- HEADLINES: Chicago bounces on Tuesday on short covering; Oil/meal spreading featured along with short soybeans/long grains; GASC tender results awaited.
- It is Turnaround Tuesday following some early day speculative selling in soybeans/meal shortly after the opening. Managed money is liquidating a stale/unprofitable soymeal position which tugged March soybeans to a new low at $12.34. We estimate that funds are 29–32,000 contracts of soymeal long, which they are trying to get out of to cut their losses. As such, soymeal has fallen back to test the early October low at $360/ton basis spot futures.
- Soymeal futures rallied $100/ton in October/November and fell $100/ton in December/January. Spot Chicago soymeal is at its cheapest price since late 2021 due to the recovery in the 2024 Argentine soy crop and the addition of 200 million bu of US crush capacity in the last half of 2024. The combination will spark an export fight for world soymeal market share between Argentina and the US. Soyoil values must increase to prevent a deeper drop in US soy crush margins.
- Soyoil (oil share) has rallied from its late October low of 35% to 39.4% and is likely to continue to rise into mid-2024. The hard question is whether soyoil rallies or soymeal declines (or both) to achieve a point where soyoil’s contribution of margin is 45-50%.
- Chicago brokers estimate that managed money has sold 3,700 contracts of soybeans, and 3,300 contracts of soymeal. Managed money has bought 1,100 contracts of soyoil, 3,100 contracts of Chicago wheat and a net 2,100 contracts of corn. Funds were sellers of 4,000 contracts of corn early day and have come back to buy over 6,000 contracts sparking the midday rally.
- NASS will be updating the past 5 years of US production, yield, and stocks data this afternoon in an effort that we call “statistical housecleaning”. We doubt that the revisions will be large enough to be an impact on the market, but it is something that traders will be watching for going home. 2024 is a year for NASS to offer revisions for US crop years from 2017-2022.
- US Census November soybean exports were far larger than expected by 30 million bu vs the monthly FGIS. The bigger November export program suggests that NASS could drop 2023 December 1 US soybean stocks by an additional 30 million bu, or 70-80 million less than last year if the 2023 US soybean crop is not adjusted. If US 2023 soybean area or yield is adjusted downward, the December 1 stocks data could yield a bullish surprise. US November Census corn exports beat FGIS by 24 million bu with wheat up 2 million bu.
- CONAB will release their 2024 Brazilian corn and soybean crop estimates early tomorrow morning. We look for CONAB to drop their soybean crop estimate to 154-155 million mt and total corn to 117-118 million mt. Early yield data from Mato Grosso continues to reflect disappointment with yields off 30-60% from last year.
- The midday GFS weather forecast is drier across South Central and Northern Brazil compared to the overnight release. However, the 10–15-day forecast is slightly wetter in this area, so the net result is little changed. In fact, a few showers are noted across Parana and Santa Caterina with rainfall totals yet to be reported. Daily shower chances will be centred on Northern Brazil with 10-day totals of 1.50-4.00”. Rain amounts will be closely followed across Paraguay, MGDS, Parana and Soa Paulo in the next 2 weeks due to 3 weeks of acute dryness. RGDS and Argentina will see at least normal rainfall with varied temperatures that favours crop yield.
- Soyoil has been the bullish stalwart with traders watching to see if March can rise above $49.00 (last week’s high) and create a weekly reversal. The other soy product, soymeal, continues to sag on long liquidation which is capping soybean rallies. Egypt’s GASC looks to secure Russian/Romanian wheat due to low price offers. Parana’s Deral dropped their crop estimate for soybeans to 71% good/excellent, 25% fair and 5% poor. Rain is in immediate need across South Central Brazil with crops in reproduction. CONAB crop sizes directs Chicago prices early Wednesday.