15 February 2021

Posted on February 15, 2021 by simon

• Markets are closed in the US (Presidents’ Day). Brazil (Carnival), and China (New Year) and consequently market news is largely absent. However, early calls for the Chicago opening are for higher levels. Extreme cold conditions across the US Plains, with temperatures down as low as zero to minus 20℉ with only 1-5” of snow cover, raises the prospect of winterkill and this will likely push wheat futures higher. Soy and corn are also anticipated to open at higher levels on a drier Argentine forecast.

• The USDA’s Outlook Forum could well provide some fresh input on Friday but we will have to wait for that!

• The Brazilian harvest is expected to gain speed later this week with farmers to deliver on forward cash contracts. Argentine crops received better than expected rainfall on the weekend, but the next 10 days (forecast) are arid into early March. The good news is that no extreme heat is expected. And somewhat drier Northern Brazilian weather is offered after Wednesday. We look for choppy trade into the USDA Outlook Forum and March option expiration on Friday. If the Argentine and S Brazilian forecasts are still dry next week, Chicago could start to add back weather premium to price and gauge coming Brazilian new crop soybean yield. Debate ranges on about the Brazilian soybean crop size with yield data to determine of the crop is 128-135 million mt.  And finally, the Australians look to have another 2 million mt of wheat to sell with a record harvest of 133 million.

12 February 2021

Posted on February 12, 2021 by simon

• HEADLINES: Slow volume Chicago midday trade; Wheat bounces on bitter cold Plains weather while corn/soy stagnates awaiting S American harvest data.

• Chicago values are mixed at midday in a reversal of Thursday’s trade with wheat futures higher while corn/soybeans sag on profit taking ahead of a long US weekend. Traders are loath to take on new risk ahead of the 3-day US weekend with Chinese buyers off on their Lunar New Year Holiday and cash trade diminished throughout Latin America by Carnival.

• It is the Monday following the USDA Outlook Forum when risk taking will return (along with volume). Until then, Research doubts that either Chicago rallies or breaks can be sustained. Be careful in buying a bulge or selling a sharp break, the market will have air pockets amid the diminished volume trend.

• Friday’s market tone is one of weekly “exhaustion” following this week’s big price moves and the statistical apathy that USDA showed in its February crop report to record large US corn/soybean export sales. We look for a mixed close with Argentine/Brazilian fob export offers below the US Gulf. The rising competition from S American exporters has put Chicago into a neutral phase, as traders and producers await Brazilian soybean yield data and Argentine weather into late February/March.

• Chicago brokers estimate that funds have been on both sides of Chicago to date. Funds are estimated to have sold 3,200 contracts of corn and 3,700 contracts of soybeans, while buying 4,100 contracts of wheat. In soy products, funds have sold 2,300 contracts of soymeal and bought 1,900 contracts of soyoil.

• Discussions continue in Moscow on Russia’s pending variable rate export tax that will start on June 2. Multinational exporters tell the Russian Government of their difficulty in pricing wheat more than a week in advance staring in May. New crop bids are (and will be) impossible to find amid tax/price uncertainty. The way the tax works is that once a week based on the Moscow Commodity Exchange delivery Novorossiysk (Novo), a fob price will be set. The tax will set in when Russian Novo fob offers are above $200/mt. The Russian Government will place a 70% tax on any price above $200/mt fob.

• The Brazilian soybean harvest is slowly pushing ahead, and yields remain disappointing with Mato Grosso being down 3-15% and Parana down 5-20%. Harvest progress will be slow and has yet to start across Mato Grosso Du Sol, Sao Paulo, and Santa Caterina. The harvest results will become important to Chicago in confirming or denying a Brazilian soybean crop of 133-134 million mt which has been bantered around Chicago in recent days. The looming large Brazilian harvest has pressured the paper fob market in the Paranagua corridor and created some trade anxiousness of soybean imports into the SE US. The US cash market will be strengthening on looming supply shortages and some measure of imports will be required in June and July.

• The USDA’s Outlook Forum will be releasing US 2021 corn, soybean, cotton, and wheat seeding estimates. The USDA has a solid track record of forecasting US seedings in February for the final June NASS report. Traders doubt that USDA will provide bullish 2021 seeding estimates with US farmers to make $100-150/acre over costs. US 2021 Seeding will be expanding, it is a question of how many acres that WASDE wants to pull from last year’s 10 million acre Prevent Plant pool. Normally, US farmers only enrol 2-3 million acres in Prevent Plant.

