HEADLINES: Chicago grain markets are mixed at midday. Chicago wheat rallied smartly following the morning reopening with March Chicago reaching psychological resistance at $6.00.
The sharp rally in wheat pulled corn into the green with soybeans/soymeal sagging on weakening Brazilian paper trade with March Paranagua said to be trading at -$0.80/bu vs Chicago. We would note that liquidation of cash and futures against March contracts is ongoing. Midwest cash basis levels are holding, but most elevators want cash basis or vs cash contracts cleaned up by early next week. First notice day against March futures is a week from today. We look for a mixed Chicago close with soyoil bouncing off contract lows while the Chicago March/May wheat spread has traded out to a 6 cent premium.
The USDA reported the sale of 126,000 mt of US sorghum to China. Private Chinese importers do not need a TRQ (import license) to book and import US sorghum into China. US sorghum sales as of Feb 8 were 173.1 million bu vs just 35 million in the year prior or an estimated 75% of the annual forecast.
Chicago brokers report that managed money has bought 2,100 contracts of wheat while selling 2,100 contracts of corn and 3,200 contracts of soybeans. In soy products, funds have sold 2,500 contracts of soymeal while being a net buyer of 1,500 contracts of soyoil.
US weekly ethanol production was 318.7 million gallons vs 318.4 million gallons last week. The weekly total was up 5% from last year and record large. Since the bitter cold of mid-January, the US ethanol grind has been in strong recovery based on positive margins. The interesting aspect of the ethanol grind is that US ethanol stocks fell by 13 million gallons to 1,071 million gallons, which is unchanged from last year. We maintain that US ethanol production will stay robust with another 25 million bu hike in the annual grind expected from WASDE.
Chicago March corn open interest stood at 274,027 contracts at Wednesday’s close. Additional liquidation is required which is applying pressure to futures. March corn has fallen into the middle of long-term key support at $3.98-4.10. March option expiration on Friday should inspire a low by Monday.
The midday GFS weather forecast is like the overnight run with below normal rainfall for Argentina/South Central Brazil, and near to below normal rainfall for Northern Brazil. Heat will be returning in the 8–12-day period with highs ranging from the mid 80’s to the mid 90’s. Brazilian high temperatures hold in the 80’s to the lower 90’s. The Brazilian weather forecast helps the early soybean harvest but is worrisome in terms of soil moisture for winter corn. We maintain the importance of paying close attention to the Northern and Central Brazilian weather forecast in March.
Corn futures are liquidating and could push to key support at $4.00 March, the top range of the highs from 2013-2020. China is securing a few cargoes of Brazilian soybeans each day, but their cumulative demand is disappointing. We understand that China will auction off 1.0 million mt of soybeans from their reserve to help domestic crushers with spot tightness. Each year China rotates is soybean reserves.
The US weekly export sales report is not expected to hold any bullish fanfare, but the trade is watching to see if China booked a few US SRW cargoes on the break. Funds are holding a record corn short position, but a reversal is needed to confirm a bottom.
HEADLINES: Chicago corn sinks to new low at $4.11 March; Brazilian soy crop estimates edge lower; GFS midday weather forecast like overnight run.
Chicago grain markets are lower at midday with speculative selling felt early in the reopening in corn, soyoil and soybeans. Speculators appear to be less willing to pressure wheat until more is known about new US economic sanctions that will be placed on Russia on Friday by the Biden Administration.
March soybeans are back testing last week’s low at $11.62/bu while March corn futures have scored a new low at $4.13. The corn market is sagging lower as price has yet to reflect a sizeable increase in US corn export demand beyond Mexico. Chinese corn import margins are rising, but there has been no indication of Chinese demand for US corn following record imports from Brazil and Ukraine. Ukraine is pricing wheat/corn cheaply to gather cash to seed 2024 crops with fob corn offered at $4.25/bu and wheat at $5.70/bu. Ukraine wheat has an export chance to Indonesia depending on freight costs through the Red Sea or around the Horn of Africa. Brazil is not offering corn for export until late July at $0.60 over, which is nearly flat with the US Gulf corn price offer. US SRW Gulf new crop wheat is offered at $230/mt or $6.20/bu.
