- HEADLINES: Wheat bounces from early session selling on rising Russian fob offers; Soybeans sag on weak Brazilian premiums; GFS midday weather forecast is wet for N and C Brazil.
- Chicago values are mixed at midday with wheat futures rising while the soy complex sags. Soyoil has been the downside price leader as Friday’s rally stopped just short of $0.50/pound basis May and selling returned. Chicago traders are awaiting the EPA update on their GREET model and how it will impact corn and soyoil demand to produce green fuels. The EPA has not provided any timetable of when a GREET model announcement will be made, but several sources suggest that it could be released prior to the middle of April. Oil share pushed out to 42.5% last Friday, its best level since mid-September. Key support now rests at 50-50.5% on any correction.
- The Russian/Ukraine war is broadening amid the weekend drone/missile attacks on Odessa and interior Russian oil refineries. World grain traders fear that the expansion of the war could involve key Russian ag export ports like Novorossiysk which could cause disruptions to Russian grain trade at some point. No attacks on Novorossiysk have occurred to date, but the shorts are taking a more cautious approach in positioning heading into the end of the quarter/month and coming key USDA reports on March 28. Wheat bears are fearful of waking up to a Ukraine drone attack on Novorossiysk, and world grain markets that are in a panic short covering mode.
- The Russian/Ukraine war has held a bearish influence on world grain values as Ukraine established an export corridor through the Western Black Sea into Istanbul. However, Russia’s constant bombardment of Odessa is causing worry as to Ukraine’s grain export capabilities.
- Chicago brokers estimate that managed money bought 3,100 contracts of wheat and 500 contracts of corn, while selling 2,800 contracts of soybeans. In the soy products, funds have sold 2,500 contracts of soyoil and bought a net 600 contracts of soymeal. The fund related trade is in decline at midday.
- US export inspections for the week ending March 14 were 48.8 million bu of corn, 25.2 million bu of soybeans, and 11.1 million bu of wheat. The US has shipped out 909 million bu of corn for its crop year to date (up 217 million or 31%), 1,314 million bu of soybeans (down 305 million or 19%), and 504 million bu of wheat (down 94 million or 16%). We maintain that WASDE needs to raise its US 2023/24 corn export estimate by 25-50 million bu and cut soybeans 15-25 million bu in March. US wheat exports appear to be correct following recent week cancellations by China.
- China will auction off 226,000 mt of 2019/20 soybeans with no origin being specified on Tuesday. It is rumoured that the state (Sinograin) decided to go ahead and crush 1.0 million mt of recently imported soybeans, rather than place them in the reserve. This could diminish future import demand by a like amount. China appears to be cautious in the purchase/placement of new crop Argentine soybeans into their state reserve.
- China’s corn import pace is record large and WASDE will have to raise Chinese corn imports in their April WASDE report. We hve China importing 16.5 million mt in the crop year through February. Pace analysis would argue for China corn import pace of 31-33 million mt which seems too large. All that is known today is that China’s import pace will exceed 19.0 million through March, with China an active buyer/importer of Ukraine corn in recent weeks.
- Stabilising Russian wheat export prices and a new growing season is spurring short covering from long time wheat bears. Dryness across the Black Soils area of Russia is interesting but non-threatening today. Close attention must be paid to future Black Sea weather including Eastern Ukraine where dryness has lingered since January. Wheat appears to have the best world fundamentals heading into a new growing cycle, but soybeans will struggle on rallies until 85% of the Brazilian soybean harvest is completed. Brazilian rain in the next few weeks will boost winter corn and replenish soil moisture. We doubt that corn/soy breaks or rallies can be sustained until after the March 28 USDA report.