• The midday GFS weather forecast is consistent with the overnight model (and prior day runs) in that a trend of below normal rainfall will continue across the southern third of Brazil and the entirety of Argentina. The S America’s upper air flow blocks meaningful rain from flowing across Argentina and S Brazil and funnels regular rain into Mato Grosso, Goias, and NE Brazil. No extreme heat is noted into late February.

• There is not much to say with trading volume curtailed by the coming holidays. It is S American weather, Brazilian soy yields and the USDA Outlook Forum that will direct values into March. Our nearby vote is for a Chicago range trade into next Friday’s March option expiration. US wheat futures are higher on the Plains bitter cold forecast and short covering. But with snows slated to fall, it is doubtful that wheat’s bounce can be sustained.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 12 February 2021

11 February 2021

Posted on February 11, 2021 by simon

• HEADLINES: Row crops recover following CONAB, Export sales data.

• Chicago soybeans have led a recovery in row crop values while US wheat futures trade steady to slightly lower. CONAB’s failure to raise Brazilian soy production above 135 million mt is noted, and US weekly export sales exceeded expectations. There is still no concrete evidence that US export demand is slowing, and even amid the absence of China US corn sales remain far above the pace needed to meet the USDA’s forecast.

• Export sales through the week ending Feb 4 featured 57 million bu of corn, an impressive total given China’s securing of 2.1 million mt on Jan 29 was reported in the previous week’s tally. Mexico and Japan combined for purchases of 39 million bu. From mid-Feb to August exporters must now average corn sales of only 12 million bu per week to hit the USDA’s 2,600 million bu target. US soy sales totalled 30 million bu, unchanged on the previous week and which included confirmed Chinese purchases of 19 million bu. Soy sales moving forward must average only 2 million bu per week. US wheat sales were 22 million bu, vs. 24 million the prior week. Meal sales totalled a sizeable 263,000 me, and a clear boost in US meal export demand has occurred since the end of 2020. Slowed Argentine crush and worrisome dryness there will sustain interest in US meal through spring.

• For their respective crop years to date, exporters have sold 2,266 million bu of corn, up 142% from last year and a record 87% of the USDA’s forecast, 2,185 million bu of soybeans, up 81% from last year and also a record 97% of the USDA’s forecast, and 845 million bu of wheat, up 5% on last year. Pace analysis places final 2020/21 US corn exports at 3.0-3.1 billion bu and final 2020/21 US soy exports at 2,350 million bu. USDA numbers as they stand today demand a rapid shift in world trade flows or massive cancellations of existing sales. The market is watching Brazilian vessel waiting times grow amid slowed soy harvesting. The pace of harvesting is unlikely to improve until the latter part of February.

• To that end, markets have quickly fallen to fair value as determined by the USDA’s February US balance sheets. The market’s readjustment occurred in a rather quick 1.5 days. A choppier marketplace lies ahead as S American yield data is awaited. The risk of crop reductions will keep end users and importers active on breaks.

• European corn futures did not break significantly following the USDA’s Feb WASDE release and continue to inch closer to mid-Jan’s 7.5-year high. Up-river corn fob basis in Argentina is quoted slightly firmer this morning.

• The Buenos Aires Grain Exchange this afternoon is expected to raise corn and soy crop ratings following rainfall in far Western and Northern growing regions and mild temperatures in all areas. Yet, the two week forecast maintains near complete dryness and rising temps into late February.

• This year’s seeding delays pose a problem for later planted crops. BAGE last week estimated that 25% of the soy crop is setting pods, vs. 41% a year ago. 36% of Argentina’s corn has reached pollination, vs. 51% a year ago. Argentine weather stays critical into early March.

• The midday GFS weather forecast is drier in Central Argentina in the 11-15 day period but is otherwise consistent with prior runs. S America’s upper air flow into Feb 24 will block meaningful rainfall from flowing across Argentina and Southern Brazil. This will also funnel heavy cumulative precipitation into Mato Grosso, Goias and far Northern Brazil through the period. The GFS forecast maintains that precipitation accumulation upward of 7-10″ will impact pockets of Mato Grosso and N Brazil over the next two weeks.

• Markets will continue to trade USDA balance sheets, which has turned focus almost entirely to S American production. The return of this supply-driven market will produce wild price swings. We would caution against chasing strong breaks and rallies until more is known about S American production and US seeding intentions.

10 February 2021

Posted on February 10, 2021 by simon

• HEADLINES: Chicago tanks on fund selling and fear of larger Brazilian soy crop from CONAB Thursday morning; end user support limited as China goes on holiday.

