- HEADLINES: Chicago recovers as farmers roll basis sales forward; China demand for Ukraine corn and Brazilian soybeans; GFS weather forecast drier for north central Brazil.
- Chicago grain markets are mixed at midday. US wheat futures recovered from a lower opening, but corn/soybeans are holding in the red on fresh speculative selling and ongoing farm basis contract rolling/liquidation. First notice day against March futures is Thursday, and most elevators are demanding that US farmers have their cash March basis contracts cleaned up by Tuesday’s close. March corn futures slid to $3.945 with May corn futures pulling back to $4.0875. March soybeans scored a new low for the decline at $11.2475 while US wheat futures are finding support from cash demand to fulfil Chinese SRW sales and the heat/dryness that is spurring a “greening” of wheat across the Plains. Bringing the wheat out of dormancy is not a problem unless arctic cold returns in March/April. A mixed Chicago is expected. A close above $4.00 March corn would signify that a key low is likely in place. Brazilian premiums are rising on moderate Chinese demand this morning as crush margins likely triggered new demand. We hear that 5-6 cargoes of Brazilian soybeans were sold to China this morning. Additional demand is said to being worked on scale down basis. Also, Brazil is getting ready to expand their soyoil contribution to diesel by 2% on Friday which is firming Brazilian basis.
- Chicago brokers report that managed money has bought 2,400 contracts of wheat and 3,200 contracts of corn, while selling 2,400 contracts of soybeans. In the products, funds have sold 2,300 contracts of soymeal while being flat in soyoil with early purchases being sold back out on the break.
- There continue be to strong rumours that China has booked 7-10 cargoes of Ukraine corn for March/April. The demand is coming from the recent distribution of 2024 TRQ’s with Chinese importers looking at a profit margin of $3.25/bu including payment for the import tariff. China’s margin for corn imports is fancy and additional purchases are expected. There is a freight cost of $21-22/mt to go around the horn of Africa if the cargoes do not transfer through the Red Sea. This extra cost helps make US corn more competitive. However, for now it is expected that cheap Ukraine corn will help fulfil new TRQ demand.
- US futures brokers indicate that US farmers are rolling March length forward into May. The March/May corn spread pushed out to 15.5 cents May premium today amid the active rolling. We expect that as first notice day against March passes, US corn end users will have to start paying up again for future cash supplies. Look for basis bids to start firming again in March.
- US farmers are actively applying fertilisers and preparing ground for spring seeding due to record Midwest warmth and a lack of soil moisture. The question is how early will producers start planting corn and soybeans due to late winter warmth. US revenue insurance policies provide dates across the Central US when summer row crop planting can begin. For the key states like Iowa/Illinois, corn and southern state soybean seeding can start on April 10 with the more northerly areas of each state having to wait until April 15 to seed soybeans. Thus, farmers can get early fieldwork completed, but it is the RMA (Risk Management Agency) and key seeding dates that will hold back Midwest planting.
- The March liquidation break is coming to an end. The S American weather forecast features drier/warmer than normal weather across most of North Central Brazil that is drawing down soil moisture and making March rainfall highly important for Brazil’s winter corn crop. China is more active in seeking Brazilian soybeans with private buyers/importers securing Ukraine corn for April. Being bearish is a crowded trade, but a lasting rally demands adverse weather and a loss of supply to a major producer/exporter. USDA has a history of making important and sizeable S American crop changes (reductions or increases) in their March report. Our current bet is a more important reduction based on harvested yield data. Watch to see if corn can form a key reversal on the charts.
- This should be the week that a liquidation bottom is formed ahead of first notice day in March futures. A recovery effort should follow, though it will be choppy unless Northern and Central Brazilian weather poses a threat to their winter corn crop. China’s soy crush margins are in the green and feedgrain import margins are at a two-year high. The bears will press the downside, but the risk vs reward is shifting to the bulls with a new Northern Hemisphere growing season ahead.