Morning Commentary 2/2/21

GASC To Secure French Wheat - Russian Wheat Offered ; Argentine Drying Trend Indicated Due to La Nina; USDA February Report 1 Week Away

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

6:30 AM CBOT Prices: Mar soybeans are down 8.00 cents to $13.5725, Mar corn is down 3.25 cents at $5.46 while March Chi wheat is unchanged at $6.51.

AgResource AM CBOT Comment & Analysis: Good Morning! It has been a mixed overnight of trade. CBOT futures are unable to break and are unable to rally.  Overnight trade volume is in decline due to the considerable choppiness.

CBOT markets are caught ahead of the Chinese Lunar New Year with the bears trying to push soybeans/soymeal lower ahead of the Brazilian harvest. Soybeans have been unable to trend since the USDA January Crop Report on the 12th. Corn has been the recent bullish stalwart on 6-8 MMTs of Chinese buying.

 Yet, the likely bullish USDA February crop report is just one week away and massive and 1 week record large corn export sales will be confirmed in Thursday’s FAS weekly report. And Midwest cash basis levels for both soybeans and corn are rising on tightening supplies. The downside potential across the CBOT is limited on the lack of demand rationing and the reality that importing Brazilian soybeans or corn is far away from economically working.

 Preliminary CBOT open interest data showed a gain of 244 contracts in soybeans with losses of 969 contracts of corn, and 964 contracts of wheat.

Global financial markets are steady to firm on a renewed hope for stimulus, a quickening vaccination pace and reduced retail trade (Reddit) influences.  Silver prices & the GameStop Stock have both fallen precipitously overnight.  For now, the herd buying of heavily shorted stocks has subsided.

The reflation (risk on) trade stays in vogue on historically low US interest rates and the prospect that America (and a host of nations) can enjoy some form of normally as a greater share of the population is Covid vaccinated.

Egypt’s GASC is seeking world wheat for the last half of March with French wheat being the cheapest offer at $293.75/MT. However, Romanian and two offers of Russian wheat offer below $300/MT. There were a larger than expected 7 offers of Russian wheat to GASC which included the €50/MT tax. 5 Russian offers of Russian fob wheat ranged from $302-309/MTs.

In world ag markets, Paris March wheat futures are up €.75 at €224.25/MT while March Malaysian palmoil futures fell 99 ringgits on the increase of Indian import duties to pay for domestic ag infrastructure. China’s May Dalian corn futures rose $.04/Bu to $10.88/Bu while May Dalian meal lost $4.35/MT $532.15/MT. China’s cash corn market is staying well supported.

South American weather forecasts offer a lasting period of dry weather for Argentina with new rainfall causing increasing soybean quality issues for Parana and Southern Brazilian soybeans. Near to above normal rains return for N Brazil on Friday and continue into mid-February.  The lasting dry weather trend for Argentina is worrisome and must be closely monitored. The world cannot afford the loss of any S Brazilian or Argentine crop production.

Chinese demand for US corn, DDGs and ethanol is ongoing which is tightening domestic supplies and firming cash bids. ARC doubts that a CBOT decline can more than a few days. The CBOT is a bull market that is catching its breath! A trading low should be scored early this week with a rally into the weekend based on massive US corn sales on Thursday followed by short covering into the weekend ( dry Argentine weather forecast) and next week's Tuesday USDA February report.

South American Weather Pattern DiscussionThe primary weather models agree which raises our confidence in the 10-day forecast.  Additional rainfall fell across the southern 1/3 of Brazil (.25-1.25”) overnight while most of Northern Brazil held in a drier profile with just a few widely scattered showers (.1-1.00”). Argentina was completely dry.

The forecast models agree that on Friday/Saturday a pattern shift develops that produces a lasting dry weather pattern across Argentina while a near to above normal rainfall pattern evolves across much of Brazil. The wetter weather is unwanted across Brazil as farmers were hoping for crop dry down to start the harvest. Soy crops in Parana/Santa Caterina and RGDS have been fighting daily rain for nearly 5 weeks while it is becoming too late for rain to provide much yield benefit for Northern Brazil as soybeans mature.

ARC’s new concern is a new lasting period of dry weather for Argentina with warming temperatures in the 10-15 day period. Sunny and mild temperatures are forecast for the next 8-9 days.

The attached 10-day rainfall forecast map is from the GFS model. Note the limited rain forecast for the entirety of Argentina into mid-February.

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