Chicago brokers report that managed money has sold 1,900 contracts of wheat, 2,400 contracts of corn, and 1,500 contracts of soybeans. In the products, fund sales have been 2,100 contracts of soyoil and 2,500 contracts of soymeal.
Brazilian 2024 soybean and corn crop estimates keep sliding. One key Brazilian forecaster trimmed their soybean crop estimate to 152.2 million mt vs a prior forecast of 153.8 million due to lower than expected yields across Northern Brazil. Long-time crop analyst, Dr Cordonnier reduced his Brazilian soy crop estimate to 145.0 million mt, which is down another 2.0 million in the past week due to later planted soybean yields being disappointing. He left his Brazilian corn crop estimate unchanged at 112.0 million mt. Others have the Brazilian soybean crop at 145.4 million mt whilst awaiting further yield surveys late February. Deral in Parana estimates that their soybean harvest has reached 42% completed, nearly double the rate of last year. The 2024 Brazilian soybean harvest is pushing ahead at a near record pace.
Ukraine corn exports will jump in February on aggressive sales due to the need for producer cash flow to seed the 2024 spring crop. Ukraine will export over 4 million mt of corn in February, well above last year’s 3.3 million. Ukraine pricing of corn has been to move stocks. We calculate that USDA’s forecast for Ukraine to export 23.0 million mt of corn in 2023/24 is likely too low by 1-2 million mt. Ukraine farmers have an estimated 1.4 million mt of corn in the field from last year. As the war continues for a third year, the financial condition of the Ukraine farmer is worsening amid negative margins and a lack of capital.
The midday GFS weather forecast is like the overnight run with below normal rainfall for Argentina and South-Central Brazil and near to below normal rainfall for Northern Brazil. Heat will be returning in the 8–12-day period with highs ranging from the mid 80’s to the mid 90’s. Brazilian high temperatures hold in the 80’s to the lower 90’s. The Brazilian soybean harvest will continue to score strong progress, while drying Argentine soils only become a problem with the return of a high-pressure ridge aloft and extreme heat. It is March when focus on the longevity of the Brazilian monsoon will be important as Amazon soils are exceptionally dry.
March corn futures have pushed to fresh contract low at $4.11/bu on renewed speculative selling. The Brazilian soybean harvest is ongoing and paper premiums have eased by 5-9 cents on the extra supply. China booked 2-3 cargoes on the morning break, but they are not showing any urgency in the Brazilian soybean market. US weekly export sales will be pushed backwards due to Monday’s holiday. March-May Chicago wheat has pushed out to a 4-cent premium as exporters push for supply to fill Chinese orders. The bear market is reaching a mature stage, but it will take time before a Chicago rally can be sustained.
HEADLINES: Markets higher at midday, but off the opening rally; Soyoil tests prior bottom while US soymeal rallies on an export sale.
Chicago grain markets are higher at midday. Corn, soybean, and wheat futures are bouncing from an oversold technical condition while soyoil is seeing pressure from oil share spread unwinding and a new US daily soymeal export sale. Chicago values have fallen sharply in recent months with prices sitting at multi-year lows with funds/managed money holding a near record short position. The Chicago mood is bearish, but traders are loath to sell a break with the short side historically crowded. Chicago will have to form a base before any sustained rally can be launched when key moving averages would come into play. The timing for a low is seasonally right, but the time for a sustained rally is later in the spring. Chicago values should be range bound and choppy in the weeks ahead. Sustained downside price risk demands large Northern Hemisphere crops.
The USDA reported that 155,000 mt of US corn was sold to Mexico for 2024/25 and 228,000 mt of soymeal that was sold to the Philippines in the 2023/24 crop year. It is interesting that Mexico is starting to see that new crop US corn has value and booking coverage. We note that the soymeal sale was to a Philippine importer/end user that cannot take pelleted soymeal from S America. Argentine soybean meal is offered $23-35 below the US Gulf in the same timeframe.
Chicago brokers report that managed money has bought 3,200 contracts of wheat, a net 400 contracts of corn, and 2,400 contracts of soybeans. In the products, funds have sold 2,300 contracts of soyoil while buying 1,900 contracts of soymeal.
