- HEADLINES: Grains struggle at chart resistance; Soybeans break through 200-day moving average; Snow added to Nebraska.
- Global grain futures are mixed at midday, as Chicago corn and wheat in the US and Europe collide with chart-based resistance, while the soy complex continues its recovery from last week’s lows. Soy futures are up 11-20 cents, with spot meal up $10 per ton. It is difficult to find the catalyst for new soy buying amid ongoing erosion in Brazilian basis levels, but processing margins remain elevated and Central IL basis this week sits at $0.35-40 over for nearby delivery. Cash beans in the heart of the Midwest are again valued at $15/bu. KC’s premium to Chicago wheat has widened to $1.70/bu as 10-day forecasts are entirely void of precipitation in TX, OK, KS and CO.
- FAS’s daily reporting system included another sell of old crop corn to China worth 136,000 mt. Announced sales to China since mid-March now total 2.89 million mt, and assuming Monday’s sale to unknown destinations was China the total surpasses 3.0 million mt. China’s newfound relationship with Brazil assures China buys Brazil corn beyond summer, but not until then.
- Spot Argentine fob basis this week sits at $0.90-1.00/bu. It is common for Argentina’s cash corn market to surge in Jan-Feb as remaining supplies are rationed, but key is whether basis there begins to relax in the next 1-2 weeks. Ongoing strength in Argentine basis in the first half of April will underscore just how tight that market will be between now and June. The message is that US corn is the world’s top reliable origin nearby.
- Additionally, the spot ethanol swap market has rallied to a new 12-week high at $2.24/gallon. A normal seasonal increase in gasoline use and ethanol grind lies ahead in spring and early summer. US ethanol stocks have likely peaked for calendar year 2023.
- The US dollar index is down 0.25% at midday, and a close below 102 opens the contract up to a more bearish landscape. Index fund selling has been directly correlated with currency/interest rates, and as has been the case over the last 9 months, macro markets’ impact on ag price discovery stays elevated.
- The midday GFS weather forecast is wetter (snow) in NE and SD next week but is otherwise consistent with the morning run. The GFS forecast is in general agreement with its EU counterpart in projecting heavy snowfall upward of 10”+ across the Central and Northern Plains and Upper Midwest next week. Abnormally heavy snow cover keeps temperatures cold across the Northern US. A favourable warmer pattern emerges in the Delta and Midwest next week, with highs in IA/IL reaching into the upper 70s/low 80s. But our chief concern remains that of winter’s extension across the Northern Corn Belt and the complete lack of soil moisture across the HRW Belt.
- The market has dialed in an expansion of corn area in 2023 worth 2-3 million acres, which if it occurs keeps US soy and wheat balance sheets tight. And even the global corn balance only loosens with record US yield.