- HEADLINES: Grains rally, soy falls following CTFC update; Plunge in crude weighs.
- Chicago ag markets are again mixed, with US/world grain markets firm and the soy complex in correction mode. Price action this morning is partially a reflection of the CFTC’s commitment of traders update Tuesday evening, with record long liquidation (147,000 contracts) occurring in corn through the week ending Feb 28 and funds in Chicago wheat were short a sizable net 92,000 contracts. Funds were net long 130,000 contract of soybeans and 140,000 contracts of meal. We estimate managed funds today are long just 58,000 contacts of corn and 135,000 contracts of beans. Modest long soy/short grain spreads are being unwound. Yet, we would note that old crop-new crop spreads continue to perform. Spot soy basis in Central IL is still quoted $0.35/u above May Chicago, which is historically firm.
- Macro markets provide a blanket of weight with spot WTI crude oil down another $4.00/barrel and trading below $70 for the first time since December 2021. Concern over the health of developed economies is dominant, but we also note that crude oil stocks less reserves have built steadily since early January. EIA pegged US crude stocks less reserves on March 10 at 480 million barrels, up 1.5 million from the previous week and up 15% year-on-year.
- Biofuel markets have borne the brunt of weakness today, with May Chicago soyoil down $0.75/lb and spot rapeseed in Europe falling to a newer 21-month low. A bull story looms in US soyoil, but production/supplies tend to peak in March before eroding seasonally into the new crop soy harvest. A different US vegoil market landscape is anticipated in the April-Aug period as reduced output collides with additional renewable diesel production capacity.
- NOPA-member soybean crush in Feb totalled 165.4 million bu, slightly below the trade’s guess and fractionally above Feb 2022. Sep-Feb NOPA soy crush totals 1,044 million bu, down 7 million year-on-year. This is aligned with USDA’s forecast, and no further downward revisions to domestic US soybean disappearance are expected.
- US ethanol production in the week ending March 10 totalled 298 million gallons, vs. 297 million the previous week and in line with pace needed to meet USDA’s target. There is no evidence to support a hike in US corn industrial use, but USDA’s current forecast is about right.
- FAS in its daily reporting system confirmed that China has secured another 667,000 mt of US corn, and China in recent days has increased its US import commitment by 30%. US corn export sales on Thursday, through the week ending March 9, are projected at 30-40 million bu, but sales the following week will be 60-70 million. Recall exporters must average weekly corn sales of only 25 million bu to validate the USDA’s forecast. Ultimately, an increase in USDA’s corn export forecast of 25-50 million bu is possible given the absence of S American supplies.
- The midday GFS weather forecast is consistent in calling for improved rain chances in Central Argentina beyond March 21-22, but a pattern of complete dryness and abnormal warmth continues into the weekend. Confidence is rising with respect to a temporary pattern shift in Argentina next week, but this is no way will reverse 60-day moisture deficits of 6-7” across the driest areas of Cordoba, Santa Fe and Entre Rios.
- The Brazilian outlook leans favourable. Needed dryness occurs into late March across Parana, where safrinha seeding is most delayed, while there is no sign that the wet season ends prematurely in Mato Grosso and Goias.
- There will be no end to volatility as heightened macro concerns continue and the Northern Hemisphere growing season begins in earnest. We caution against chasing daily moves, but tight old crop US, exporter and global stocks place a floor under markets until summer climate patterns are known.