- HEADLINES: Chicago grain markets are mixed at midday. Chicago wheat rallied smartly following the morning reopening with March Chicago reaching psychological resistance at $6.00.
- The sharp rally in wheat pulled corn into the green with soybeans/soymeal sagging on weakening Brazilian paper trade with March Paranagua said to be trading at -$0.80/bu vs Chicago. We would note that liquidation of cash and futures against March contracts is ongoing. Midwest cash basis levels are holding, but most elevators want cash basis or vs cash contracts cleaned up by early next week. First notice day against March futures is a week from today. We look for a mixed Chicago close with soyoil bouncing off contract lows while the Chicago March/May wheat spread has traded out to a 6 cent premium.
- The USDA reported the sale of 126,000 mt of US sorghum to China. Private Chinese importers do not need a TRQ (import license) to book and import US sorghum into China. US sorghum sales as of Feb 8 were 173.1 million bu vs just 35 million in the year prior or an estimated 75% of the annual forecast.
- Chicago brokers report that managed money has bought 2,100 contracts of wheat while selling 2,100 contracts of corn and 3,200 contracts of soybeans. In soy products, funds have sold 2,500 contracts of soymeal while being a net buyer of 1,500 contracts of soyoil.
- US weekly ethanol production was 318.7 million gallons vs 318.4 million gallons last week. The weekly total was up 5% from last year and record large. Since the bitter cold of mid-January, the US ethanol grind has been in strong recovery based on positive margins. The interesting aspect of the ethanol grind is that US ethanol stocks fell by 13 million gallons to 1,071 million gallons, which is unchanged from last year. We maintain that US ethanol production will stay robust with another 25 million bu hike in the annual grind expected from WASDE.
- Chicago March corn open interest stood at 274,027 contracts at Wednesday’s close. Additional liquidation is required which is applying pressure to futures. March corn has fallen into the middle of long-term key support at $3.98-4.10. March option expiration on Friday should inspire a low by Monday.
- The midday GFS weather forecast is like the overnight run with below normal rainfall for Argentina/South Central Brazil, and near to below normal rainfall for Northern Brazil. Heat will be returning in the 8–12-day period with highs ranging from the mid 80’s to the mid 90’s. Brazilian high temperatures hold in the 80’s to the lower 90’s. The Brazilian weather forecast helps the early soybean harvest but is worrisome in terms of soil moisture for winter corn. We maintain the importance of paying close attention to the Northern and Central Brazilian weather forecast in March.
- Corn futures are liquidating and could push to key support at $4.00 March, the top range of the highs from 2013-2020. China is securing a few cargoes of Brazilian soybeans each day, but their cumulative demand is disappointing. We understand that China will auction off 1.0 million mt of soybeans from their reserve to help domestic crushers with spot tightness. Each year China rotates is soybean reserves.
- The US weekly export sales report is not expected to hold any bullish fanfare, but the trade is watching to see if China booked a few US SRW cargoes on the break. Funds are holding a record corn short position, but a reversal is needed to confirm a bottom.