16 February 2024

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  • HEADLINES: Chicago mixed in thin pre-holiday trade; Soybeans rise on Brazilian ag ministry talk that crop under 145 million mt; GFS S American forecast little changed.
  • Chicago grain markets are mixed at midday. March Chicago wheat tested long term chart support below $5.60/bu with prices sagging. The USDA Outlook Forum concludes in a few hours with a long US holiday weekend ahead. China will return from their weeklong Lunar New Year Holiday on Monday amid the hope for additional government stimulus in the coming weeks. Chicago price trends are down, but spot Chicago corn, soybean and wheat futures are near longer term support.
  • The US January PPI was stronger than expected at a +0.3% versus a consensus of +0.1%. The last mile for the US Central Bank to get inflation under 2% is going to be arduous. US interest rose on the news while the US stock market pulled back from record highs. The US dollar advanced on rising US interest rates.
  • The Brazilian ag ministry commented at the USDA Outlook Forum that the Brazilian 2024 soybean harvest would likely be 145 million mt or less as yields are not recovering as hoped. USDA has the Brazilian soybean crop at 156 million mt or some 11 million larger.
  • The debate on the size of the Brazilian crop has been ongoing with the Brazilian farm soybean group named Aprosoja telling its members that the final total will range from 130-135 million mt and that producers should not sell at current low prices. As the Brazilian soybean harvest pushes beyond 50% there will be more clarity on the final crop. The size of the 2024 Brazilian soybean crop has an important statistical impact US 2024/25 exports due to their export tail being shortened. Brazilian export premiums continue to rise as crushers and exporters fight for supply.
  • Chicago brokers report that funds have sold 3,200 contracts of wheat and 2,100 contracts of soyoil. Managed money has bought 3,200 contracts of corn, 1,800 contracts of soybeans and a net 1,100 contracts of soymeal. Oil share spread unwinding is offering pressure to soyoil futures.
  • Based on vessel counts, US soybean exports will range from 49-55 million bu on Tuesday. The US remains aggressive in shipping out soybeans with China a featured shipper. US corn export inspections are seasonally ramping up ahead of the S American harvest which gathers steam in May/June.
  • World freight rates continue to advance with the panamax index up for its 9th straight session on tightening vessel supplies due to the extra time to navigate around the horns of Africa and S America. The rising freight cost has added to the cost of food importers cargoes in transit from the Black Sea into Asia by $21-23/mt. Ukraine fob grain prices have declined as a result.
  • March/May Chicago wheat spread has pushed out to a 2-cent premium as export sources are trying to pull cash supplies from the farmer to fill an SRW export sale to China. The US has shipped 14.7 million bu of US SRW wheat to China but there remains another 55 million bu that is sold to China and 8 million bu to an unknown destination (likely China). US SRW wheat prices have backed down, but cash bids and spreads are staying firm amid Chinese demand.
  • The midday GFS weather forecast is like the overnight run with below normal rainfall blanking most of Argentina with showers occurring in the week 2 timeframe. The drying Argentine weather should not be a problem for crops amid a lack of heat, and new chances for showers starting after February 24. Near normal rain will persist across most of Brazil with all crop areas enjoying some needed rain throughout the 10-day forecast. Brazilian temperatures hold close to seasonal averages while near to above normal highs in the mid 80’s to mid 90’s occur across Argentina.
  • Short covering is the feature with the Brazilian ag ministry commenting on a sub 145 million mt soy crop. This has supported soybean/soymeal futures. Soyoil is weaker on oil share spread unwinding. The CFTC CoT report will be watched to gauge the size of the fund grain short.
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