- HEADLINES: Chicago wheat falls to test $5.275 low set in November on managed money selling; US weekly ethanol grind stays firm; GFS weather forecast wetter for N Brazil.
- World wheat markets are lower on the fall in Russian fob wheat offers below $200/mt with Chicago forging a new low of $5.33 May futures, the lowest price for a spot futures contract since November 2023 when values bottomed at $5.275. Corn and soybeans followed wheat’s early sag, with both markets finding support on end user pricing and fund short covering. Corn has been able to push back into the green at midday as crude oil prices are sharply higher with WTI April back testing resistance above $80.00.
- Wheat has been the Chicago bear story this morning with fund selling increasing on the break to new lows amid the US premium to Black Sea/European markets. Paris wheat has fallen to €188.50/mt in a retest of Monday’s low. Chicago wheat has been falling more sharply on Algo/AI selling. The May Chicago wheat/corn spread has narrowed to a $1.10/bu premium, which is in line with historical averages. However, if wheat premium were to drop below $0.8O vs corn, it would boost wheat feeding interest in the feedlot areas of the Plains. There is no doubt that wheat has been an anvil on the entire Chicago this morning as Russia and the EU competes for remaining world export demand heading into the new crop campaign. The funds are putting on sizeable new net short positions as evidenced by the rise in world wheat open interest.
- Chicago brokers report that funds have sold 9,700 contracts of Chicago wheat, 1,100 contracts of corn, and 3,100 contracts of soybeans. In the products, managed money has sold 2,900 contracts of soymeal and bought 1,900 contracts of soyoil. Chicago wheat open interest was up 13,500 contracts yesterday. The wheat selling is new short positions due to the break to fresh contact lows.
- The US produced 311 million gallons of ethanol last week, down 6 million gallons, but still a record for the week and up 5% from last year. WASDE/USDA is too low with their US ethanol grind estimate by 15-25 million bu based on the current pace. US ethanol stocks were up 3% on last year at 1,094 million gallons. And US gasoline consumption rose to 9.01 million barrels/day, up 5% on last year. The outlook for US ethanol consumption is seasonally brightening.
- Brazilian farmers have been more active sellers of soybeans on rallies early this week, but that selling has slowed on the break this morning. The Brazilian selling has allowed crushers and exporters to extend their forward coverage. Basis bids or premiums have not changed all that much. Estimates show that through Saturday, Brazilian farmers will have harvested 57-58% of their soybean crop. Winter corn seeding will be completed on a timely basis by March 15.
- The midday run of the GFS weather model is slightly wetter for Northern and Central Brazil with additional rainfall of 0.5-1.25” over the next 10 days compared to the overnight run. Bahia would be drier, but the GFS model has been erratic in its S American forecast for the past week. Our bias is towards the drier and consistent EU model solution. Elsewhere, favourable finishing rain impacts Argentina into mid-March.
- Chicago wheat values are testing the November low at $5.275. China cannot take cheap Russian wheat due to ambrosia seed and the need for a phytosanitary agreement. China is expected to keep shipping out US SRW wheat purchases. Whether China uses this break to add to their forward purchases is being debated by world exporters. If the wheat market pressure subsides, corn/soy futures can post a recovery. We note that traders worry that US soybean export sales will be poor Thursday with additional switches or net cancelations of unknown destination sales. The only bullish fundamental story is world vegoil pricing on rising biodiesel demand amid strong margins due to $80.00 WTI crude.