- HEADLINES: Choppiness prevails awaiting USDA outlook forum; Oil share spread shines on firming soyoil basis; GFS weather forecast unchanged at midday for S America.
- Chicago corn, soybean and wheat futures are mixed at midday with volume thinning. Macro-economic selling occurred after Chicago reopening with AI and algo trading systems adding to their net shorts. Soyoil has bucked the bearish trend on oil share spreading and firming cash soyoil basis bids. End user pricing in cash soyoil is noted with the renewable diesel industry trying to cover future feedstock needs and lock down profitable margins. Otherwise, news is lacking with modest amounts of cash corn selling on the need for spring planting revenue. We look for a mixed close with the USDA Outlook Forum expected to produce more bearish news in terms of 2024/25 US corn, soybean, and wheat stocks. Seeded US acres will be the most important statistics with yield to be determined by Mother Nature. The strong US dollar is a bearish omen ahead of the USDA Outlook Forum.
- Chicago brokers estimate that funds have sold 3,200 contracts of soybeans and 1,900 contracts of corn, while being flat in wheat. In the soy products, funds have sold 1,600 contracts of soymeal while buying 1,600 contracts of soyoil.
- The US CPI was higher than expected at 3.1%, which was down from December’s 3.4%, but still higher than the 2.9% that was forecast by analysts. The US stock market is down sharply while the US dollar is sharply higher. Prices moves are being exacerbated by the holidays in S America and Southeast Asia. The US CPI being above 3.0% took the chance for US Central Bank rate cut off the table in March. US financial markets are adjusting to a higher for longer US Central Bank interest rate manta which argues that US equity prices are overvalued. The 10-year US treasury note yield has risen to 4.25% which is adding to commodity price pressure.
- There are a lot of varied opinions on Brazil’s soybean crop with the range of estimates being between 130-157 million mt. Until the industry can agree on S American crop sizes, it is difficult to be overly bullish or bearish of Chicago. The outlook for S American crop is varied due to the need for additional harvest yield data and history that shows the rarity of a Northern Brazilian drought from September through December. Yield analysis maintains a Brazilian soybean crop estimate of 145 million mt, but our future lean is for a further reduction in the crop.
- And there are many unknowns with Brazil’s second corn crop with Mato Grosso cash bids clustered around $2.70/bu for July/August delivery. Ag Rural added 5 million mt to their winter corn production estimate due to a wider planting window with the Brazilian soybean harvest 23% completed. However, Brazilian farmers suggest that they will not plant due to poor profit margins.
- The midday GFS weather run is dry for Argentina and Southern Brazil with any rain not showing up until the last 24 hours of the forecast run. The 10-12 day stretch of limited rainfall will drop soil moisture, but without any extreme heat, crops should be able to perform following 7 days of needed rainfall ranging from 2-5.50”. Northern and Central Brazilian rainfall will be normal with seasonal temperatures. The Brazilian monsoon shows no sign of prematurely ending and no extreme heat is evident. As long as near normal rainfall returns to Argentina and Southern Brazil after February 25, the yield impact of 10-12 days of dryness is negligible.
- Amid the high odds that USDA’s 100th Outlook Forum will produce bearish 2024/25 US corn, soybean and wheat end stocks, traders are unwilling to hold onto net long positions. Bulls are quick to take profits on any rally. However, traders are also loath to push new shorts too far. This means that Chicago prices should chop sideways with all eyes watching price reaction to the USDA Outlook Forum late week. The inability of Chicago to decline (late week) allows for the start of a seasonal rally effort.