- HEADLINES: Chicago rallies to $15.50 resistance in March soybeans as soyoil futures break resistance; US weekly exports disappointing for grains.
- Chicago ag markets are mixed at midday with the grains lower, while soybeans and soy products are able to hold in the green. Once again, March soybeans rallied to test key resistance at $15.50 and March corn to $6.83 before faltering. The wheat market was never able to post much of a morning recovery with Russian fob offers staying depressed at $297-299/mt. Chicago values are chopping at midday with soyoil futures posting new daily highs. It is soyoil that must rally if the soybean market can bust to new highs. End users or importers are unwilling to chase US cash soymeal much above $500-520/mt, approaching a record high.
- Grains are following soybeans , but it is the unknown regarding the Argentine soybean crop size has underpinned the complex. A lower close would suggest that much of the Argentine supply losses have been digested by the trade with talk of a 33-35 million mt soybean crop circulating for the past week. We doubt that the Argentine 2023 soybean crop will be less than 33 million mt amid recent 4-week rains and NDVI indexes that are improving during the pod filling stage. We estimate the Argentine soy crop between 34-39 million mt depending on weather.
- Chicago brokers report that funds were buyers of 4,600 contracts of soybeans, 3,800 contracts of soymeal and 3,600 contracts of soyoil. Fund managers sold 900 contracts of corn and 3,600 contracts of Chicago wheat. It does not require much selling for the wheat market to decline. We also note that March soyoil futures are hitting against the 50-day moving average. A close above $0.6225 March soyoil (50 day moving average) will produce fresh fund short covering.
- US weekly export inspections were disappointing in corn/wheat, and as expected in soybeans at 58.0 million bu. For their respective crop years to date, the US has exported just 540 million bu of corn (down 312 million or 37%), 1,520 million bu of soybeans (up 52 million or 3%), and 538 million bu of wheat (down 15 million or 3%). The US corn and wheat export pace continues to disappoint, and WASDE is likely to make additional cuts in 2022/23 US corn export estimates. US wheat exports are already resting at a 40 year low.
- Brazil will return on Wednesday with their selling shoes on following the Chicago rally. Brazil is expected to harvest nearly 2.0 million mt of soybeans daily this week of which 1.0 million will move across the scales and be hedged in Chicago. The Brazilian hedging could produce a correction in Chicago soybean and soymeal values. Brazil is offering 48% hi-pro meal at $40-42/mt below the US Gulf. Neither US soybeans nor soymeal are competitive in the world export arena. US soyoil will not be exported due to the massive demand coming from renewable diesel pricing for coming plant start-ups. The US is leaving as a world vegoil exporter for years due to renewable diesel subsidies/demand.
- The midday GFS weather forecast is wetter than the overnight or the EU model with several bouts of showers. The first chance is later this week across Northern and Central Argentina with rain totals of 0.1-0.7” with a more important chance starting Wednesday March 1 and continuing into the weekend. This system is forecast to produce 0.5-2.00” of rain on good coverage of Cordoba, Buenos Aries, and Southern Santa Fe. Traders will be watching to gauge if the EU model follows through with the GFS rain forecast.
- Brazil will see near normal to above normal rainfall with the heaviest totals for RGDS/Santa Caterina and Parana. No extreme heat is forecast, and the harvest should continue normally over the next 2 weeks. The key for S American crop production is whether Argentine crops can catch a needed rain.
- The market is aware of the 2023 Argentine soybean crop loss of 13-16 million mt, but this is balanced against the record large Brazilian harvest of 152-155 million mt and a Paraguay crop of 9.6-10.5 million mt. Brazil also has a storage problem with the sheer size of their harvest to pressure fob basis offers even lower. USDA on Thursday will likely release US 2023/24 end stock totals that are far larger than the current year based on yield/acre gains. This will cast a bear shadow on price once the Argentine losses are digested. Don’t chase rallies in soybeans, soymeal, or corn.