1 February 2021

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  • HEADLINES: Chicago declines as China corn sales announcement was not offered; January US soybean exports record large; no sign of us soybean/corn rationing.
  • Chicago futures are lower at midday as China did not show up as securing additional US corn which left the market in profit taking mode. Corn, soy and wheat futures have retreated as bulls need to be fed every day and the market was in need of a correction (following last week’s gain). The bears cite the coming Lunar New Year holiday on February 12 and Brazil’s start of the soybean harvest in 2-3 weeks as reason for today’s softness. US cash basis bids are firming on the Chicago falls as end users struggle to get US or S American farmers to sell in a down market. We doubt additional weakness in either corn, soy or wheat futures. $5.35 March corn, $13.40 March soybeans and $6.15 March KC wheat should offer chart-based support. The premium of KC March wheat to corn has narrowed to just $0.76/bu. US cash HRW wheat cannot afford to be included in US feed rations into the new crop.
  • Chicago brokers estimate that funds have sold 9,000 contracts of corn, 5,500 contracts of wheat, and 6,400 contracts of soybeans. In soy products, funds have sold 3,300 contracts of soymeal and bought 2,100 contracts of soyoil.
  • The USDA/FGIS reported that for the week ending January 28 the US exported 43.4 million bu of corn, 65.8 million bu of soybeans, and 14.6 million bu of wheat. Last week’s US soybean inspections were revised upwards by 4.6 million bu to 77.3 million bu, a revision trend that extends way back to September. US grain inspectors are having trouble catching all the weekly US soybean trade.
  • For their respective crop years to date, the US has exported 782 million bu of corn (up 357 million or 84%), 1,736 million bu of soybeans (up 757 million or 77%) and 608 million bu of wheat (down 4 million or 1%). Both US soybean/corn exports are record large for their crop years to date. China exported 36.4 million bu of US soybeans or 54% of the weekly total. We look for another upward revision of last week’s US soybean exports of 4-6 million bu such that US January soybean exports will equate to a record large 342-348 million bu. We  estimate that through January the US will have exported 1,765-1,775 million bu of US soybeans for a 355 million bu average in the first 5 months of the crop year. Through February, we look for US soybean exports to reach 1,900-1,920 million bu. There is no evidence of any slowing of US export demand with China likely to switch additional cargoes to the US based on the latent Brazilian harvest. There is near 10 million mt of vessels waiting to load soybeans in Brazil!
  • World wheat futures have declined on rumours of an increase in Russian farm sales. Yet, the selling had to occur basis late in the Moscow day and is not confirmed by any cash connected sources. We suspect that the break is more related to fund selling. Russian farmers may have decided to sell some cash wheat prior to the February 15 tax increase, but most suggest that they will wait until April/May to determine new crop conditions. There is just one offer in the Russian fob paper market at $300/mt. All other offers are pulled surrounding the planned hike in the export tax. And if Moscow decides to place a formula tax on new crop wheat, it throws into question new crop offers and planting. The entire Russian wheat market is up in the air on export tax hikes which creates tremendous future uncertainty. We doubt that any Russian exporter would offer to Egypt’s GASC should a tender develop early this week.
  • There are also rumours that China has turned to booking US DDG’s and ethanol on the break this morning. China remains active in seeking US grains on weakness. Their demand tells us that one has to be very careful about selling into any Chicago decline.
  • The midday GFS weather forecast is wetter in Mato Grosso and EC Brazil into Feb 11, a time when dry weather is wanted for the 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 average rainfall totals. The new drying trend must be watched closely as La Niña tends to produce mid to late season droughts across Argentina/S Brazil.
  • Parana’s Deral (Dep’t of Rural Economics) will be out with their crop condition ratings on Tuesday which is expected to show deterioration due to weeks of rain/cloud cover. Some private analysts fear the Parana soy yield could decline more than 10% on rust and rain. Pod droppage reports in W Parana are widespread. Research calls for $6.00-6.25 May corn futures which argues that the break in wheat is overdone. Another 1.5-2.0 million mt of Chinese demand for US corn could well be announced this week. Chicago needed a break, but there is no evidence of demand rationing either domestically or in trade. China’s interest in US DDGs and ethanol argue for a bigger import program that is in the offing.

