1/27/21

Morning Commentary 1/27/2021

Fresh Contract Highs in Soyoil as Palmoil Rallies Sharply; Corn Seeking New Highs on Revived Demand; S Brazil Wet

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

6:30 AM CBOT Prices: Mar soybeans are up 11.00 cents to $13.8125, Mar corn is up 4.50 cents at $5.3675 while Mar Chi wheat is up 4.00 cents at $6.695.

AgResource AM CBOT Comment & Analysis: Good Morning! CBOT futures are higher in a continuation of recent day trends with traders expecting that FAS could announce new old crop soybean business to China. And exceptionally wet weather for Parana/Southern Brazil is delaying crop maturity with Thursday’s US weekly export sales report to reflect additional large 2020/21 corn/soybean sales and a heightened need for demand rationing. The US soybean market is entering a new bullish phase as US exporters fight domestic crushers for leftover supply.

Tuesday’s CBOT open interest data showed corn gaining 12,953 contracts, soybeans 6,217 contracts and 6,659 contracts in wheat. End users and speculators are willing to add market length on strong daily rallies.

World Financial markets are mixed as they await US earnings reports and the conclusion of the US Federal Reserve Bank meeting early this afternoon. The reflation trade appeared to be on hold awaiting the Fed’s decision. The US dollar is slightly higher with crude oil up $.17 at $52.78/ barrel, while the DOW edged lower with losses of around 200 points. ARC Research expects the US Fed will stay fully supportive of language for an extended period of low US interest rates for months to come.

In world ag markets, Paris March wheat futures are up €.75 at €230.50/MT while March Malaysian palmoil futures rallied a sharp 128 ringgits to close at 3,552 RM/MT following sharp recent day gains in canola, sun and soyoil values. China’s May Dalian corn futures closed steady at $10.94/Bu while May Dalian meal rose $7.90/MT to $539.90/MT. Active cash soymeal trade was noted in domestic Chinese markets in the forward months of April and May.

A nationwide Brazilian trucker’s strike that starts on February 1st gathered steam overnight as Brazil’s National Confederation of Transportation and Logistic workers urged its 800,000 members to join the planned shut down of Brazilian truck transportation. Rising inflation and low trucking rates are at the center of the strike along with rising fuel prices. Brazilian ag exporters are closely following the strike and a potential logistical slowdown.

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 rainfall forecast at 5-9.00”. A trend of below normal rainfall persists across Mato Grosso, Goias, Minas Gerias and Sao Paulo where just 20-60% of normal rains will fall. Brazilian soy crop potential is in retreat with the bulk of the new crop harvest shifted backwards by 3-4 weeks.

The US Ag Attaché in China estimated that China would import 22 MMTs of corn compared to WASDE at 17.5 MMTs. ARC sees China taking 24-26 MMTs of world corn

It has taken just 3 days to rally the soybean market nearly $1.00/Bu and corn $.40 in a test of recent highs. Soyoil futures have scored new contract highs on rising world vegoil values. There is no evidence of much needed demand rationing with wet S Brazilian weather extremely worrisome for the harvest.  The US soybean and corn market has to slow demand through higher prices.  Delays in the Brazilian soy harvest could pile up export loadings during into March/April.

South American Weather Pattern DiscussionThe primary weather models are in general 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 in decline. And above normal rain will fall across Parana/RGDS and Santa Caterina into February 6th with the extended 11-15 day forecast holding onto that wet profile. The heavy rain is causing fungal crop diseases according to producers. The risk of flooding is rising with each wet day. 10-day rainfall totals will range from 4-9.00” across S Brazil.

Argentina will see near to above normal rainfall over the northern half of the country with a drier trend across the south. Below normal temperatures prevail.

The 10-day rainfall forecast map is from the EU model. ARC’s growing concern is the wet weather forecast for the Southern 1/3 of Brazil and how excessive soil moisture can impact soybean yields. A needed 10 day slot of dry weather is desperately needed. The 11-15 day forecast maintains the cool/wet trend across Parana, Santa Caterina and RGDS. Enduring mud could be a big problem in starting the Parana harvest.

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