• Chicago futures are sharply lower at midday with corn, soybean and wheat futures busting to the downside on long liquidation and tepid end user pricing. We note that end users chased the market heading into the USDA February report and are not willing to substantially add on today’s break. Moreover, traders are concerned that CONAB will release a larger Brazilian soy crop estimate on Thursday which could drive an question mark into Tuesday’s USDA forecast of 133 million mt. The point is that the industry needs to gauge a Brazilian soy crop of 131 million mt or less to start a new rally phase. It is the size of the 2021 Brazilian soybean crop that plays into coming soy price determination.

• Chicago corn/wheat futures have posted sharp declines in midday trade with wheat falling below last week’s low and testing the 50-day moving average at $6.3075. March Chicago wheat has not breached the 50- day moving average since mid- December. A close below $6.30 March would be seen as bearish. Corn futures are holding last week’s low with the 50-day average under the market at $4.85.

• However, March soymeal futures has fallen below last week’s low with 50 day moving average support noted at $419.90. It is Chicago wheat/soymeal futures that must be followed into the close to gauge if there is additional fund liquidation. Funds were strong sellers from the opening across the Chicago.

• Chicago brokers estimate that funds have sold 8,200 contracts of Chicago wheat, 23-24,000 contracts of corn, and 12-14,000 contracts of soybeans. In soy products, funds have sold 6,500 contracts of soymeal and 5,300 contracts of soyoil. It has been an active morning of fund selling across the Chicago.

• FAS/USDA reported that 132,000 mt of US corn to an unknown destination was cancelled. Commercials report that the April/May US sales were shifted to Argentina amid their cheaper price offers. Upriver Argentine basis levels are under pressure, the Parana River level is at multi decade lows which makes loading panamaxes more costly due to topping off closer to seaport.

• EIA reported that last week’s US ethanol grind held steady at 275.2 million gallons with US ethanol stocks falling 2% on last year to 1.00 billion gallons. US gasoline consumption will seasonally rise in several weeks which will aid US ethanol consumption. Research argues that USDA’s annual US corn ethanol corn grind at 4,950 million bu is 200 million too low. We see the slow return of normal life and additional US gasoline consumption as boosting the US corn ethanol grind to 5,150 million bu. Last year’s consumption pattern will not be followed with demand crawling back closer to 2019 levels.

• FAS/USDA is expected to release another significant US corn export sales total on Thursday of 90-100 million bu while US soybean and wheat sales sag. We maintain that the US could announce another 1-2 million mt of US corn to China before the demand pace slows.

• The midday GFS weather forecast is slightly wetter across the harvest areas of Mato Grosso/Goias while holding onto a below normal rainfall trend for Argentina and S Brazil. The heavy rain across N Brazil will slow the harvest with more than 11 million mt of soybean vessels waiting to load at port. A drier harvest trend is needed. No extreme heat will be felt across Argentina and S Brazil which is aiding the RGDS soybean crop. The falls in Argentine soil moisture is concerning with rains needed in late February.

• The hangover from the USDA report is causing fund managers to sell out a portion of their market length with China to go on holiday on Friday. Chicago will also be closed on Monday for President’s Day. Chinese demand is absent, and a bottom will likely be forged when fund sales slow. The May soybean target is $13.25 and $5.20-5.25 in May corn futures.

9 February 2021

Posted on February 9, 2021 by simon

• HEADLINES: USDA disappoints in its February report with limited export demand increase; S American weather and crop size in focus into March

• The USDA statistically plodded in the February WASDE report and decided not to make any big changes. This produced a negative reaction in Chicago as the bulls exit market length and argue against USDA’s slow nature in making upward revisions to US 2020/21 corn and soybean exports. The USDA report did not feed the bulls and moderate correction lies ahead.

• The USDA February report implies that new US export demand must step forward or adverse weather for S America for new highs to be scored. The USDA sent the message that soybean or corn demand rationing (through higher price) is not required. That is not the right message in our view, but the USDA seems to want to see the massive US corn sales ship before making a larger upward adjustment in US 2020/21 corn exports. We note that the risk in the USDA’s “plodding nature” is that the rationing message is never properly sent which sends corn /soybean and wheat values sharply higher on an acute demand rationing rally in April/May. The USDA is risking that the market does not start the rationing chore by assuring end users of adequate supplies/stocks. We consequently see the USDA February WASDE as slightly bearish, but we doubt that any break will be sharp or severe with the need to make sure that US farmers plant every acre possible this spring. Nov soybeans will find support below $11.50 and Dec corn below $4.40.

