- Chicago grain futures are lower at midday with March corn falling below key support at $6.70 while fresh selling pulls March KC wheat closer to chart-based support at $8.40-8.50. Soybean futures tried to rally on the new speculative buying in soyoil, but then failed with the complex being pulled lower with the grains. US soybean and soy product demand is lacking as Brazilian premiums keep edging lower. And traders wonder if the USDA Outlook Forum is producing a shift in market mentality away from focusing on Argentine weather, to the new Northern Hemisphere growing season.
- Brazil has now harvested nearly 45 million mt of soybeans which is refilling the world soybean pipeline. As previously stated, we do not believe that the frost produced much yield loss and see the Argentine soybean crop in a range of 34-38 million mt. Such a crop does not elicit a rally much above key resistance at $15.50-15.75 with an emotional top possibly scored on Tuesday. Historically, it is difficult to see yield losses greater than 30% in crop areas that have good soils. Supply driven markets often peak when the weather looks the worst, and a frost scare fits into that category.
- Chicago brokers estimate that funds have sold 6,700 contracts of corn, 3,800 contracts of soybeans, and 2,200 contracts of wheat. In soy products, funds have sold 1,400 contracts of soymeal while being flat in soyoil. Funds are thought to be holding sizeable, long positions in corn, soybeans, and soymeal.
- The USDA Outlook meeting US spring seeding of the 4 major crops (corn, soybeans, wheat, and cotton) was 238.9 million acres vs 240.7 million acres in the year prior. We could argue that there is still room for growth in US soybean acres due to double cropping. Midwest SRW wheat seedings soared last autumn and producers now are eligible for a $10/acre payment and crop insurance if they double crop with soybeans. Our guess is that a considerable amount of SRW wheat acres will double crop which will raise US soybean acres by 700,000-1.1 million acres in the final count in June. We maintain that 2023 US soybean acres will reach 88.5-89.0 million under the new program.
- BSE has been recorded in Brazil which shut their exports to key countries like China. Brazil was forecast to export 3.0 million mt of beef and veal in 2023, which is now in jeopardy. Note that Brazil exports twice as much beef as the US and a portion of the lost demand could be pushed to the US. Such demand will further tighten declining beef production and lift US beef prices to record highs this spring. The Brazilian BSE beef ban is country by country, but Brazil will have to prove that it is BSE free for at least 6 months for exports to restart. Whether it is bird flu and now Brazilian BSE, feed usage rates are in decline amid disease issues.
- USDA Sec Vilsack at the USDA 2023 Outlook Forum said that Mexico will produce challenges for US corn exports and that there is little room for compromise. Mexico is trying to ban US GM corn imports beyond 2024. The market will continue to closely follow US/Mexico GM corn negotiations. Mexico will import more than 600 million bu of US corn in 2022/23 or some 30% of total US corn exports.
- The midday GFS weather forecast is wetter than the overnight with better rain coverage/higher amounts for Argentine crop areas after March 2. The GFS forecast pegs rainfall totals in a range of 0.5-1.50”. Dry weather follows in the 10–15-day period with another rain needed in mid-March. The Brazilian harvest is ongoing with below normal totals this week for northern and central crop areas.
- Chicago has a heavy feel as new money is not flowing into raw material markets. Chicago seems to be shifting its focus from Argentine weather to the potential for improved Northern Hemisphere seeding and lower world wheat prices. Our mindset stay bearish, wanting to sell rallies.