29 January 2021

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  • HEADLINES: China books 2.1 million mt of US corn, largest US daily corn sale since October 1989. Southern Brazil stays wet.
  • Chicago futures are mixed at midday with corn/wheat higher while soybean futures trade violently on both sides of unchanged. Soymeal futures retreated to test last week’s low on active oil/meal spreading. Research expects that March soymeal will hold $420/ton support on active US meal export loadings and that March soybeans has solid support below $13.40. We look for a higher close across Chicago.
  • FAS/USDA announced another 2.1 million mt of US corn to China (second largest daily sale on record surpassing a sale of 2.0 million made to the USSR back in October of 1989). This morning’s sale takes this week’s China corn purchases of US corn to 6.0 million mt (240 million bu), a weekly and annual record.
  • We hear that China is working another 2 million mt of corn for a total purchase package of 8 million (315 million bu). This purchase package amounts to 18% of last year’s US corn exports. China has secured an estimated 20 million mt of US corn to date, with a projection that total will reach 24-26 million mt. The nearly 1 billion bu of China demand for US corn has accentuated corn’s already bullish outlook. The new demand argues that spot Chicago corn futures can reach $6-6.25 which would argue for spot soybeans to advance to $15.50-16.00.
  • Including this week’s China sales announcements, the US has now sold a remarkable 4,350 million bu (combined) of US corn/soybeans for the crop year to date. Last year the US exported 3,460 million bu of corn/soybeans. The point is that 2020/21 US corn/soybean sales commitments are already 890 million bu more than a year ago, with 7 months (more than half) of the crop year remaining. The US corn/soy demand bull market is alive/well.
  • Chicago brokers estimate that funds have bought 12,000 contracts of corn and 4,300 wheat, while selling a net 3,400 soybeans. In soy products, funds have sold a net 1,900 contracts of soyoil and 4,300 contracts of soymeal.
  • Mato Grosso’s IMEA lowered their estimate of their soybean crop to 35.48 million mt from 35.87 million at the end of November. Yields were lowered just over 1.0% with a downward bias on the dry weather for January. The Mato Grosso soybean harvest is extremely slow to start with progress limited this week. Some cutting will start around February 5, but the bulk of the Mato Grosso soybean harvest will hold off until after February 21, which means that Brazil’s soybean export season will be largely pushed back to March.
  • Producers report that a lack of sunshine and excessive rains is taking a toll on the Parana, Santa Caterina and SE Mato Grosso do Sul soy crops. No harvest has taken place, and none will start for another two weeks. Unfortunately, the forecasts offer additional wet weather for the next 10-14 days. Crop woes look to worsen which is harming yield potential.
  • The midday GFS weather forecast is wetter in Mato Grosso and EC Brazil into February 8. The forecast remains wet for Parana and the southern third into February 14 which will raise the risk of yield losses and seed degradation with another 3-6.00″ of unwanted rain.
  • Drier weather is offered for Argentina with rainfall totals of just 0.25-1.25″ over the next 10 days. The diminished rain will cause a further reduction in soil moisture. Argentine and Southern Brazilian high temperatures hold in the 70′s to 80′s which is some 8-12 degrees below normal. Excessive wetness across Southern Brazil remains a high concern heading into February.
  • The Chinese buying of 6-8 million mt of US corn has shifted corn’s outlook to ultra-bullish as this demand led bull accelerates. Soybean futures will follow corn on acute need for demand rationing along with new crop November fighting with corn for 2021 US acres. There are over 9 million mt of vessels waiting to load cargoes in Brazil (up 3.2 million mt in the past week) with harvest still 2-3 weeks away. The price risk stays to the upside with Chinese demand so large the US might have to feed considerable amounts of wheat. Stay bullish, the entire Chicago complex appears to be priced too cheaply relative to fundamentals following China’s massive US corn purchase.
To download our weekly update as a PDF file please click on the link below:

28 January 2021

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  • HEADLINES: Ag markets retreat from morning highs; China ups weekly purchases of US corn to 147 million bu.
  • Chicago futures are again mixed at midday with confirmation of large US export sales and additional Chinese corn demand having been digested by the morning rally. However, the US is exporting its corn and soybean surpluses much too fast and it remains that breaks in value only serve to encourage consumption.
  • The spot futures-based soybean crush margin at midday is calculated at $0.77/bu, which is profitable. Early season Brazilian soy exports remain at risk amid the possibility that a pattern of above normal precipitation continues across Southern Brazil throughout February. EU rapeseed oil is now quoted at $0.51-0.52/lb into April. The message is that there is no indication that global cash prices are weakening, which is important.
  • US export sales through the week ending Jan 21 featured 73 million bu of corn, 17 million bu of soybeans and 14 million bu of wheat. Corn sales were above expectations while wheat and soy were in line. China also secured another net 7 million bu of US sorghum for old crop delivery and 1.5 million bu of sorghum for delivery in 2021/22. US sorghum export commitments sit at 227 million bu, or roughly 80% of the USDA’s forecast with a full 7 months remaining in the crop year.
  • For their respective crop years to date, exporters have sold 1,916 million bu of corn, up 126% from last year, 2,125 million bu of soybeans, up 83% on last year and 95% of the USDA’s forecast. US wheat export commitments total 800 million bu, up 4% from last year.
  • China this morning bought another 67 million bu of US corn for old crop delivery, which again confirms that TRQs are not needed for government purchases and also implies the USDA’s US corn export forecast is MASSIVELY understated. When adding announced sales made to China and unknown destinations since last Thurs (160 million bu of corn, 14 million bu of soy), US corn exports moving forward must average only 16 million bu/week to meet USDA’s forecast and weekly soybean sales must average only 3 million bu.
  • Even in years of timely harvests in Brazil, the pace of US soy sales does not retreat into the single digits until Jun-Jul. Brazilian fob beans for March arrival are offered just $0.09/bu below US Gulf origin. Soy harvest in Mato Grosso is unlikely to reach 50% complete until the end of Feb/early March.
  • Meanwhile, exporting countries’ focus on food security/food inflation reflects the need for ideal weather moving forward, beginning with Brazil during the Mar-May period. There remains concern that Argentina will follow Russia in slowing the pace of grain/soy exports to quell rising prices there.
  • The midday GFS weather forecast is drier in Mato Grosso and NE Brazil in mid-Feb than the overnight solution and is wetter in Paraguay and RGDS in far Southern Brazil. The consistent trimming of precipitation totals in Central Brazil is aligned with longer term climate outlooks, which for weeks have called for abnormal dryness in Central and Northern Brazil throughout the month of February. Cumulative rainfall in Southern Brazil (which accounts for 35% of Brazil’s soy area) will reach 3-6″ into early next week. Pockets of RGDS and Parana will see totals of 6-8″. Unwanted rain in the south and continued soil moisture loss across the safrinha corn belt are concerns. Argentine weather will be favourably cool/wet.
  • Small percentage changes in value are now larger flat price moves. Yet, this volatility is a symptom of a developing bull market. We maintain that breaks must be used by consumers to pick away at forward coverage.

27 January 2021

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  • HEADLINES: New Chicago corn contract high ($5.4375 Mar ‘21) on new US sale to China; US soy demand rationing elusive (but needed).
  • Chicago futures are mixed at midday with the summer row crops firmer, while wheat sags on intercrop spreading. Traders are using wheat as their short leg against long corn/soybeans amid building market volatility. The wheat/corn spread has narrowed to a premium of $1.24/bu with corn being the bullish stalwart. Canola futures have soared to fresh 13-year highs with a print of $717.40/mt on exceptionally tight stocks. The Chicago trend stays higher on the need for demand rationing. However, selling the fact of Chinese purchases has pressured Chicago. We look for a mixed Chicago close with debate ongoing whether China will post another round of sales tomorrow morning.
  • FAS/USDA announced the sale of another 680,000 mt of US corn to China, along with 126,500 mt of US soybeans to an unknown destination (rumoured to be China) along with 132,000 mt of 2021/22 soybeans to China. The US has now sold 2.04 million mt (80 million bu) of corn to China in the past 2 days which will raise US corn 2020/21 export commitments to a record large 1,975 million bu. And US soybean sales will be record large at 2,150 million bu with US exporters already shipping out 76% of this total. The US is exporting soybeans nearly as fast they sell. And Chinese importers are shocked that US exporters keep offering them soybean offers amid the dramatically tightening domestic supply.
  • Chicago brokers estimate that funds have bought 7,700 contracts of corn, 6,500 contracts of soybeans, and 4,400 contracts of soyoil. Funds have sold 2,300 contracts of wheat and 2,900 contracts of soymeal.
  • The Biden Administration will offer debt relief to 12,000 financially struggling US farmers. The USDA will suspend past due debt collections and foreclosures. The USDA will move to find ways to help farmers amid Covid-19 struggles including new direct aid. The relief is not expected to change either grain or livestock holding. Generally, US farmers have sold an estimated 90% plus of their 2020 soybean and 80-85% of their corn crops.
  • EIA reported that weekly US ethanol production fell 1.3% to 274 million gallons (vs prior week) which consumed an estimated 95 million bu of corn. This demand would consume some 4.95 billion bu of US corn if annualised over the crop year. US ethanol stocks held steady at 991 million gallons. US ethanol demand is holding steady, but as a larger share of Americans are vaccinated by the spring, there should be an increase in gasoline demand that pushes US 2020/21 corn use for ethanol up to 5,100 million bu. The weekly report is being deemed as positive.
  • The midday GFS weather forecast is consistent with the overnight run with soaking regular rain to drop across the southern third of Brazil. This rain will cause crop quality issues and low-level flooding with 10-day rains of 4-9.00″. EC Brazil will hold in an arid flow while near to below normal rains drop across Northern Brazil. The Argentine forecast offers near to above normal rainfall which will aid crops.
  • The temperature outlook for Argentina and Southern Brazil is for below normal readings with highs ranging from the 70′s to the upper 80′s. The cool/wet weather slows maturation and heightens the spread of fungal diseases.
  • Selling the Chinese demand confirmation has sparked a midday profit taking. Yet, the 2.0 million mt of US corn demand confirms that TRQ’s for imports are no longer required. The Chinese Government is buying US corn for in country resale and the Government does not need to issue TRQs to themselves. Additional US corn purchases are likely as Chinas lowers its weekly wheat auctions and domestic feed prices rise. China will continue to book old crop US soybeans amid the latent Brazilian (Parana) harvest amid excessive wet weather. Breaks will be brief/shallow with large US weekly sales expected Thursday morning in corn/soybeans.