• The USDA estimated 2020/21 US corn end stocks at 1,502 million bu, a 50 million reduction from January to 2,600 million bu. The increase was well below what was expected based on US corn sale data and the recent over 240 million bu of US corn to China. No other changes were made to the balance sheet with the average US farmgate corn price raised by 10 cents to $4.30/bu.

• World 2020/21 corn stocks were raised 3 million mt to 286.5 million mt based on 3.0 million cut in world demand. The USDA left the Brazilian corn crop estimate at 109 million mt and Argentina at 47.50 million mt. Yet, China’s corn exports were raised to 24 million mt (up 6.50 million) as their feed use was hiked 6 million to 206.0 million mt. China’s 2020/21 corn end stocks were forecast at 196.2 million mt, up 4.5 million from January.

• US 2020/21 soybean end stocks were lowered by 20 million bu to 120 million with the USDA raising US soybean exports to 2,250 million bu, a 20 million bu increase. The rest of the balance sheet was left unchanged with the average US farmgate soybean price holding steady with January at $11.15.

• The USDA left their estimates of the 2021 Brazilian soybean crop unchanged at 133.0 million mt with Argentina at 48.0 million mt. The weather during January did not deviate far enough from normal to make any yield or production change. The USDA normally waits until March or April to make crop production changes based on harvested yield data. China’s 2020/21 soybean import estimate was left alone at 100 million mt. To date, China has loaded 20% more soybeans through January than last year. USDA is forecast that China’s 2020/21 soybean imports up 1.5%.

• The USDA forecast 2020/21 US wheat end stocks at 836 million bu, unchanged from January. The USDA raised the seasonal average cash price to $5.00, up $0.15/bu from January. The 2020/21 US wheat balance sheet offered no surprises.

• World wheat end stocks fell 9 million mt to 304.2 million as China’s domestic feed use estimate was raised 5 million to 140 million mt, a record. Russian 2020 /21 wheat exports were left unchanged at 39 million mt. USDA did not make any adjustment to Russian wheat or grain trade as export duties are enacted in wheat next week. World wheat stocks are down, but still large and it is difficult to find any bullish impetus without enlarged US export demand.

• The USDA does not release their country-by-country export grids on any grain or oilseed. This has traders wondering how the USDA could raise Chinese 2020/21 corn imports to a record 24.0 million mt (up 6.5 million) while only boosting US 2020/21 corn exports by 50 million bu or 1.3 million mt.

• Most traders argue that the USDA may wish to see the US corn ship to China before making a US export upward adjustment The USDA February report leaves traders asking more questions than answers, and the bulls wanting more.

• With China heading to their Lunar New Year holiday and Brazilian fob soybean offers cheaper than the Gulf from late February through July, the demand led bull market phase has ended. If new Chicago highs are to be scored, it must be based on the loss of S American crop, either through Brazilian soy yield data or Argentine/S Brazilian dry weather. Supply losses are the new driving mantra of the bulls with us corn/soybean sales already record large.

8 February 2021

Posted on February 8, 2021 by simon

• HEADLINES: Corn scores fresh contract high at $5.6575 basis March; soybeans rise on disappointing Brazilian soybean yields; Argentine/S Brazilian weather is parched

• Corn futures have soared to new contract highs with soybeans finding independent strength on lower than expected soybean yield data from Mato Grosso, Goias and Parana in Brazil. And in the background is the bullish tailwind from the dry Argentine weather forecasts over the next two weeks. Chicago has been unable to rally since the January Crop Report based on the hope for record large S American soy/corn crops. This “hope” is being deflated by early harvest yields with world consumers adding to their “buy” coverage ahead of the USDA February Crop report. Chicago has a bullish feel at midday with March corn futures able to score a new contract high at $5.6475. Wheat has tagged along on cold weather forecasts for the Central US Plains and the Black Sea. Winterkill is the worry amid bitter cold air masses for each region. End users and farmers are not sellers on the rally ahead of what they see as a bullish February USDA crop report. A close above $13.915 turns the price trend back bullish for March soybean futures.

• Chicago brokers estimate that funds have bought 5,600 contracts of wheat, 9,100 contracts of corn, and 7,200 contracts of soybeans. In soy products, funds have bought 4,100 of soymeal and 2,300 contracts of soymeal. There was an order that bought 9,000 contracts of the $17-18.00 May soybean call spread.

• No new US export sales were reported by FAS this morning, but rumours abound that China continues to seek cash offers on May-June US corn.

