Morning Commentary 2/4/21

Corn Scores New High Ahead of USDA Weekly Sales Report; Palmoil Futures Recover on Falling Stocks; Russian Grain Tax Permanent?

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

6:30 AM CBOT Prices: Mar soybeans are up 1.00 cent to $13.7225, Mar corn is up 5.00 cents at $5.57 while March Chi wheat is down 1.00 cent at $6.4725.

AgResource AM CBOT Comment & Analysis: Good Morning! CBOT corn futures have scored new contract highs overnight with March rising to $5.58 on the expectation of record large US weekly corn sales. Soybeans and wheat have traded both sides of unchanged in diminished volume. The USDA February Crop Report and likely falls in US 2020/21 US corn and soybean end stocks loom large for the marketplace next Tuesday. US corn and soybean exports are underestimated based on the existing record large sales pace.

Wednesday’s CBOT open interest totals showed that funds and commercials used the 2-day break to secure new purchases. Corn open interest jumped 16,473 contracts, soybeans 1,280 contracts and wheat 2,805 contracts.

US and world traders are renewing their reinflation bets as there is clear signals that the US and world economy is starting a recovery as the vaccination pace quickens. US equity prices are firmer and resting just below record highs while crude oil rallies on promises from OPEC that they are clearing excessive supplies accumulated from the pandemic. Crude reached over $56/barrel for the 1st time in over a year. And the Biden Administration appears to be hell bent on passing a $1.9 Trillion aid package as a backstop.

The UN’s key food inflation index has been rising for 8 months, scored a new 6.5 year high in January. The rise has the attention of politicians, but as they focus their fight on the pandemic, the result is greater demand for a shrinking pool of foodstuffs. ARC expects the UN’s index to gain into mid 2021

Russian President Putin claimed that global food inflation is worsening with his economic minister announced plans for a permanent formula on grain export taxes that would start on April 1st (instead of June 1st). The formula will be calculated from the new Moscow Futures Exchange. Additional details are awaited but the news is that the formula tax would be ongoing and continue in force for potentially multiple crop years. ARC Research sees the news as being adverse to the Russian farmer, but helpful to EU/other Black Sea exporters.

South American weather offers a lasting period of dry weather for Argentina with above normal rainfall causing new harvest delays across N Brazil. Near to above normal N Brazilian rains start Friday and continues into mid-February. The lasting dry weather trend for Argentina is worrisome and must be closely monitored with soil moisture levels already low. Some early harvest data is being collected by our sister firm– AgResource Brazil –which shows Mato Grosso soybean yields being some 5-15% below last year – a concerning early trend.

In other world ag markets, Paris Mar wheat futures is up €1.00 at €225.75/MT while Mar Malaysian palmoil futures rose 91 ringgits to 3,317 RM/MT on the prospect of lower January palmoil end stocks. China’s May Dalian corn futures rose $.065/Bu to $10.845/Bu while May Dalian meal gained $9.60/MT $532.15/MT. Most see recent China hog disease stories might be a plant to drop soy prices.

ARC stays bullish with Brazilian soy yield trends to be monitored closely. Any fall in the crop could ignite the next rally CBOT soybean rally phase. Corn is already scoring new highs with wheat forming a seasonal low.

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

 Additional rain fell across far Northern Argentina and the southern 1/3 of Brazil (.25-1.25”) overnight. And the rains worked into Parana with totals of .1-.7”. Parana will have a chance of another 48 hours of clouds/rain before a drying trend develops. Weeks of cloudiness and excessive rain has damaged crops.

The forecast offers above normal rainfall for N and C Brazil while a rain free forecast is offered for Argentina and Southern Brazil. The wet weather for N Brazil is unwanted as farmers were hoping for crop dry down to start the harvest. It is becoming too late for rain to provide any yield benefit for N Brazil as soybeans close to full maturity with an active harvest to start after February 21st.

A new and lasting period of dry weather is offered for Argentina with warming temperatures in the 10-15 day period. Sunny and mild temperatures are forecast for the next 14 days which will produce sharp falls in soil moisture levels.

 The attached 10-day rainfall forecast map is from the GFS model. The 11-15 day timeframe maintains wet weather across N Brazil and the dryness for Argentina.

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