26 January 2021

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  • HEADLINES: Canola (Rapeseed) soars above $700/mt to best price since 2008; China rumoured to have bought 2 million mt US corn/soybeans as well.
  • Midday Chicago futures have rallied sharply with corn, soy and wheat posting strong gains on fresh US export demand. Demand led markets respond to new sales with vigour as US cash supplies/stocks dwindle. And exporters continue to sell US soybeans as a rapid pace, which means that US crushers must cut their runs so the US does not run out of soybeans. This is the driving fundamental of a demand led bull market in trying to decide the price that slows/stops demand.
  • China booked 1.4 million mt of US corn in a daily FAS sale with rumours that another 600,000 mt was also completed (but not announced). And cash connected traders report that China continues to secure US soybeans over the past 36 hours with an estimated 300-350,000 mt sold off the PNW for February. China remains active as a buyer of US corn/soybeans on the worsening worry that Brazil’s main soybean harvest will be pushed back to the third week of February due to late Mato Grosso seeding and excessive rains across Parana/Santa Caterina.
  • The ongoing rapid sale/export of US soybeans has Western US crushers unwilling to offer soy products beyond May, unless you sell them soybeans in the same period. The point is that US crushers are worried about local soybean supply availability for processing which is starting to panic US end users.
  • Canola (rapeseed) futures soared to limit up gains before retreating on profit taking. This was the second consecutive day where canola futures jumped the limit. Canola futures rallied above $700/mt for the first time in 13 years, and are now targeting the all-time high at $750/mt set back in 2008. The shortage of canola seed/oil is real and along with soaring sunoil prices is bullying US soyoil futures. Cash soyoil ex Decatur IL is nearly trading 2.0 cents above Chicago futures which will limit the movement of cash soyoil into delivery.
  • Chicago brokers estimate that funds have bought 9,300 contracts of corn, 7,500 contracts of soybeans, and 4,600 contracts of wheat. In the products, funds have bought 3,400 contracts of soymeal and 4,900 contracts of soyoil.
  • US farmers have sold an estimated 82-87% of their soybean and 80-85% of their corn crops based on the sharp Chicago price rally and strong basis levels according to US merchandisers. This is allowing China and other nations to secure US corn/soybeans without rallying the cash basis very much. Commercials are selling out of their net long cash with ease. There is a point in late February or March where any new US demand will become bullish to futures and cash basis. With farmers heavily sold, there is no natural seller above values
  • It is surprising that Egypt’s GASC has not tendered for world wheat in recent days. One would have thought that Friday’s break would have sparked a tender. GASC is close bought on wheat and needs coverage in the late February forward timeframe. Any GASC tender will show if Russian sellers exist in any size.
  • ADM Chief Financial Officer Young reported in its earnings call that China had secured about 200 million gallons of ethanol into mid 2021, a near record amount. CFO Young was upbeat on additional China ethanol demand and China’s total ag demand in the second year of the Phase One agreement between the US/China.
  • The midday GFS weather forecast is consistent with the overnight run with soaking regular rain to drop across the southern third of Brazil. This rain will cause crop quality issues and low-level flooding with 10-day rains of 6-9.00″. East Central Brazil will hold in an arid flow along with the southern half of Argentina. The combination of dryness for East Central Brazil and excessive rainfall for the south raising crop yield risks in early February. No extreme heat is noted but temperatures will be warmer than normal across most of Northern Brazil.
  • The almost insatiable Chinese demand for US and Brazilian soybeans argues for new highs that turns crush margins negative. It is remarkable that China is this active with purchases prior to their Feb 12 Lunar New Year holiday. Brazilian harvest delays are worrisome for both soybeans and their winter corn crop. Stay bullish!