• As reported Friday, we hear that China has booked 1-1.5 million mt of Canadian and upwards of 500,000 mt of Australian wheat We guess that when China needs foodstuffs, it eases or drops retaliatory trade issues.

• FGIS reported that for the week ending February 4, the US shipped out 62.0 million bu of corn, 66.2 million bu of soybeans, and 16.2 million bu of wheat. All were on the high end of trade expectations. Last week’s soybean exports were revised upwards by 4.1 million bu. China shipped out 30.9 million bu last week or 47% of all US exports. Open Chinese purchases are now estimated at less than 3 million mt.

• For their respective crop years to date, the US has exported 1,806 million bu of soybeans (up 805 million or 81%), 844.5 million bu of corn (up 388 million or 86%), and 624 million bu of wheat (up 7 million or 1%). We had expected that the US would export around 122 million bu of US soybeans during February, but today’s weekly soybean shipping total argues that such an estimate is far too low.

• We are hearing of disappointing early soybean yields in Mato Grosso, Goias, and Bahia. These are from soybeans that did not endure the September/October acute dryness. The Mato Grosso yields are running 48-69 sacks/ha, well under last year’s average of 72 sacks/ha. The Mato Grosso harvest is nearing 20% completed and yields are disappointing.

• We also hear that Brazilian farmers are considering using Brazilian law to declare short term bankruptcy which would break existing soybean sales contracts. Brazilian farmers are finding that they sold too many soybeans relative to the crop yield to date. They are hopeful that yield trends improve in coming harvest activity.

• A near to above normal rainfall pattern is forecast to continue across N Brazil with the midday forecast being further south than what was offered overnight. Argentina holds in a dry weather trend except for a few isolated showers. The 11-15 day forecast maintains the dry Argentine/S Brazilian trend which will start to have an important adverse impact on soy/corn yield. Close attention to the forecast is warranted.

• It has been a one way/bulldozer trade today amid end user/fund buying. There are few resting sell orders over the market as US farmers are virtually sold out, while Brazilian/Argentine farmers have sold too much crop relative to yield. The shortfall in the Brazilian soy crop (poor yield) would be exceedingly bullish amid dry Argentine weather. It is all about S American crop sizes following the USDA Report. The Argentine/S Brazilian forecast is threatening.

5 February 2021

Posted on February 5, 2021 by simon

• HEADLINES: US census December exports surprisingly large, thank China; Stats Canada data bullish canola/oats/wheat; demand rationing?

• Low volume and mixed values rule Chicago at midday. Nearby corn futures are sagging on modest profit taking (by the bulls) against $5.50 March while soy/wheat futures push higher on firming cash basis and feedlot demand for new crop wheat in the Plains. Plain’s corn supplies are going to be extremely tight by summer with cash basis bids of $0.40-0.80 over July Chicago. The new crop HRW wheat at $0.25-0.40 under July KC futures is attractive if elevators will commit to selling months of feed use in advance. Remember that wheat holds a protein advantage to corn and offers 10% more ruminant feed value. We look for a mostly higher Chicago close as traders want to be long ahead of the USDA report and dry weather forecasts for Argentina. The reason that US soybean futures have held in a range for the past 3 weeks is the hope for record large S American soy and corn crops. If there is any indication that is not the case, a new strong Chicago price rationing rally will likely unfold.

• Chicago brokers estimate that funds have bought 2,100 contracts of wheat and 3,100 contracts of soybeans while selling 1,300 contracts of corn. In the products, funds have sold 1,100 contracts of soyoil and bought 2,400 contracts of soymeal. The market has a firm tone at midday with a close above $13.81 March soybeans indicating a new uptrend.

• FAS reported that the US sold 101,600 mt of 2020/21 US corn to an unknown destination overnight. The buyer is rumoured to be Japan or South Korea.

• The US Census Bureau estimated that the US shipped out 181.7 million bu of corn, 71.9 million bu of wheat, and a record 398 million bu of US soybeans during December. FGIS reported December US corn exports of 163.9 million bu (Census total was 17.8 million bu larger). The Census December soybean exports were a hefty 30 million bu larger. Weekly inspection revisions and monthly Census US soybean exports have been well above initial exports which only adds to the bullish demand outlooks for both corn/soybeans. The US has exported record amounts of US soybeans in each month since August. January US soybean exports are also shockingly large at 341-345 million bu, another record. The US looks to have exported just over a 1,850 million bu of soybeans through January, a remarkable record.

