Morning Commentary 1/26/2021

Friday's CBT Break Fuels New Import Demand from China; S Brazilian Flooding Risk Increasing; Rationing Rally Ahead

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

6:30 AM CBOT Prices: Mar soybeans are up 13.00 cents to $13.5675, Mar corn is up 7.00 cents at $5.1875 while Mar Chi wheat is down 1.00 cent at $6.475.

AgResource AM CBOT Comment & Analysis: Good Morning! The CBOT is mixed this morning with corn/soybeans – higher while wheat futures hold at slightly lower levels. The volume of trade stays active with more than 39,000 contracts of March corn and more than 27,000 contracts of March soybean changing hands.

Monday’s CBOT open interest data showed corn up 5,783 contracts, soybeans down 3,553 contracts while wheat gained 2,482 contracts. Soyoil open interest surged 6,088 contracts on Monday’s rally.

Ukraine said that it would limit its 2020/21 corn exports to 24.0 MMTs, down from 29.0 MMTs last year, but right at the WASDE forecast of January. The move means that the Ukraine Gov’t will not allow the world market to draw down its corn stocks beyond 1.50 MMTs, a move that could rally their domestic prices even higher.

The Russian Gov’t approved and signed the long-discussed March 1st €50/MT export tax on wheat, along with €10/MT tax on barley and a €25/MT tax on corn exports through June. Deputy Economy Minister IIyichyov stated that the Russian Gov’t will continue to monitor domestic prices and adjust accordingly.

The Russian Gov’t is trying to come up with a proposal for a flexible tax on new crop wheat and grain that would prod Russian farmers to part with stored supplies. Russian farmers are unwavering in that they need to see new crop yield prospects before parting with old crop stores. Russian wheat fob offers  are difficult to find beyond the start of the taxes on Feb 15th and March 1st. The tax will push world wheat importers to the EU, and then North America.

World financial markets are mixed as new virus variants and fresh hurdles to the Biden Covid Stimulus package suggest that a Congressional deal will not be reached before mid-March. The US dollar declined on the news while the spot WTI crude oil edged above $53.00. US stock indexes are perched a record highs awaiting additional reports on this quarterly corporate earnings.

In world ag markets, Paris March wheat futures are up €.50 at €227/MT while March Malaysian palmoil futures rallied 28 ringgits to close at 3,424 RM/MT following gains in canola, sun and soyoil. China’s May Dalian corn futures lost 4.00 cents to $10.94/Bu while May Dalian meal rose $.20/MT to $532/MT.

South American weather is about the “haves and the have nots”. Exceptionally wet weather is forecast for Parana, Santa Caterina, and RGDS in S Brazil with 10 day rain exceeding 6.00”. This will spread crop fungal diseases and delay the needed soybean harvest and flow of beans to the corridor. Below normal rain drops across EC and Northern Brazil into Feb 10th which trims yield.

China is booking new cargoes of US corn/soybeans which will tighten already tight stocks. China was expected to load out 5 MMTs of Brazilian soybeans in February – now they may only get 2 MMTs. The new Chinese demand for US soybeans should push CBOT values to new contract highs on demand rationing.  Chinese interest for US corn is also being rumored.

South American Weather Pattern DiscussionThe primary weather models are in good agreement which raises our confidence in the 10-day forecast.

A below normal rainfall pattern will persist across Northern and East Central Brazil for another 2 weeks. This arid pattern has been in place here since late December with soil moisture levels in decline. And much above normal rain will fall across Parana/RGDS and Santa Caterina. The regular heavy rainfall is causing fungal crop diseases according to producers. The risk of flooding is rising with each wet day. 10 Day rainfall totals look to exceed 6.00”.

Argentina will see near to above normal rainfall over the northern half of the country with a drier trend across the south. It’s the southern half of Argentina where a drying trend looks to cause the biggest concern for dryness and heat.

The 10-day rain forecast map is from the GFS model. Unusual dryness will stretch across most of EC Brazil and extend west into Mato Grosso and Goias. Excessive rain will occur across Southern Brazil and E Paraguay.  The South American weather pattern is far from normal. The excessive wet weather from Parana to RGDS must stop or there will be a real risk to crop quality and new crop availability.

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