25 January 2021

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  • Chicago futures have rallied sharply to start the week as SE Asian hedge fund selling has ended and commercials have stepped forward to extend their coverage. There are air pockets above and below the market with limited selling noted until March corn reaches $5.10 and March soybeans $13.45. The wheat rally has not been as robust without strong export demand. We look for a higher close as the market forges a trading low in the 5-month demand led bull market. Note that 10% corrections occur from time to time in demand led rallies.
  • Chicago brokers report that funds have bought 7,400 contracts of corn, 6,500 contracts of soybeans and 4,500 contracts of wheat. In soy products, funds have bought 4,800 contracts of soyoil and 4,600 contracts of soymeal. A lack of selling over the market has pushed Chicago values upwards
  • FGIS weekly US Inspections for the week ending January 21 were; 54.8 million bu of corn, 72.7 million bu of soybeans and 19.2 million bu of US wheat. Last week’s US soybean exports were raised to 83.5 million bu, up another 7.9 million bu. China loaded 44.5 million bu of US soybeans or 1.2 million mt. China will load an average of 1.9 million mt of soybeans during the year. Brazil nor Argentina exported any soybeans to China last week, with the US the only supplier.
  • For their respective crop years to date, the US has loaded about the same number of soybeans for the entirety of the 2019/20 crop year at 1,664 million bu. This is up a record 737 million bu or 79%. The US has now exported 83% of the WASDE annual US export estimate and only needs to export an average of 11.6 bu/week for the remainder of the crop year (to achieve the USDA export forecast of 2,030 million bu). Such a forecast is woefully low and argues for higher prices and a more aggressive effort with demand rationing. The US also shipped out 737 million bu of corn (up 337.4 million bu or 84%) and 591.5 million bu of wheat (down 4 million bu which is down 1%). The US corn export pace will be rising sharply into May amid the US’s price competitive position.
  • Brazil has harvested less than 1% of its soy crop, well below historical averages due to latent seeding dates amid the September-November drought. The bulk of the Mato Grosso soy harvest will not be occurring until the third week of February. This means that the record tonnage of vessels 6.3 million mt waiting to load as of today, will swell to 10-12 million mt by mid-February. We doubt that Brazil will be a sizeable soybean exporter until the opening days of March.
  • There will be additional switching and new outright purchases of US soybeans to bridge the supply gap of Brazil’s soybean export program. 3-5 week harvest delays will push loadings backwards and cause logistical struggles in March.
  • The midday GFS weather forecast is slightly drier across Eastern and Central Brazil, but wetter across Paraguay, Parana and all of Southern Brazil where some areas could receive as much as 8-12.00″ of rain. The excessive rain in S Brazil will slow the harvest and cause widespread soybean rust outbreaks. Far Northern Argentina will also be in this wet pattern. Central and Northern Brazilian dryness is edging soy yield potential lower. It was hopped that soybeans in Parana would allow the Brazilian harvest to start in earnest, but low-level flooding is now causing delays.
  • Big markets have big swings. Recent Chicago price action points to the heightened volatility that we expect TO continue. Soy futures have an acute economic need to ration US demand. The worrisome delay in the Brazilian soy harvest only adds to the upside Chicago price potential. Black Sea fob wheat offers are impossible to find after Feb 15 which will soon shift world demand to North America.