• China also imported around 13 million gallons of ethanol during December, another larger than expected total. Through Year 1 of the Phase One agreement, China has taken $28.75 billion of US ag goods according to USDA data. Although the total fell short of the initial Year One Pledge of $36.5 billion, China’s ag purchase pace was enormous since July and shows no sign of slowing in early 2021. We look for China to take $43.5 billion of US ag goods in 2021 which based on current prices could work out to 44-47 million mt of US soybeans and 24-28 million mt of corn. China is likely to adhere to their Phase One Agreement in year 2, $43.5 billion, which offers massive demand for new crop US corn and soybeans. This is why new crop Nov soybeans and Dec corn is pacing today’s Chicago rally.

• Stats Canada estimated their December wheat stocks at 24.8 million mt (down 100,000 mt from last year), and below trade estimates. Canola (rapeseed) stocks were just 12.1 million mt, down just over 2.0 million. Even Canadian oat stocks were lower at 2.7 million mt. There are cash connected rumours that China has been booking Canadian wheat in recent weeks. Confirmation will come with export loading data.

• An above normal rainfall pattern starts across all of N Brazil today which will linger into late February. The rainy/cloudy days will slow the harvest across Mato Grosso. The 11-15 day forecast is also wet which could hamper delivery of soybeans during early March. An arid forecast is offered for the entirety of Argentina and most of RGDS in S Brazil. A front passes Feb 11-12 which could produce 0.2-1.00″ of rain. Otherwise, limited rain is anticipated.

• Ongoing record large US demand shows no sign of slowing with the NOPA January crush rate to be record large on Feb 15. CONAB’s Brazil corn/soy estimates are released on 11 February, Thursday with the USDA out on Tuesday. Research suggests staying bullish as US cash markets tighten. Buy small breaks with new crop soybeans to pace a February rally on the need to secure acres.

To download our weekly update as a PDF file please click on the link below:

Weekend summary 5 February 2021

4 February 2021

Posted on February 4, 2021 by simon

• HEADLINES: FAS confirms record large US weekly corn sales of 290 million bu; China books estimated 37 million mt of US soybeans; Argentine weather dry.

• Chicago futures are mixed at midday with the soy complex higher while the grains sag. Corn scored a new contract high overnight at $5.58 basis March but retreated after the opening as a rumoured 2 million mt sale of US corn to China was not announced. As we have been reporting, most cash connected traders expect that additional US corn will be announced to China, it is just a question of timing.

• The tone of the soybean market is up as the US sells additional US soybeans to China (550,000 mt) while US white wheat sales exceed the WASDE annual estimate with 5 months remaining in the US wheat crop year.

• US 3 major crop sales last week amounted to 347 million bu, a record. The US sold a record large 293 million bu of corn, 30 million bu of soybeans and 24 million bu of wheat. Total US corn/soybean sales are just under 4.4 billion bu or more than entire 2020 US soybean crop. And more than half of the crop year remains.

• There is no evidence of demand rationing and it will be interesting to gauge how much the USDA will raise US 2020/21 soybean and corn export estimates next Tuesday, Somehow/someway the market must encourage demand rationing, especially in old crop soybeans. The fundamental price trends are higher until actual demand rationing can be confirmed through a China wash out or confirmation of soybean imports from S America (if there is loadout space available).

• Chicago brokers estimate that funds have bought 5,400 contracts of corn, 4,800 contracts of soybeans, while selling 3,200 wheat. In soy products, funds have bought 3,100 contracts of soyoil while selling 900 contracts of soymeal.

• FAS reported that for the week ending January 28, that the US sold 23.6 million bu of wheat, a record 293 million bu of corn, and 30.3 million bu of US soybeans.

• For their respective crop years to date, the US has sold 823.5 million bu of wheat (up 42 million or 5.3%), 2,209 million bu of corn (up 1,312 million or 146%), and 2,155 million bu of soybeans (up 970 million or 82%).

• China has booked 35.3 million mt of US soybeans on a known basis and shipped out 32.3 million. Including what we earmark for China in unknown destinations, they have secured 37.1 million mt of US soybeans in total and are on their way to taking 40-41 million mt for the 2020/21 crop year. This is nearly 1,500 million bu of US soybeans or equal to 90% of everyone in the 2019/20 crop year. The US soybean sales pace as of February 1 argues for a US soybean export estimate of 2,375-2,410 million bu, far above the WASDE forecast at 2,230 million bu and US end stocks forecast at zero or even a negative if the market does not ration US soy demand.