US weekly export inspections for the week ending February 15 were 14.0 million bu of wheat, 36.2 million bu of corn, and 43.6 million bu of soybeans. The export pace was greater than expected for soybeans, less than expected in wheat and in line in corn.
For their respective crop years to date, the US has shipped out 713 million bu of corn (up 173 million or 32%), 1,174 million bu of soybeans (down 346 million or 22%), and 444.3 million bu of wheat (down 94 million or 22%). The US soybean export pace continues to lag the pace needed to achieve the USDA annual export forecast. Future US soybean export cuts are ahead from WASDE.
Brazilian premiums are holding firm with truckers across Mato Grosso looking to transit soybeans to Northern arc ports at cheap rates. The paper premium rally is different from last year due to the smaller soybean harvest and unwillingness of farmers to sell the new crop off the combine. Producers are estimating that Mato Grosso will be 76-78% completed with their soybean harvest by Friday with 74-76% of the winter corn crop planted. The soybean harvest focus is shifting to MGDS and Parana in the weeks ahead. Basis bids in the soybean paper market have rallied 50-56 cents in the past 2 weeks. China has booked 10-12 cargoes of Brazilian soybeans in the past 24 hours for April/May. China has considerable coverage to book from LH May onwards.
The midday GFS weather forecast is like the overnight run with below normal rainfall blanketing most of Argentina with showers occurring in the week 2 timeframe. The drying Argentine weather should not be a problem for crops amid a lack of heat, assuming the forecast is correct with showers restarting March. High temperatures will hold in the 80’s to the lower 90’s, a few degrees warmer than normal for late February.
Near to below normal rain will persist across Brazil with most crop areas enjoying some needed rain throughout the 10-day forecast. The driest area will be Southern MGDS where soil moisture levels are reported to be short. Otherwise, the forecast leans neutral to slightly negative to S American crop production for the next 10 days.
Chicago is a bear market, but it is reaching a mature phase. However, this does not mean that lows have been formed or that rallies can last longer than a few days. Choppy base building is ahead as traders/producers assess new crop weather and supply opportunities. Chinese soymeal and soybean supplies are tight, so tight that China may have to release some reserve stocks. Look for China to be a more aggressive Brazilian soybean buyer on breaks. Traders that follow charts are looking to gauge if soyoil is forming a double bottom. More back and forth trade is what to look for into late week.
HEADLINES: Chicago mixed in thin pre-holiday trade; Soybeans rise on Brazilian ag ministry talk that crop under 145 million mt; GFS S American forecast little changed.
Chicago grain markets are mixed at midday. March Chicago wheat tested long term chart support below $5.60/bu with prices sagging. The USDA Outlook Forum concludes in a few hours with a long US holiday weekend ahead. China will return from their weeklong Lunar New Year Holiday on Monday amid the hope for additional government stimulus in the coming weeks. Chicago price trends are down, but spot Chicago corn, soybean and wheat futures are near longer term support.
The US January PPI was stronger than expected at a +0.3% versus a consensus of +0.1%. The last mile for the US Central Bank to get inflation under 2% is going to be arduous. US interest rose on the news while the US stock market pulled back from record highs. The US dollar advanced on rising US interest rates.
The Brazilian ag ministry commented at the USDA Outlook Forum that the Brazilian 2024 soybean harvest would likely be 145 million mt or less as yields are not recovering as hoped. USDA has the Brazilian soybean crop at 156 million mt or some 11 million larger.
The debate on the size of the Brazilian crop has been ongoing with the Brazilian farm soybean group named Aprosoja telling its members that the final total will range from 130-135 million mt and that producers should not sell at current low prices. As the Brazilian soybean harvest pushes beyond 50% there will be more clarity on the final crop. The size of the 2024 Brazilian soybean crop has an important statistical impact US 2024/25 exports due to their export tail being shortened. Brazilian export premiums continue to rise as crushers and exporters fight for supply.
