- HEADLINES: Wheat/corn continue to liquidate on charts; Soybeans follow via high price; China selling back soybeans to Argentina; First notice day on Tuesday.
- Chicago grain futures are sharply lower to mixed at midday. Liquidation has been the 3-day theme in corn/wheat, while soybeans sag in sympathy. Oil share spread unwinding has dominated soy product trade with traders exiting short March soymeal futures ahead of first notice day. It will be interesting to monitor if soymeal deliveries develop with March futures trading above $500/ton and cash basis levels starting to leak lower.
- We favour long soyoil/short soymeal spreads heading into mid-summer. The only Chicago grain that has a bull demand story is soyoil as massive US renewable diesel plants start to come online in April/May. Feedstock accumulation by these producers should soon rally cash soyoil on basis during the last half of March. We look for a lower Chicago close today, but bottom picking could develop before the settle as traders argue that corn/wheat futures have become oversold on momentum indicators. Chicago could be primed for a post-delivery bounce. However, longer term price tops are in place for corn, wheat, and soybean futures. Choppiness could follow as the world grain market waits to see if the Black Sea Grain Export Corridor Deal is extended.
- Chicago brokers estimate that funds have sold 9,200 contracts of corn, 5,400 contracts of wheat, and 4,800 contracts of soybeans. In soy products, funds have sold 500 contracts of soymeal and 5,300 contracts of soyoil. Funds are adding to their large net short wheat holding, while cutting their corn long.
- US Weekly Export Inspections for the week for Feb 23 were 22.5 million bu of corn, 21.7 million bu of wheat, 25.40 million bu of soybeans. US corn exports continued to disappoint with exports showing no sign of a seasonal pick up.
- For their respective crop years to date, the US has shipped out 563 million bu of corn (down 350 million or 38%), 1,546 million bu of soybeans (up 52 million or 3.5%), and 560 million bu of wheat (down 9 million or 1%). The US wheat and soybean export shipment paces are above amounts that are needed to meet USDA/WASDE annual targets, but corn exports continue to lag.
- There are rumours that China is selling back over 1 million mt of Argentine soybeans to domestic crushers/exporters due to price/supplies. China purchased the soybeans for their soybean reserve months ago. Now due to the drought and price, China is said to be looking to sell those soybeans back into Argentina and purchase the soybeans elsewhere. China likes to secure US or Argentine soybeans for their reserve due to storability. Some world importers wonder if China is considering Brazilian soybeans due to their attractive price today. We have no confirmation of the S American soybean swap, just that cash traders are discussing a resale of Argentine soybeans back into Argentina.
- The midday GFS weather forecast is slightly drier than the overnight run with limited rainfall for Argentine crops into March 10. There is still a chance of a few light showers of 0.1-0.8” this Wednesday/Thursday, but then the forecast then goes hot/dry. The lack of rain and coming heat will produce additional drought stress on Argentine crops.
- The Brazilian harvest is ongoing with below normal totals this week for northern and central harvest areas with light rain for RGDS. As it has been the case all season, the Brazilian weather outlook is favourable, and Argentina is harmful. Big crops get bigger and small crops get smaller!
- Chicago grains are liquidating into first notice day against March futures. However, Paris or Black Sea wheat fob wheat values have not fallen as deeply as Chicago/KC – yet!. And Argentine crop sizes are still in decline amid hot/dry weather for another 2 weeks. However, this won’t make a difference until the speculative selling pressure relents. Chicago grain charts are oversold, this is no place to be making new sales with Russia complaining that the latest round of sanctions adversely impacts their ag exporters.