22 January 2021

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  • HEADLINES: Chicago sharply lower on massive fund selling; funds sales dominate trade; no fundamentals explains the acute Chicago break.
  • Chicago futures are sharply lower at midday The market tried to bounce off the overnight lows on larger than expected US weekly exports of summer row crops while wheat has tried to follow. Wheat futures have languished with little resolve amid sinking Paris futures on a pickup in French farm sales. The volume of Chicago trade has been massive with the charts turning lower amid this week’s inability to rally. This is the first week in six that Chicago corn /soybeans futures did not close higher.
  • Chicago brokers report that funds have sold 34,000 contracts of corn, 21,900 contracts of soybeans and 15,400 contracts of wheat. In soy products, funds have sold 8,200 contracts of soyoil and 9,400 contracts of soymeal.
  • The USDA/FAS reported that the US sold 136,000 mt of US soybeans and 123,000 mt of US sorghum for the 2020/21 crop year. On the week, the US sold just over 430,000 mt of old crop soybeans, 16.0 million bu.
  • The USDA reported that for the week ending Jan 14 the US sold 12.1 million bu of wheat, 56.6 million bu of corn, 66.8 million bu of soybeans, and 11.6 million bu of sorghum.
  • For their respective crop years, the US has sold 785 million bu of wheat (up 40 million or 5%), 1,843 million bu of corn (up 1,044 million or 131%), and 2,108 million bu of soybeans (up 962 million or 84%). Including what the US has announced sold on their daily reporting system this week, the US has sold 2,115 million bu of soybeans or 95% of the WASDE annual forecast. US corn and soybean sales are record large for the middle of January and as a percentage of the crop year total. The US cannot keep making these large weekly sales or the US is going to quickly run out of soybeans. Acute demand rationing will be needed at some point, it is all a question of timing.
  • China has booked a known 34.4 million mt of US soybeans (1,263 million bu) in the 2020/21 crop year with another 2.5 million mt likely held in an unknown destination category. The point is that China has secured a record 37.0 million mt of US soybeans and they are still bidding for February and late summer shipment from the US Gulf and PNW. A couple of fresh cargoes have sold today. Based on the sales pace, the USDA should be raising their 2020/21 US soybean export estimate above 2,400 million bu or 150-170 million bu more than they are forecasting. The problem is that if the USDA were to make such an export adjustment, US 2020/21 soybean end stocks would be negative. Negative end stocks will not occur as the market must reach significantly higher prices to starve demand. Today’s liquidating market is sending the wrong message to importers and end users.
  • US and S American farmers have shut of cash sales on the market decline. We look for cash bids to rally next week on the sharp futures drop.
  • The midday GFS weather forecast is slightly drier from the overnight run, but it is more in line with the EU model with limited rainfall across the southern half of Argentina in the next 10 days. Mostly dry weather holds across NE and EC Brazil for at least the next 10 days while regular rain falls across Parana, S Mato Grosso do Sul and N Argentina. No extreme heat will be lasting with 90s/100s expected across Argentina this weekend before a cold front pulls northward on Tuesday. The primary weather models have not been consistent from a run-to-run basis. A drier profile is offered in the extended range for both N Brazil and much of Argentina in the 9-15 day period.
  • Surprisingly, large US export sales of US soybeans and corn should be pushing Chicago values higher in a rationing rally. Instead, the Chicago is in massive liquidation with funds racing each other to sell out long positions. We cannot find a headline or fundamental to justify today’s plunge. This appears to be just good old purge of excessive market length. End users and importers should be using this break to extend forward coverage. We continue to doubt that seasonal highs have been formed. This is a good old fashioned washout.
To download our weekly update as a PDF file please click on the link below:

21 January 2021

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  • HEADLINES: Wheat falls as Russia won’t install a wheat export quota, just €50 tax; soybean spreads tighten on demand.
  • News that the Russians were not going to be more restrictive on 2020/21 export volumes pulled Chicago futures lower from a sharply higher Chicago opening. Wheat paced the morning decline as Russia will keep exporting wheat at elevated prices.
  • The €50/mt ($1.65/bu) Russian wheat export duty will be signed and applied on March 1, but this tax has largely been factored into existing Russian fob wheat offers at $302/mt. An early €25 duty will be applied on February 15.
  • Importers and end users will be forced to pay for most of the Russian €50 wheat export duty. We doubt that Russian interior wheat/grain values will decline the 10% that President Putin desires. The door remains open that Russia could put a quota on its wheat exports at some point, but for now the Russian Grain industry/exporters have beaten back such harsh restrictions.
  • The Russian Grain Industry and the Russian Economy Minister held an ad hock meeting this morning where it was decided to proceed with a €50 euro export tax as outlined last Friday. We look for the Russian Prime Minister to sign the wheat/corn/barley duty decree before the end of the week.
  • FAS/USDA reported daily sales of 136,000 mt of 2020/21 soybeans to China and 163,290 mt to Mexico for combined sales of 300,000 mt. 138,000 mt of US HRW wheat to Nigeria and 336,500 mt of US corn to an unknown buyer (about half the sales that were rumoured yesterday to China). We hear that China continues with their February US soybean and April/May US corn interest.
  • Chicago brokers estimate that managed money has sold 4,400 contracts of soybeans, 2,500 contracts corn and 3,900 contracts of wheat. In soy products, funds have bought 4,200 contracts of soyoil while selling 3,800 contracts of soymeal. China has been active in spreading the oil/meal share in their domestic markets. It appears to have carried forward to Chicago in recent days.
  • The US grain analytical industry are expecting that US farmers will plant all to wall in 2021. We would mostly agree with this. But the seeding of 92 million acres of corn and 90 plus seeding of soybeans requires favourable spring weather across mid America. And crops like sorghum, cotton and even barley also offer attractive returns. Growers report that they have spent money to apply fertiliser and chemicals based on open autumn and early winter weather. We doubt that US corn seeding will push above 93 million acres, but the real struggle will be to seed record large US soybean acres above 90 plus mil acres. The point is that 2021 22 US corn, soybean, sorghum, cotton, barley and wheat balance sheets require every extra acre and a favourable spring seeding season. Chicago won’t bend or break until large 2021 US corn, soybean and wheat yields are known in June or July.
  • The midday GFS weather forecast is wetter for Central and Southern Argentina than what was offered overnight by either the EU or GFS model runs. Mostly dry weather holds across NE and EC Brazil for at least the next 10 days while consistent rains continue to fall across Parana and S Mato Grosso do Sul where low lying flooding is now occurring. The GFS midday model has been the wettest for days on end, and our trust in its solution is less than the overnight run. However, the rain should not be dismissed, they must be confirmed in the overnight runs. No extreme heat will be lasting with 90′s expected across Argentina through Monday, before a cold front pulls northward. Pay close attention to coming forecasts to best determine confidence in additional rain in the 7-12 day Argentine forecast.
  • As previously suggested there needs to be a period of technical healing following the recent sharp 3-day break. A back-and-forth process is required with support noted $13.50 basis Marchs soybeans, $ 3.20 March corn and $6.50 March Chicago wheat. However, the weekly FAS export sales report should be supportive on Friday. We sees no statistical evidence of demand rationing or a top in US corn or soybeans.

