Morning Commentary 2/3/21

Palmoil Futures Tank & Soyoil/Soybeans Follow; Thursday's FAS Report to Show Record Large US Corn Sales; Argy Weather Too Dry!

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

6:30 AM CBOT Prices: Mar soybeans are down 6.00 cents to $13.4875, Mar corn is down 4.75 cents at $5.3825 while March Chi wheat is down 8.50 cents at $6.3625

AgResource AM CBOT Comment & Analysis: Good Morning! Sharply lower palmoil futures pressed CBOT values overnight with soybeans/soyoil in its bearish tug. Neither soybeans, corn nor wheat has been able to engender any upside momentum amid long liquidation and bearish chart formations.

March soybeans are back testing $12.40, March corn $5.35 and March Chi wheat $6.30 technical support. It is important that the aforementioned support holds - and for CBOT markets to launch a rally today into Thursday’s FAS/USDA weekly export sales report and then next Tuesday’s USDA February Crop Report. Last week’s massive Chinese corn purchase of 6 MMTs (240 Mil Bu) looms large for Thursday’s USDA weekly sales and next Tuesday’s USDA report.

AgResource has been forecasting that a trading low form either late Tuesday or early today to launch a bounce into the USDA February crop report.

What has been lacking for the bulls following the January USDA crop report is confirmation of supply loss for either Brazilian or Argentine crops. Although far from perfect weather, private analysts have either held or raised their Brazilian and Argentine crop estimates which has acted to cap CBOT rallies. And Russia showed that it will remain an exporter in Wednesday’s GASC tender.

A new CBOT rally phase will unfold if there are any weather issues for Argentine or Brazilian corn/soy crops in the next 4-6 weeks. ARC’s sister firm - AgResource Brazil - maintains a Brazilian soy crop estimate of 128 MMTs which is 5 MMTs below WASDE. And equally import is the potential development of a new spate of dry weather across Argentina which could knife soil moisture totals into late February. It is the loss of 5-7 MMTs of South American soy or 4-6 MMTs or corn that would shift CBOT futures into the next bullish phase.

South American weather forecasts offer 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 continue into mid-February. The lasting dry weather trend for Argentina is worrisome and must be closely monitored with soil moisture levels already depleted. ARC sees South American weather forecasts as supportive to CBOT valuations.

In world ag markets, Paris March wheat futures are down €3.00 at €223/MT while March Malaysian palmoil futures fell 165 ringgits to 3,226 RM/MT. China’s May Dalian corn futures fell $.01/Bu to $10.78/Bu while May Dalian meal lost $9.60/MT $522.55/MT. There was a newswire report that China’s hog farmers are not only fighting ASF, but also PED which is raising piglet prices

Egypt’s GASC is tendering for vegoils while any break in CBOT corn will bring back new world demand for US corn. An Argentine trucker’s strike is dramatically slowing grain deliveries to ports - a growing concern.

Volatile choppiness has prevailed since the Jan USDA Crop Report. The USDA Feb Crop Report should be bullish on lower US end stocks. Yet, adverse South American weather is needed to for new CBOT highs. Monitor Argentine weather as the forecast offers 2 weeks of dry weather with heat returning in the 11-15 day period.

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

Additional rainfall fell across far Northern Argentina and the southern 1/3 of Brazil (.25-1.25”) overnight. Rainfall totals ranged from .2-1.00”.

The forecast models forecast a late week pattern shift which produces a lasting dry weather pattern across Argentina and S Brazil while a near to above normal rain falls across N and C Brazil. The wetter weather is unwanted across N Brazil as farmers were hoping for crop dry down to start the harvest. It is becoming too late for rain to provide much yield benefit for Northern Brazil as soybeans fully mature with active harvest to start after February 21st.

ARC’s new overriding 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, but sharp soil moisture declines must be watched.

The attached 10-day rainfall forecast map is from the GFS model. Note the limited rain forecast for the entirety of Argentina and Paraguay into mid-February. The 11-15 day period maintains the arid weather trend into the February 20th.

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