- HEADLINES: Wheat sags and soymeal soars on Argentine weather; Divergent price trends awaiting the USDA report on Wednesday; CONAB out Thursday.
- Chicago grain values are mixed at midday with corn/wheat/soyoil values lower while soybean/soymeal futures are higher. May soymeal futures has pushed to a new contract high of $494.70/ton on the ongoing acute drought impacting the Argentine soybean crop. On the other hand, the Chicago wheat market has pushed to its lowest price since September 2021 on renewed fund selling of the coming end of the old crop export season. Also, traders are banking on the Ukraine Export Corridor deal will continue based on the weekend comments from Turkey that they are working hard on its extension.
- We would feel better about an extension of the corridor pact if there were favourable comments coming from Russia. We believe that a UN corridor deal has not yet been ratified. A mixed Chicago close is expected with spreads trying to re-jig on Tuesday. Wheat/corn ($0.55/bu spot futures) and soymeal/soyoil spreads (37.1% oil share spot futures) appear to be out of line fundamentally. Argentina is the world’s largest soymeal and soyoil exporter and a loss of crop/crush is more bullish to soyoil with US exportable soyoil supplies going to renewable diesel. We continue to see no reason for May soymeal futures to sustain a rally above $500/ton. It is soyoil that has future upside potential.
- The USDA reported the sale of 110,000 mt of US corn to Japan and 182,400 mt to an unknown destination. Questions abound if the unknown US corn sale is to China, and we just don’t know currently. Also, there are rumours this morning that China booked a cargo of US soybeans for late March shipment off the PNW.
- Chicago brokers indicate that funds have sold 4,400 contracts of wheat, 2,400 contracts of corn, and bought 9,200 contracts of soybeans. In soy products, the funds have bought 6,700 contracts of soymeal while selling 1,300 contracts of soymeal. The funds fully jumped to buy soybeans this morning.
- US export inspections for the week ending March 2 were 35.4 million bu of corn, 20.0 million bu of soybeans, and 9.8 million bu of wheat. For their respective crop years to date, the US has shipped 601 million bu of corn (down 374 million or 38%), 1,524 million bu of soybeans (up 44 million or 3%), and 572 million bu of wheat (down 12 million or 2%). The corn and soybean exports were larger than expected.
- Focus on Argentina has rightly been centred on historic drought which shows no sign of relenting. The 2023 Argentine soy crop was pegged at 34-36 million mt and corn at 41-43 million mt near the close of February. However, the ongoing hot/dry weather has taken a toll on production. Private Argentine soy crop estimates have fallen to 29-32 million mt with corn at 36-40 million mt. This crop loss has shifted the world soybean balance sheets back to extreme tightness with questions being asked on whether logistically Argentina can import 7.5-8 million mt of soybeans from others to boost its soy product exports.
- Soymeal rallies as it makes up +77% of the soy product production from crush. This is why meal always reacts first to any Argentine drought/crop loss. However, the world is facing increasingly tight supplies of vegoils, and with the US no longer exporting soyoil, and Malaysian palm/Argentine soyoil production down on adverse weather, a supply bull story is budding in vegoils.
- The midday GFS weather forecast is drier for Northern and Central Argentina and more in line with the overnight EU model. The core of Argentina’s ag belt stays warm/dry into March 16. Any rain will be focused on Buenos Aries and La Pampa in far Southern Argentina. And extreme heat persists for another 10 days with highs in the 90s/lower 100s. Near to above normal rainfall falls across Northern Brazil to the benefit of winter corn, but the moisture will slow the remaining soybean harvest. Dry weather helps speed the harvest in Parana.
- Spreads are out of line on capital flows today, but we look for oil/meal and wheat/corn spreads to perform for the remainder of the week. The USDA March Report will be out Wednesday with Brazil’s CONAB releasing their crop estimates on Thursday morning.