• In US corn, China has known purchases of 17.7 million mt or 695 million bu. Including another 2 million mt held in an unknown category, We estimate that China has taken 19.7 million mt of US corn. And there are rumours of China booking another 2 M million mtMTs which would take US corn purchases by China to 22 million mt or a big 865 million bu.

• US 2020/21 corn exports based on pace analysis argues for a range of 2,850-3,000 million bu, 300-450 million bu above the WASDE January forecast. Using a mid-point of the export range would drop 2020/21 US corn end stocks to 1,175 million bu, assuming WASDE does not raise US ethanol forecasts by 50-100 million bu amid the expanding demand for US unleaded gasoline as the US economy recovers. US 2020/21 corn end stocks of 1,050 million bu or less are valid, if China halts its US corn purchase pace now, and for the rest of the 2020 /21 crop year.

• An above normal rainfall pattern starts across all of N Brazil which persists into mid-February this weekend. The 11-15 day forecast is also wet which could hamper the start of the Mato Grosso/Goias soy harvest. An arid forecast is offered for the entirety of Argentina and most of RGDS in S Brazil. The wet weather for N Brazil is a worry.

• S American weather and early Brazilian soy yield results will drive Chicago ahead of the USDA’s February crop report. Our view stays bullish with corrections to be modest on the need for demand rationing. Weaker wheat values will not be sustained as US hard wheat cannot reach values that allow it to be fed.

3 February 2021

Posted on February 3, 2021 by simon

• HEADLINES: Chicago corn/soy bounce on cash firmness and big domestic cash meal buying: Midday Argentine forecast stays dry into Feb 15.

• Chicago futures are mixed at midday with corn/soybeans higher on renewed fund buying and talk of active domestic soymeal business this morning. The cash meal market fell near the January lows which saw domestic livestock feeders taking coverage out as far as they were allowed (US crushers limiting forward coverage to May on soymeal with few confident that there will be enough domestic soybeans to crush thereafter).

• Corn followed meal higher with Gulf sources suggesting that China had shown new interest in US corn on the break. It appears that China has not left the US corn market and will add to their forward coverage on breaks. This is rallying CIF corn bids for February/March as export slots get quickly booked. A huge US corn export program lies in the offing which is underpinning US cash basis and futures spreads. The March/July corn spread is trading at 15 cent premium this morning,

• Soybean CIF offers are up 20 cents during the past week. US exporters are withdrawing offers for May forward positions amid US supply uncertainty. Like US crushers, exporters are not willing to sell forward soy positions amid the tightening US soy supply outlook. This should be a warning sign for rationing.

• There has been talk of China soybean switching to the US PNW and washouts of February cargoes by China in the Paranagua paper market (limited new crop available) which has pressured paper export premiums to 30-32 cents over March. We would point out that this paper trade does not come with a commitment to load soybeans at a prescribed contract date. CIF cash market contracts that have loadout provisions are soaring in premium on the lack of harvest/exportable supply. Our point is that there are two totally different cash traded soybean markets in Brazil. Looking at the paper trade in the Paranaqua corridor does not fully reflect the building concern for the latent Brazilian soybean harvest and a vessel line up that is nearing 10 million mt!

• The GASC tender indicated that Russia remains a world wheat exporter. Russia sold 2 cargoes of wheat with the €50 tax at a price just below $300/mt. Russian farmers have stepped up their cash selling knowing that a variable rate tax could be enacted for 70% above $200/mt after June 1. The sales have not been heavy, but it is a start. However, it is the exporter that will continue to draw on Russian cash wheat, not the miller or flour producer. Domestic availability of wheat will be tight which holds interior prices near the record highs. This was not what President Putin wanted, and a change in policy could come by late winter. For today, Russia still has 17.5 million mt of grain that can be sold with the tax of which 12.5 million can be wheat.

• Plains feedlots are looking at the price of HRW cash wheat compared to corn. The spread has narrowed so close that HRW wheat could be fed from May-August.

• The problem is that the US HRW cash market cannot allow wheat to be fed amid tightening stocks. If a feedlot chooses to use HRW wheat as a feedstuff, we advise that the supply and price be fixed. If the US feeds an extra 50-75 million bu of HRW wheat it tightens the US balance sheet to untenable tight levels which will send KC wheat futures to new highs at $6.70-7.00.

• For the first time in the 2020/21 growing season, an above normal rainfall pattern starts across all of N Brazil which persists into mid-February. The 11-15 day forecast is also wet which could hamper the start of the Mato Grosso/Goias harvest. A dry forecast is offered for the entirety of Argentina and most of RGDS in Southern Brazil. Parana and Mato Grosso do Sul will see near to below average rainfall.

