- HEADLINES: Row crops weaken; Wheat recovers; Macros lean heavy on fed chair comments.
- Chicago ag markets are mixed and rather listless at midday. Corn and soybeans are trading steady to lower in preparation for Wednesday’s WASDE release, in which US corn exports may be lowered 25 million bu and 2022/23 US soy crush is likely to be trimmed slightly. There is not yet evidence to boost total US row crop consumption, and while Argentine drought has become historic in nature and in the long run funnels corn and meal demand to other markets, including the US, this is unlikely to be printed tomorrow. We do note that nearby spreads continue to perform, with March corn’s premium to May widening to $0.10/bu. March soybean’s premium to May is up $0.04/bu to $0.16/Bu. FAS’s daily reporting system was void of new export sales this morning.
- Otherwise, it has been a largely macro day. Federal Reserve Chairman Powell this morning hinted that US benchmark interest rates in 2023 would likely exceed market expectations following ongoing strong economic performance and unrelenting strength in the labour market. The US dollar index is up a full 1.1% at a newer two-month high.
- Spot WTI crude is down $2.40/barrel at $78, which leaves $80 as decently strong overhead resistance. The Dow at midday is down 320 points.
- The Argentine weather forecast at midday remains outright hot despite summer’s fade into autumn there. The GFS forecast maintains max temperatures in parts of Santa Fe and Entre Rios in the upper 90s/low 100s, while precipitation will be confined to fringe producing areas of Argentina’s southern crop belt. Argentine yield losses will cross thresholds seen only a few times in recent decades. Corn has been less willing to add premium due to this year’s contraction in total global trade, but uncertainty will hang over global soymeal and oil flows for some time. Argentine soy crush in 2022/23 is likely to drop 5-7 million mt year-on-year. Soy product supply tightness is unavoidable.
- A broad pattern of active precipitation and cold temperatures is offered to the Central US into the latter part of March. Additional snowfall of 6-15” is possible across the Dakotas and in NE/IA into the weekend. A warmer/drier setup will be desired in April.
- The midday GFS weather forecast is consistent with the morning release in calling for unrelenting heat and dryness across key areas of Argentina throughout the next 10 days. Temperature moderation is forecast thereafter, but confidence is low given the recent warmer trend. Argentine showers nearby will instead favour La Pampa and southern Buenos Aires. Normal/above normal rainfall and mild temperatures will continue in Brazil. Soy harvesting/safrinha corn seeding will be slowed in Mato Grosso do Sul.
- Argentine drought this year will prevent a build in corn stocks and weigh heavily on the build in global soy stocks anticipated just 60 days ago. Argentine production loss and uncertainty over spring/early summer Black Sea grain flows place a heavier burden on production across the Northern Hemisphere, which likely avoids major threats but this must be confirmed before lasting bear trends emerge. Wheat remains oversold in the US and Europe.