Chicago brokers report that funds have sold 3,200 contracts of wheat and 2,100 contracts of soyoil. Managed money has bought 3,200 contracts of corn, 1,800 contracts of soybeans and a net 1,100 contracts of soymeal. Oil share spread unwinding is offering pressure to soyoil futures.
Based on vessel counts, US soybean exports will range from 49-55 million bu on Tuesday. The US remains aggressive in shipping out soybeans with China a featured shipper. US corn export inspections are seasonally ramping up ahead of the S American harvest which gathers steam in May/June.
World freight rates continue to advance with the panamax index up for its 9th straight session on tightening vessel supplies due to the extra time to navigate around the horns of Africa and S America. The rising freight cost has added to the cost of food importers cargoes in transit from the Black Sea into Asia by $21-23/mt. Ukraine fob grain prices have declined as a result.
March/May Chicago wheat spread has pushed out to a 2-cent premium as export sources are trying to pull cash supplies from the farmer to fill an SRW export sale to China. The US has shipped 14.7 million bu of US SRW wheat to China but there remains another 55 million bu that is sold to China and 8 million bu to an unknown destination (likely China). US SRW wheat prices have backed down, but cash bids and spreads are staying firm amid Chinese demand.
The midday GFS weather forecast is like the overnight run with below normal rainfall blanking most of Argentina with showers occurring in the week 2 timeframe. The drying Argentine weather should not be a problem for crops amid a lack of heat, and new chances for showers starting after February 24. Near normal rain will persist across most of Brazil with all crop areas enjoying some needed rain throughout the 10-day forecast. Brazilian temperatures hold close to seasonal averages while near to above normal highs in the mid 80’s to mid 90’s occur across Argentina.
Short covering is the feature with the Brazilian ag ministry commenting on a sub 145 million mt soy crop. This has supported soybean/soymeal futures. Soyoil is weaker on oil share spread unwinding. The CFTC CoT report will be watched to gauge the size of the fund grain short.
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HEADLINES: Chicago sinks to fresh lows in corn/soybeans on large USDA stocks; NOPA reports record January crush.
Chicago grain markets have been mixed through the morning, with large fund selling noted on a lower morning open. Once that buying was filled, Chicago grain markets drifted lower off the highs, leaving corn, wheat, and soybean markets in the red at midday.
The soy product markets have been mixed with a burst of fund buying in soybean meal after the morning open, which was accompanied by similar selling in soybean oil. Meal slipped back into the red as the morning progressed, and soybean oil has been negative all morning.
The highlight for Thursday’s trade has been the USDA Outlook Forum’s acreage estimates. The USDA’s acreage and balance sheet estimates did not offer any major surprises, but the report release did relieve some of the overhead bearishness that has been in the market in anticipation of the release. NOPA reported a record large January soybean crush rate of 185.8 million bu.
HEADLINES: Chicago sinks to fresh lows in corn/soybeans ahead of USDA outlook forum; Corn fund short near or exceeds record; US weekly ethanol production gains.
Chicago corn, soybean and wheat futures are lower at midday. Corn futures slid to new lows with March futures faltering to $4.2215/bu while December corn has dropped to $4.63. Soybeans posted an early rally, but the weakness in the grains pulled the complex lower. March Chicago wheat fell to $5.775 and tested its mid-January low before recovering. The Chicago oil share spread is slipping.
Managed money selling has been the most pronounced in the grains. The tone of Chicago stays bearish ahead of the USDA Outlook Forum which is expected to show growing new crop supplies and stocks. And Thursday’s USDA/FAS weekly export sales report is expected to reflect sluggish US demand due to cheaper Russian wheat and Brazilian soybean offers. US corn is competitive against S American offers, but Ukraine remains the world’s lowest cost origin due to rising freight costs through the Black and Red Sea’s. A lower Chicago grain close is expected today. Any short covering will have to wait until after the USDA 100th Annual Outlook Meeting that starts early tomorrow. By our calculations, the net fund short position in corn has likely exceeded the prior record at 317,000 contracts today.
Chicago brokers estimate that funds have sold 9,500 contracts of corn, 4,300 contracts of wheat, and 4,300 contracts of soybeans. In the products, funds have sold a net 3,200 contracts of soyoil while being flat in soymeal.
