- HEADLINES: Chicago sags on better rains for Argentina; US dollar catches a bid; Key 50 day moving average just below in corn/soybeans.
- Chicago grain futures are lower at midday on a gain in the US dollar, rising US/China political tensions, and potential for rain across the key crop areas of Argentina this weekend and early next week. Today’s tone of Chicago is bearish, but the USDA February Crop report will be released in less than 48 hours with traders adjusting their risk accordingly.
- Funds are holding sizeable, long positions in soymeal, soybeans and corn and a sizeable net short position in US wheat futures. Yet, we calculate that funds are holding their smallest net long soyoil position in 20 months. The recent break has pulled spot Chicago soyoil futures to their lowest level since July 15 when spot futures fell to 58.40 cents. The low this morning for March soyoil was $58.43. We would argue that soyoil futures are undervalued and that soymeal futures are overvalued. It will be key to monitor the oil share spread following the USDA February Crop report on Wednesday. We look for a mixed close today, and for that trend to persist into the USDA report. Record soybean yields out of N Brazil will make up for any Argentine soybean crop shortfall under 40 million mt. The N Brazilian soy yields are that sizeable.
- Chicago brokers estimate that funds have sold a net 4,700 contracts of corn and 3,800 contracts of soybeans, while buying 900 contracts of wheat. Funds were early buyers of 2,900 contracts of wheat and turned around as sellers of 2,000 contracts for a net of 900 contracts on the day. In soy products, funds have sold 3,400 contracts of soymeal and 4,800 contracts of soyoil.
- The USDA confirmed that Mexico purchased 200,000 mt of US corn with 118,000 mt to be sold to Japan. The Japanese corn was old crop while the Mexican corn purchases was evenly split between old and new crop.
- The devastating S Turkish earthquake has not caused any delays in Black Sea grain inspections or shipments. However, it could delay future Turkish grain tenders until more is known about the financial and structural damage to Turkey. Today it is about the aftershocks and the help needed in distributing food, aid, and other supplies.
- US export inspections for the week ending February 6 were 18.9 million bu of corn, 19.7 million bu of wheat, and 67.2 million bu of soybeans. Wheat exports were larger than trade expectations, while corn was less while soybeans were right at trade ideas. For their respective crop years to date, the US has exported 493 million bu of corn (down 239 million or 33%), 1,392 million bu of soybeans (up 8 million or 1%, and 505 million bu of wheat (down 9 million or 7 million bu or 2%). US corn loadings must soon start to rise for there to be any chance of reaching the WASDE forecast of 1,925 million bu. We see 2022/23 corn exports at 1,850 million.
- Stats Canada will release their closing January grain stocks tomorrow morning. It is expected that stocks of wheat, canola, oats, and corn will be well up from the year prior, remember that 2021 was drought impacted.
- The midday GFS weather forecast is wetter than the overnight with better rain coverage/higher amounts for Argentine crop areas after Feb 12. The GFS forecast pegs rainfall totals in a range of 0.5-2.00” from Sunday through Tuesday of next week. Dry weather follows in the 10–15-day period with another rain needed in late February. Projected Brazilian rain has improved for RGDS/Parana with heavy totals of 2-5.00” offered for Sao Paulo.
- Extreme heat returns to Argentina this week but abates next week. USDA will likely cut its Argentine corn/soy crop estimates on Wednesday due the ongoing drought.
- Chicago has a heavy feel as new money is not flowing into raw material markets. This is a departure from the start of the year. And the USDA report is not scaring end users into taking soymeal coverage before the report. The 50-day moving average crosses at $6.65 basis Mar corn/$14.92 basis Mar beans.