- We saw a mixed start to trade in Chicago, which has trended towards marginally higher levels across the board with an hour to go until the close tonight. There is little, if anything,in the way of fresh news today and traders have little to cling onto and determine a clear direction (nothing new there then!). Traders are awaiting the latest reports from CONAB and USDA, both scheduled for release on Thursday.
- Crude oil has eased and the US$ remains firm. Brazilian cash soybean offers are firmer today as close to record exports appear to be able to cope with early harvest supplies. US Gulf soybeans continue to be the world’s cheapest, and this looks to be the case through until April, and until such time as we see declining basis prices in Brazil it is hard to imagine price breaks lasting. This scenario also plays out in wheat where Black Sea cash prices remain strong offering support to the rest of the world in the short term. That said, S American cash corn prices have eased a touch this week and Argentine corn is now offered at parity with the US for March availability, and is a slight discount for April/May.
- The key going forward is the size of the S American crop and it seems the market is anticipating a modest revision higher in Brazilian corn and soybean output by CONAB later in the week.
- The ongoing transition to S American soybean exports and cheap Gulf corn for spot delivery will offer support on price breaks. However, recent improvement in Argentine precipitation will keep buying limited at, or near to, technical resistance, and so we maintain a neutral outlook into March. The longer term outlook remains a function of S American crop size, and thus April to August US export demand, which will be better known in the next 30 days. If we recall correctly it was early March when soybeans surged to near $12 a year ago. So far, there is no indication of lasting excessive rain in Argentina and soil moisture in N Brazil is much improved from last year.