The weekly US ethanol grind reached a record for the middle of February at 318 million gallons, up 14 million gallons from last week, and up 7% from last year. US ethanol stocks grew by 43 million gallons to 1,084 million gallons, 2% above last year. The US ethanol industry remains profitable across variable costs and is pushing to secure additional feedstock supplies. The recovery in US ethanol production since the arctic onslaught of mid-January has been dramatic.
The midday GFS weather run is dry for Argentina for the next 9 days with showers returning in the 10–15-day period. Northern Brazil will have open harvest weather through Sunday when better rainfall returning next week. The 2-4.00” of Northern Brazilian rainfall will slow the harvest. No extreme heat is forecast. The lack of Argentine rain is not a concern as long as the 10–15-day forecast is correct via the return of rain.
Traders are betting that WASDE will use a 2024 US corn yield of 181 bushels/acre plus and a soybean yield of 52.0 bushels/acre plus to produce growing 2024/25 supplies and end stocks. The funds are piling into a record or near record net short corn/soy position heading into a new Northern Hemisphere growing season. The timing of a record short does not make a lot of sense. Like last year, USDA is expected to release their new crop balance sheets when chief economist Seth Meyers offers the economic outlook for the US farm economy in 2024. Today’s sharp break is positioning for the USDA Outlook Conference with new lows in corn/soybeans.
HEADLINES: Choppiness prevails awaiting USDA outlook forum; Oil share spread shines on firming soyoil basis; GFS weather forecast unchanged at midday for S America.
Chicago corn, soybean and wheat futures are mixed at midday with volume thinning. Macro-economic selling occurred after Chicago reopening with AI and algo trading systems adding to their net shorts. Soyoil has bucked the bearish trend on oil share spreading and firming cash soyoil basis bids. End user pricing in cash soyoil is noted with the renewable diesel industry trying to cover future feedstock needs and lock down profitable margins. Otherwise, news is lacking with modest amounts of cash corn selling on the need for spring planting revenue. We look for a mixed close with the USDA Outlook Forum expected to produce more bearish news in terms of 2024/25 US corn, soybean, and wheat stocks. Seeded US acres will be the most important statistics with yield to be determined by Mother Nature. The strong US dollar is a bearish omen ahead of the USDA Outlook Forum.
Chicago brokers estimate that funds have sold 3,200 contracts of soybeans and 1,900 contracts of corn, while being flat in wheat. In the soy products, funds have sold 1,600 contracts of soymeal while buying 1,600 contracts of soyoil.
The US CPI was higher than expected at 3.1%, which was down from December’s 3.4%, but still higher than the 2.9% that was forecast by analysts. The US stock market is down sharply while the US dollar is sharply higher. Prices moves are being exacerbated by the holidays in S America and Southeast Asia. The US CPI being above 3.0% took the chance for US Central Bank rate cut off the table in March. US financial markets are adjusting to a higher for longer US Central Bank interest rate manta which argues that US equity prices are overvalued. The 10-year US treasury note yield has risen to 4.25% which is adding to commodity price pressure.
There are a lot of varied opinions on Brazil’s soybean crop with the range of estimates being between 130-157 million mt. Until the industry can agree on S American crop sizes, it is difficult to be overly bullish or bearish of Chicago. The outlook for S American crop is varied due to the need for additional harvest yield data and history that shows the rarity of a Northern Brazilian drought from September through December. Yield analysis maintains a Brazilian soybean crop estimate of 145 million mt, but our future lean is for a further reduction in the crop.
And there are many unknowns with Brazil’s second corn crop with Mato Grosso cash bids clustered around $2.70/bu for July/August delivery. Ag Rural added 5 million mt to their winter corn production estimate due to a wider planting window with the Brazilian soybean harvest 23% completed. However, Brazilian farmers suggest that they will not plant due to poor profit margins.