20 January 2021

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  • Today marks something of an change in the world order as President Biden is sworn in as 46th President of the USA. Politics and people are deeply divided and we can only hope that the last four years turbulence and division becomes history. Notably, the Trump years end with a break in tradition as presidential tradition is broken and the departing President declined to usher in the incoming President. Coming weeks and months will be interesting to say the least.
  • HEADLINES: Chicago recoups overnight losses on end user pricing and firming non US grain prices; China crush margins improve.
  • Chicago futures are mixed to lower at midday with the markets trying to recover from their 3-day correction. Speculative excesses have been curtailed as March corn fell below $5.20 and March soybeans reached near $13.50 as short-term momentum funds sold out a portion of their long holdings. There has also been rumours that Chinese traders piled into too much length following the USDA January crop report (evening spike high) and most of that length has been sold. March corn filled an open chart gap left from the USDA January crop report at $5.17. Soybeans and wheat charts held no such gaps.
  • Following a nearly $3.00 rally in soybeans and $1.00 rally in corn, Chicago needed a correction to ease technical overbought conditions. The revival of the world economic outlook due to vaccinations, Brazilian soybean yields and renewed Chinese import demand look to spur the next rally leg.
  • March corn/soybean futures are gaining on back months in renewed bull spreading. US, Russian and S American farmers have shut down cash sales on the break and the market will soon have to bid up to secure a new supply. Research looks for a slightly lower to mixed close, doubtful that bullish trends have ended.
  • Chicago brokers estimate that managed money has sold 13,100 contracts of soybeans, 18,400 contracts of corn and 6,100 contracts of wheat. In the soy products, funds have sold 7,100 contracts of soymeal while buying 4,400 contracts of soyoil.
  • FAS/USDA did not announce any new US daily grain or oilseed sales. However, we hear that China has shown strong interest for US corn off the PNW for April-June and for US Gulf soybeans for February. We hear that 2-3 cargoes of US soybeans have been sold with most cash traders reluctant on corn tonnages. Some speculate that China could step up their purchases with President Biden taking office to get off to the right foot with the new administration.
  • Brazilian sources indicate that there are 4.5 million mt of ships waiting to load soybeans at their ports. This total is growing daily as ships get in line for new crop Brazilian soybeans. Yet, Brazilian commercials report that few new crop soybeans will be loaded until the last half of February. We estimate that January Brazilian soybean loadings will be below 500,000 mt with February loadings being no larger than 2.5-3.0 million mt based on the delayed maturation of the Northern Brazilian crop. When Brazilian soybeans start to load in size, there could be more than 8.5 million mt of vessels waiting at port.
  • Chinese spot crush margins are calculated at their best levels since August at more than 400 Yuan/mt. The margins have jumped on the Chicago soybean price fall. We expect rising import margins to boost Chinese  soybean import buying.
  • Chinese cases of Covid are sharply rising and China is expected to roll out a strong vaccination policy/quarantine to limit its spread. Chicago nor world financial markets are paying much attention to China’s Covid infection rate at this time.
  • The midday GFS weather forecast is consistent with the overnight forecast. Limited rainfall occurs across Argentina over the next 5 days before showers return to Santa Fe and Corrientes on Tuesday. The southern half of Argentina and a broad area of N and EC Brazil will stay dry for the next 10 days. It is N Brazil where the dryness is having an adverse impact on yield. High temperatures will reach the 90′s to lower 100′s for both S Argentina and Northern Brazil.
  • Improved Chinese crush margins combined with Brazilian harvest delays will underpin Chicago soy prices. And Mato Grosso soy yield reports along with ongoing and proposed truckers strikes in Argentina/Brazil will keep bullish soy trends intact. And Russia is still deciding on robust export restrictions while China seeks additional US corn for spring/summer. Corrective lows were scored overnight and end users should be looking at taking advantage and taking/extending forward coverage.