• Record large US corn export sales are expected Thursday of nearly 280 million bu. Cash basis levels for US corn/soy are firming with new highs in Chicago needed to spur the next round of sales. Early soybean harvest yield data in Mato Grosso is disappointing. It is actual harvest yields in Brazil and Argentine dryness that spurs the next rally and new contract highs. We stay bullish on any break.

2 February 2021

Posted on February 2, 2021 by simon

• HEADLINES: Low volume Chicago decline argues that break is correction on momentum fund selling; Cash market tightness to lead corn/soy higher into March/April.

• Chicago futures are lower at midday on renewed liquidation. Mexico booked a couple of US corn cargoes overnight that was announced by USDA/FAS this morning, but otherwise, the tone of the market is one of profit taking.

• Several day corrections in bull markets are normal and needed for technical refreshes. Few will want to be overly short heading into Thursday’s USDA export sales report with China rumoured to be bidding for US DDG’s and ethanol.

• And rumours persist that China has or will book another 1.5-2.0 million mt of US corn that will elevate China’s total corn purchase to 7.5-8.0 million mt. Although China has paused in terms of daily sales announcements, China remains active in seeking US ag commodities in terms of new crop soybeans, corn, corn by products and meats. Chicago breaks will be supported by China demand/interest. We look for a trading low in Chicago either today or early Wednesday.

• Chicago brokers estimate that funds have sold 6,100 contracts of corn, 3,000 contracts of wheat, and 5,100 contracts of soybeans. In soy products, funds have sold 900 contracts of soymeal and 2,600 contracts of soyoil.

• US equity markets have rallied sharply as the “risk on” reflation trade is ongoing. The DOW is up nearly 600 points and new highs are anticipated. The US$ has rallied with the Brazilian Real priced at 5.38:1 while the Argentine Peso is priced at 87.70:1. The Brazilian nor Argentine farmer is pricing any additional new crop corn or soybeans amid large sales on the books. With US farmers having 90% plus of their soybean crop and 80-85% of their old crop corn crop, any Chicago selling is related to profit taking from the bulls.

• Deral Parana degraded crop ratings in announcing that 78% of their soybean crop was good or better, 20% fair and 2% poor. There was 326,000 acres that fell from the good or better to the fair or poor category. A total of 5.3 million Ha (13 million acres) of soybeans are planted in Parana. The very early harvest is showing disappointing yield totals with sacks per hectare down 9-14% from last year. Additional harvest data is needed to confirm the trend, but the outlook for Parana is a soy yield 4-9% below 2020. Weeks of cloudy/wet weather has caused rust/fungal diseases that is impacting soybean quality and yield.

• Egypt’s GASC booked a massive 480,000 mt of wheat for last half of March shipment at prices that ranged from $311.20-311.95/mt basis C&F. The purchase included 240,000 mt of French wheat, 120,000 mt of Russian and 60,000 mt each of Romanian and Ukraine wheat. The purchase confirmation rallied Paris wheat futures which in turn underpinned Chicago/KC wheat. The tender confirmed that world wheat fob prices are rising, and sharply so on a landed basis into the world’s largest wheat importer. The availability of Ukraine and Romanian wheat is limited with high Russian taxes curtailing their future sales. The EU is the destination where the world will turn for wheat in future tenders.

• The midday GFS weather forecast is wetter in Mato Grosso and EC Brazil into Feb 12, a time when dry weather is wanted to start the harvest. For the first time in the 2020/21 growing season, an above normal rainfall pattern starts across Mato Grosso on Friday, which persists into mid-February. The 11-15 day forecast is also wet which could really hamper the start of the Mato Grosso harvest. A dry forecast is offered for the entirety of Argentina and most of RGDS in Southern Brazil. Parana and Mato Grosso do Sul will see near to below average rains. The new drying trend must be watched closely as La Niña tends to produce mid to late season droughts across Argentina/S Brazil.

• Cash markets for US corn/soybeans are snug and firming on basis which suggests that Chicago declines will not be able to carry through. Momentum funds try to sell Chicago values down but cannot find any carry through which causes them to cover going home. End users and importers are using any break to extend their forward coverage. Our lean is to disappointing Brazilian soybean yields which is contrary to those looking for improvement. Tuesday’s USDA report could be a monster for the bulls on expanding exports and falling stock. Be very careful!