The midday GFS weather run is dry for Argentina and Southern Brazil with any rain not showing up until the last 24 hours of the forecast run. The 10-12 day stretch of limited rainfall will drop soil moisture, but without any extreme heat, crops should be able to perform following 7 days of needed rainfall ranging from 2-5.50”. Northern and Central Brazilian rainfall will be normal with seasonal temperatures. The Brazilian monsoon shows no sign of prematurely ending and no extreme heat is evident. As long as near normal rainfall returns to Argentina and Southern Brazil after February 25, the yield impact of 10-12 days of dryness is negligible.
Amid the high odds that USDA’s 100th Outlook Forum will produce bearish 2024/25 US corn, soybean and wheat end stocks, traders are unwilling to hold onto net long positions. Bulls are quick to take profits on any rally. However, traders are also loath to push new shorts too far. This means that Chicago prices should chop sideways with all eyes watching price reaction to the USDA Outlook Forum late week. The inability of Chicago to decline (late week) allows for the start of a seasonal rally effort.
HEADLINES: Chicago bounces in tepid volume trade; Brazilian soy crop estimates hold in big range; Aprosoja tells members to hold soybeans.
Chicago grains are higher at midday with soybeans/soymeal pacing the rally. Corn and wheat futures have been pulled from their opening losses on short covering in extremely slow volume. It does not take much volume to push the markets around with S America and SE Asia on holiday. Fresh news is limited with the bears pointing to the USDA Outlook Forum for a late week break on historically large US new crop stocks. However, debate also centres on the wide disparity of CONAB/USDA crop estimates in Brazil. The lack of clarity on S American crops offers talking points to both the bears and the bulls in what we see choppy sideways market. Traders note the near record net short position in corn and Chicago grains in general which opens the potential for a sizeable Chicago rally with a fundamental catalyst. Seasonally, Chicago values tend to form their lows in mid-February, or in the next few weeks.
Brokers estimate that funds have bought 1,000 contracts of wheat and 3,200 contracts of soybeans, while being flat corn. In the soy products, funds have sold 1,900 contracts of soyoil and bought 2,700 contracts of soymeal. Bull spreading of March-May soymeal reflects strong cash basis bids.
US weekly grain inspections for the week ending February 8 were 34.6 million bu corn, 48.7 million bu of soybeans, and 15.0 million bu of wheat. Last week’s US soybean export total was revised up by 12 million to 64.3 million bu. For their respective crop years to date, the US has exported 676.6 million bu of corn (up 160 million or 31%), 1,130 million bu of soybeans (down 332 million or 23%), and 430.3 million bu of US wheat (down 95 million or 18%). The US 2023/24 soybean export pace is disappointing with a further cut in the US soybean export estimate expected in March of 15-25 million bu.
The Brazilian Soybean Farm Association, Aprosoja, is telling their members to withhold cash soybean sales due to a smaller crop and higher prices that are forecast. Aprosoja estimates the 2024 Brazilian soybean crop in a range of 130-135 million mt, by far the lowest of Brazilian private soybean crop forecast. Producer groups always favour declining harvests and higher prices/profit margins, but it is highly unusual for Aprosoja to tell its producers to hold a “seller’s strike”. Parana and Northern Brazilian actual harvest yields are disappointing, but a sub 140 million mt soybean crop is premature. History does show that WASDE does not tend to make a big reduction in their crop forecast until March when harvest data offers an informed trend.
There are a lot of varied opinions on Brazil’s second corn crop with Mato Grosso cash bids clustered around $2.70/bu for July/August delivery. Ag Rural added 5 million mt to their winter corn production estimate today due to a wider planting window with the Brazilian soybean harvest 23% completed. Others claim that price and profit will limit seedings and crop input use. Mother Nature will have the final voice on supply.
The midday GFS weather forecast is slightly drier for Argentina and Southern Brazil for the next 2 weeks. The midday model run extracted rain from the forecast and added back some heat in the 6–10-day period with highs back in the upper 80’s to the mid 90’s. Thankfully, the past 6 days has produced needed rains across Argentina ahead of the new period of dryness. Northern and Central Brazilian rainfall will be normal and amid a lack of heat, crop yields should respond favourably. The Brazilian monsoon shows no sign of prematurely ending and no extreme heat is evident.
