1/15/21

Morning Commentary 1/15/2021

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Russia Places $50 Euro Duty on Wheat From Mar 1-June 30th - A Defacto Export Ban; NOPA Crush at 11 AM CT

AgResource Farm Marketing Advice for Friday: 1/ No new advice.                                                   

6:30 AM CBOT Prices: March soybeans are down 7.50 cents to $14.23, March corn is down 0.50 of a cent at $5.3375 & March Chi wheat is up 15 cents at $6.85.

AgResource AM CBOT Comment & Analysis: Good Morning! The CBOT has traded mixed overnight with wheat sharply higher as the world’s largest exporter - Russia - placed restrictive export duties on its trade.

The volume of overnight CBOT trade remains active with over 40,000 contracts of March corn, more than 27,000 contracts of March soybeans, and 22,000 contract of March Chi wheat changing hands. CBOT soybean traders await the release of NOPA member soybean crush data for December at 11 AM CT.

Thursday’s CBOT open interest rose 8,300 contracts in corn, 11,112 contracts in soybeans and 7,155 contracts in wheat. The CBOT will not forge a short-term high until CBOT open interest declines for a couple of consecutive days.

Russia announced that it will place a €50/MT ($1.65/Bu) duty on its wheat exports beginning March 1st that will continue into June 30th. Russia will still go ahead with its prior plan to place a €25/MT duty ($.825/Bu) starting February 15th. Russia will also place a duty of €25 on corn and €10/MT on barley starting March 15th to preserve domestic stocks to ease prices. The aggressive €50/MT wheat duty is a defacto Russian wheat export ban starting March 1st and other primary exporters including the US will fill world demand.

The concern for world wheat importers is that that Argentina has committed its wheat crop already (Brazil to secure US HRW wheat), while Australia has limited export slots open for export through April, and the EU lacks the wheat supply (exceptionally short on feedgrain), and the Ukraine is virtually sold out of last year’s harvest. After February 15th, world wheat demand will be focused on North America – the US and Canada. The loss of Russia trade will further rally world wheat price levels such that US wheat becomes competitive.

NOPA will release its December member soybean crush rate today which is forecast by ARC Research at 184-186 Mil Bu – a record for December and potentially for all months. The prior all month record was set in October at 185.2 Mil Bu in October 2020. Amid massive crush rate, NOPA member soyoil stocks are expected to rise to 1,730 Mil pounds. This compares to 1,757 Mil pounds at the end of December 2019. The report will be released at 11 AM CT and will further confirm the record usage of US soybeans that must be slowed.

China’s Dalian corn and soymeal futures finished the week at record levels. Dalian May corn closed at $11.20/Bu, up 2 cents on the day while May Dalian soymeal finished steady at $577/MT. This was the best weekly close for China corn, soymeal and soybeans on record.

Malaysian palmoil fell to another day of sharp losses on disappointing Jan 1-15 export data. March Malaysian palmoil futures closed at 3,423 ringgits/MT, down 104. The correction in Malaysian palm was the largest in 10 weeks.

 Paris March wheat is up €5/MT at €234.50, the best price since 2013. The next upside price target rests the 2012 highs at €280/MT.

There is no evidence of demand rationing in corn or soybeans with prices needing to shock end users to slow their consumption.  Yet, demand rationing is a process that will take time. Today wheat will be the bull leader with traders debating if Chicago wheat futures can reach $7.50-8.00 for a seasonal high?

South American Weather Pattern DiscussionA cold front pulled through Argentina overnight which through midnight, had not produced meaningful rain. However, the system became active across C and N Argentina after 3 AM. Rainfall has yet to be reported, but based on satellite images, totals are estimated in a range of .25-1.00” and locally heavier. The system is rapidly pushing north and will re-intensify again this afternoon across N Argentina and S Brazil.

Northern and Central Brazilian rains were widely scattered with totals of .1-2.00”. The best rain fell across Minas Gerais and Bahia with totals of .5-1.50”

The 10-day rain forecast map is from the GFS model (EU model similar). Heavy rains of 5-8.00” will bedevil Parana and portions of Mato Grosso do Sul on the weekend and next week. Such rain will produce localized flooding. The remainder of Northern Brazil will have daily shower chances on solid coverage.

S Brazilian and Argentine soil moisture will continue to decline into the end of January amid a developing 7-9 day arid weather pattern with rising temperatures. Below normal rainfall is forecast for Argentina with high temps reaching into the 90s/lower 100s mid late next week. Key will be if rains return in late January.

Near to Above Normal Rainfall for N and C Brazil Next 10 Days; Dryness S Brazil and Argentina: 

10 Day Rainfall Anomalies Offers the Return of 7-9 Days of Argentine Dryness: 

Heat to Build Across Argentina Following 5 Days of 70's and 80's: 

AgResource Daily Cattle Analysis: Cattle futures closed mixed on Thursday and a steady outlook is offered for early trade at the end of the week. February cattle leaked lower on Thursday, while April found support against the 100-day moving average. At the same time, deferred cattle contracts again pressed to new contract highs on rising feed costs.

However, gains in late 2021 and early 2022 cattle prices were not enough to offset higher feed costs, and feeder cattle closed lower. The nearby feeder/fat spread has trended lower from the start of the year and has held below average. The spread is slightly better than a year ago in the nearby position, but forward spreads are well under average amid strength in the corn market.

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