with traders struggling with the back and forth of prices, depending on whether the money comes or leaves. Today is another example of new fund investment flowing into soybeans/soymeal and out of corn and soyoil. Funds are flat in wheat after being early buyers. It is the difficulty in predicting whether an investment manager wants to be a buyer or a seller or a spreader of the oil share which hurt trend followers.
- We look for a mixed Chicago close with the index fund roll to add some market drama next week as March longs are rolled forward. Most index funds will roll to the May position, but some will go forward to December corn and November soybeans. If you want to be bullish of Chicago, new crop offers a better opportunity vs the nearby with cash basis levels likely to leak lower as world soybean/grain demand is fulfilled by S America (corn/soybeans) and Russia (wheat). These are not easy markets to trade.
- Chicago brokers estimate that funds have bought 1,600 contracts of wheat, 6,500 contracts of soybeans, and 5,900 contracts of soymeal. Funds have sold 4,300 contracts of corn and 2,300 contracts of soyoil. Chicago open interest has risen nearly 85,000 contracts in corn/soybeans (each) in 2023, which is one of the reasons for the price rise during January.
- The USDA/FAS did not announce any new purchases of US corn, soybeans, soy products or wheat in its daily reporting system. This week’s US corn, soybean and wheat sales are down, which will be reflected in next week’s USDA weekly export sales report. We are seeing world soy demand switched totally to S America. With the $0.80/bu discount of Brazilian soybeans and the $0.20/Bu savings on freight, Brazilian beans landed in China are $1.00/bu cheaper not including the $0.15-.020/bu bonus on quality. Brazil has quite the advantage right now.
- US weekly export sales for the week ending January 26 were; 5.0 million bu of wheat, 63.0 million bu of corn, and 27.0 million bu of soybeans. For their respective crop years to date, the US has sold 594 million bu of wheat (down 40.0 million or 6.4%), 1,009 million bu of corn (down 767 million or 43%), and 1,736 million bu of soybeans (up 80.0 million or 5.0%). We expect this to be the last big week of US soybean sales with US wheat sales through January being at a record low. We would argue that USDA must cut its corn export estimate by 100-150 million bu and with Brazil now offering soybeans into October, US new crop export estimates are too high above 2,100 million bu. The Brazilian soy export program will have a long tail that harms US exports well into their harvest.
- The midday GFS weather forecast is drier (which did not have much rain either), but our confidence in the GFS model stays low. Showers are exiting E Argentina at noon and will reform across Uruguay and RGDS later today. Argentina will endure 8-9 days of dry weather with heat returning early next week. The good news, near to above normal rain is forecast in the 10–14-day period which should aid Argentine yields.
- The Brazilian weather forecast offers near to below normal rain across the North and improving rain chances for RGDS in Southern Brazil. The harvest will quicken into mid-February. The weather forecast for Brazil stays favourable with record corn/soybean crops in the making.
- Brazil’s soy export aggression will be felt for months to come, and well into the US new crop position. US corn export demand is disappointing with a suggestion that a secondary price top is either forming or in place. US wheat futures ran higher on short covering, but the Russian offers to Egypt’s GASC were aggressive. A purchase announcement of Russian wheat is awaited. Russia is now offering cheap wheat into April and will likely export 44-45 million mt. We doubt that rallies in soybeans or meal can be sustained.