The big question that traders are ponding is how much bearishness is worked into current prices with managed money sitting on a near record short corn/soybean position. Brazilian premiums are rising in the paper market and there is a 60-cent positive spread for June/July Brazilian soybeans vs the current spot market. This premium structure suggests that the Brazilian soybean crop is well under the USDA estimate. We continue to maintain that soyoil will outperform soymeal with any break being corrective of last week’s reversal.
HEADLINES: Soyoil retreats following 50-day moving average test; GFS weather forecast midday slightly drier for SC Brazil; good rains for Argentina.
Chicago grain futures have traded both sides of unchanged with the grains rising while soy futures sag. The selling has come in soyoil as March futures tested its 50-day moving average. The early day rally failed with price in retreat on algo chart related selling. The soyoil price trend remains down and although the recent rally is creating a weekly reversal, the inability to rise above the 50-day moving average sparked renewed algo selling.
March corn tested key support at $4.30 which sparked a bounce while wheat futures are rising on short covering. All Chicago grains are at multi year lows and traders are loath to enlarge their bear position amid seasonal price trends that call for a bottom in mid to late February, and the arrival of a new Northern Hemisphere growing season. To make matters worse, farmers and traders are debating who is right on S American crop sizes, USDA or CONAB. There is a 60-cent premium from today’s $1.14 under offer to July, which Brazilian traders argue is suggesting that CONAB is the right crop estimate. Some maintain a 145.4 million mt Brazilian crop estimate, but it will take months, and potentially into 2025 before the debate is resolved. The bulls and bears both have talking points for today.
Chicago brokers estimate that funds have sold 2,200 contracts of soybeans, while buying 3,900 contracts of wheat and 3,200 contracts of corn. Managed money was early sellers of corn which they bought back on the rally. In soy products, funds have sold a net 800 contracts of soyoil while buying 1,100 contracts of soymeal. Midwest cash meal basis is rising on the Chicago decline as end users book forward needs and crushers work to fill record large US soymeal sales. Illinois soymeal on the rail is trading at $20/ton over this morning.
US core inflation held at 3.3% while the December CPI was revised downwards to 0.2% or an annualized rate of 2.4%. The rate of inflation is coming down, but the 4th quarter annualised rate is 2.7%. The US Central Bank is expected to start gradually easing in May or June meetings. Some believe that the US Central Bank will reduce rates 2-3 times before the end of the year and end quantitative tightening of the money supply. This should produce an easing of the US dollar. We expect that China will be more robust in fighting deflation with a broad stimulus pact and more aggressive rate cuts, which is why we doubt 4 US rate cuts as the market is forecasting.
Mato Grosso spot soybean and new crop corn bids continue their decline which is raising worry about Brazilian farm profitability and winter corn seeding. The cash bid today for spot Sorriso soybeans is $8.59/bu with the July bid for winter corn at $2.66. Both bids are below estimated farm breakeven costs. Farmers that plant winter corn will cut back on their fertilisation program to save costs. As such, March/April weather will have an oversized impact on yield.
Soyoil is priced below tropical oils in the world market which is boosting demand for Brazilian supply. And the Brazilian government is tendering for supply to boost their blend rate in diesel fuel as of March 1 to 14%. The combined demand is placing a bid under the domestic Brazilian soyoil market. And US soyoil is trading below imported Used Cooking oil into the West Coast. There have been some big block trades in futures and options that traders associate with renewable diesel firms locking down margin and supplies into summer. NOPA next week is expected to show a modest rise in US soyoil stocks, but the arctic cold will curtail the crush rate.
The midday GFS weather run is slightly drier for South Central Brazil with limited rainfall for the next 7 days before totals arrive next weekend. Stress will be building on crops with high temperatures in the upper 80’s to the mid 90’s. Otherwise, rains will be above normal across Argentina and near normal across N Brazil. No extreme heat is evident.
There is limited fresh news to end the week. The market must get past next week’s USDA Outlook Forum for all the bearish news to be digested. The 2024/25 US corn balance sheet will be bearish with stocks of 2.5-2.70 billion bu with soybean stocks of 350-390 million bu. WASDE will not catch all the new US crush plants coming online in 2024/25. It has been a big week for oil share and soyoil with a weekly reversal forming. US renewable diesel feedstock supplies are tightening on new plant demand. It is soyoil that has a bullish demand story. The Index fund roll will be ongoing at the close.
