- HEADLINES: Chicago expectedly retreats following early soybean rally; Brazilian farmers reward the rally with large cash sales; GFS midday weather model wetter for S Brazil.
- It has been a vicious trading session into the midday hour with early chart-based buying in soybeans/soymeal sparking a sharp morning rally. Soybean futures rallied to more than 20 cent gains with soymeal up $8.00/mt before hedge related selling emerged. Wheat and corn prices sagged on the cancellations of Australian wheat and errant rumours that French purchases are also being postponed/cancelled. Chicago wheat futures have fallen back to last week’s low, but end user demand is offering support below $5.30 May Chicago.
- The Brazilian farmer leaned on the rally with new cash soybean sales which has pulled values into the red. We doubt that any bull or bear trend can be sustained until after the USDA Stocks/Seeding report later this month. This is one of the most important reports of the year, which is followed by the spring seeding season. There are wide private opinions on US corn/soybean seeding intentions and farmers are still changing their crop mix as they ink revenue insurance policies. Key support is offered below $5.25 May Chicago wheat, $4.285 May corn, and $11.80 in May soybean futures. Soyoil will be the bullish stalwart on setbacks due to the narrowing of palmoil/soyoil spreads. While great crop debate will persist across Brazil on disappointing soy yields.
- Chicago brokers estimate that managed money has sold 7,200 contracts of wheat and 6,500 contracts of corn. Funds have bought 1,200 contracts of soybeans, 2,900 contracts of soymeal, and 1,400 contracts of soyoil. Brazilian farmers were sizeable sellers of cash soybeans on the morning rally with some brokers estimating hedge related sales of over 1.2 million mt.
- There are rumours that China has cancelled 500,000 mt of French wheat. We cannot confirm the rumour and are doubtful. China has cancelled 500,000 mt of US SRW wheat which was announced in the daily USDA sales report. We understand that China private and JV buyers of world wheat are seeing losses and are unable to pass those losses along to the government as it has in the past. The buyers have decided to cancel the sales which are being announced. As the wheat market heads even lower, there may be additional cancellations.
- US weekly export sales for the week ending March 7 were 3.1 million bu of wheat, 50.5 million bu of corn, and 13.8 million bu of soybeans. US soymeal sales were 209,000 mt with soyoil sales at 11,200 mt. The soyoil sales were at a marketing year high. For their respective crop years to date, the US has sold 680 million bu of wheat (up 28 million or 4%), 1,595 million bu of corn (up 342 million or 27%), with US soybean sales down 355 million or 19%). WASDE needs to adjust US soybean export forecasts down another 15-25 million bu in their April report. No change is due in either US corn or wheat annual export forecasts.
- The midday GFS weather forecast is consistent with morning output. Improved rainfall impacts Mato Grosso/Goias across Brazil. 10-day rainfall totals of 2-3.00” are forecast. Soaking rainfall of 3-6.50” is forecast for Southern Brazil and far NE Argentina. Such rain will produce regional flooding with soil moisture levels already saturated. There is a risk to the developing and nearly mature soybean crop that needs to be closely followed. Otherwise, enough rain looks to drop across the remainder of Argentina for favourable crop development with the early corn harvest underway. Strong and in some cases record Argentine corn yields are being reported.
- Until the markets are past the key March 28 USDA reports, values will chop sideways in a somewhat unpredictable pattern. The shorts are trying to cut their market risk while the bulls and end users will not chase a rally without real adverse new crop weather. The first weather risk to monitor is Brazil’s winter corn crop and if the extended range forecasts are correct in an early withdrawal of the monsoon in early April. Our message; “Don’t chase breaks or rallies until after the Easter Holiday”.