19 January 2021

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  • HEADLINES: Chicago weaker in correction with key chart support near; domestic soyoil end users add forward coverage.
  • Chicago futures are weaker at midday with US wheat futures giving back early gains as the Russian Prime Minister has not yet signed the new €50 euro duty proposal from the Economy Minister. The debate has left Black Sea Russian wheat exporters guessing as to what the Government is considering. Sources report that the Russian Government could be contemplating an even more restrictive export policy that includes the €50/mt tax along with a quota on the exact amount of wheat tonnes to be exported. So far, the Russian export tax just raises world wheat prices, but has yet to push the Russian farmer into new sales or cause a slowdown in Russian grain exports.
  • Corn and soybean futures are enduring a corrective break with the weekend rains helping to stabilise Argentine crops. However, there is an expectation is that world vegoil prices have had a large enough of a correction to engender a fresh round of forward coverage by end users. The world vegoil outlook stays bullish with stocks/supply shortages developing. Soyoil futures has been able to shake off early losses on the expectation that the world most plentiful vegoil, palmoil, is close to a seasonal bottom. SE Asian palmoil production stays seasonally constrained into May when yields start to increase
  • Chicago brokers estimate that managed money has sold 10,500 contracts of soybeans and 12,600 contracts of corn along with 4,300 contracts of soymeal and 3,100 contracts of soyoil. Funds have been net buyers of 2,100 contracts of wheat. The funds were more aggressive early buyers of wheat, with midday sales pushing prices back near unchanged.
  • The USDA/FAS announced that the US sold 132,000 mt of 2021/22 soybeans to China, along with 128,000 mt of 2020/21 US corn to Japan and 100,000 mt to Israel. China continues to ask for US offers on US corn from May into July.
  • Weekly export inspections for the week ending January 14 were; 34.5 million bu of corn, 75.6 million bu of soybeans, and 18.9 million bu of wheat. Last week’s US soybean export estimate was revised upwards by 2.5 million bu to 67.9 million. This was one of the smallest weekly revisions since early September.
  • For their respective crop years to date, the US has exported 572 million bu of wheat (down 15 million or 2.5%), 680.1 million bu of corn (up 306.8 million or 82%), and 1,578 million bu of soybeans (up 690 million or 78%). It is remarkable that the US will have exported more soybeans through January than the entirety of last year. China continues to quickly export its soybean purchase commitments from the US
  • The Algerian wheat tender will be interesting, and is widely expected to be filled by EU wheat. The EU cannot keep selling/exporting wheat to North African nations without causing an acute feedgrain shortage by late February/ March.
  • The midday GFS weather forecast is consistent with the overnight forecast. Limited rainfall occurs across Argentina over the next 5-6 days before showers return to Santa Fe and Corrientes on Monday. The southern half of the Argentine crop areas will stay dry for the next 10 days. High temperatures will reach the 90′s to lower 100′s late this week.
  • Northern Brazilian rainfall totals will be just 50-70% of normal with acute drying noted over NE Brazilian crop areas. The need for rain will build across Minas Geri as and Sao Paulo if they hold in an arid weather trend into late January. High temperatures are forecast to range from the mid 80′s to the mid 90′s.
  • A correction was needed following the USDA January Report which caused futures to become technically overbought. We doubt that March corn will be able to fall too far below $5.20 or March soybeans too far below $13.85 before a trading low is established. KC March wheat has support below $6.35 awaiting the final Russian decision on export taxes. Research stays bullish as there is no statistical evidence of demand rationing or a slowing of Chinese demand. As they say; “Bull markets always let you in.”