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HEADLINES: February WASDE a touch negative; Market reaction muted so far; Soyoil rallies in tandem with crude.
The USDA February Crop Report was slightly negative. WASDE reduced their estimate of the Brazilian 2024 soybean crop by 1.0 million to 156.0 million mt and cut their total Brazilian corn crop estimate by 3 million to 124.0 million mt. USDA is reducing their Brazilian crop production estimates (like CONAB), but at a much more measured pace. We look for additional cuts in Brazilian corn/soybean production due to unfavourable weather conditions and ongoing disappointing harvested yield data. RGDS, MGDS and Santa Caterina soy/corn crops have been stressed by recent heat/dryness, but the early harvest is only just beginning.
The USDA will not get the Brazilian or Argentine crop sizes right until April/May. WASDE left their estimate of the 2024 Argentine corn crop at 55.0 million mt and the soybean crop at 50.0 million mt. Whether weeks of extreme heat took off the top end of production will not be determined until March.
The USDA raised 2023/24 US corn end stocks by 10 million to 2,172 million bu. USDA left the 2023/24 average US corn farmgate price at $4.80/bu.
World 2023/24 corn stocks fell 3.0 million to 322.0 million mt on a drop in production and modest decline in domestic demand. Estimated corn stocks were up 22 million mt from last year due to larger American and Argentine production. Ukraine’s corn exports were raised 2.0 million to 123 million mt and could be hiked another 2-3 million in future reports. World 2023/24 corn stocks must decline back near 300 million mt for longer term bullish price trends to be restored. The majority of world corn stock in the 2023/24 crop year is domiciled in the US.
US 2023/24 soybean end stocks were raised by 35 million bu due to a cut in US soybean exports of a like amount. No other balance sheet changes were offered. The US soybean export pace has fallen behind on pace analysis and we would argue for an additional 10 million bu reduction. However, record large US soybean crush is forecast with an expectation that future WASDE reports will raise their crush estimate to 2,340 million bu. As a massive amount of renewable diesel demand comes online in the next 6 months, the need for soyoil grows.
USDA elevated 2023/24 global soybean end stocks due to a sizeable 2.0 million mt jump in the 2022/23 carry in stocks, which was carried forward to arrive at 116.0 million mt. We forecast that world soybean supplies will decline in subsequent reports due to declining S American production. We would also argue for an expansion in world crush rates due to US and world soyoil demand. It is the Chicago close today that counts.
USDA wheat data leans slightly bearish as WASDE trimmed US food use 10 million bu following milling data through December and as 2023/24 US exports were left unchanged at 725 million bu. US end stocks were raised 10 million to 658 million bu. USDA did hike global consumption and world trade 1.1 million mt but awarded this increase in demand to Ukraine and Australia. Ukrainian exports were raised 1 million to 15 million mt following the success of Ukraine’s humanitarian corridor in winter. Australian exports were increased 0.5 million mt amid lower projected feed use there. Other meaningful changes in world supply and demand were absent, with exporter stocks/use in February unchanged at 14.8%, vs. 16.0% in 2022/23. Russian fob is still offered at $225/mt for late winter arrival. This is a weight on the marketplace, though we note US export sales in the week ending February 1 totalled 13.9 million bu, 8.5 million above the pace needed to hit USDA’s target. US SRW export commitments now total 166 million bu, or 95% of USDA’s forecast. We maintain that USDA’s annual US export forecast is 15-25 million bu too low.
The market’s reaction to another round of neutral/bearish USDA data has been muted, which suggests most bearish input has been digested, we estimate managed funds’ combined short in corn, soy and CBOT wheat at 476,000 contracts, the fifth largest on record, and focus turns to S American soy yields, the performance of Brazil’s monsoon during safrinha corn pollination in April and Northern Hemisphere seeding levels and dates. The spark needed to trigger and sustain short covering is absent today but reactions to supply surprises will be intense given the size of funds’ short today.
