Morning Commentary 2/9/21

Corn Sets Another Contract High at $5.7075 March; Traders Brace for Market Volatility Following USDA February Report; Argentine Weather Stays Arid

AgResource Farm Marketing Advice for Tuesday: 1/ Corn Producers: Accept profits on Short May $4.00 puts used as a hedge against short futures at .5 cents or better. Filled!

6:30 AM CBOT Prices: March soybeans are up 15.50 cents at $14.03, March corn is up 3.50 cents at $5.675 while March Chi wheat is down 2.50 cents at $6.53.

AgResource AM CBOT Comment & Analysis: Good Morning! CBOT corn pushed to another new contract high overnight ($5.7075) with March soybeans rising above $14.00 in preparation for what is expected to be a bullish USDA February Crop Report. The volume of overnight trade has been active with over 42,000 contracts of March corn and 22,000 contracts of March soybeans changing hands. The CBOT is set for another wild day as traders react to USDA monthly data.

 The trade expectation is for US 2020/21 corn end stocks to decline 180 Mil Bu to 1,372 Mil Bu while US soybean end stocks fall to 119 Mil Bu, down 21 Mil Bu. The range in corn end stocks is wide at 465 Mil Bu in a range of 1,050-1,515 Mil Bu. In soybeans, the range is 100 Mil Bu from 50-150 Mil Bu. ARC doubts that WASDE will cut its soybean end stocks much below 110-120 Mil Bu which is viewed as pipeline (the bare minimum stocks that must remain). The USDA will flash the need for demand rationing in its farmgate price forecast.

Following the USDA report, its South American weather/crop size that will determine CBOT next steps as China soybean/corn demand slows from the US.  The Brazilian soybean harvest is just starting, and their record crop will maintain that Brazil holds a price advantage in selling soybeans abroad thru July. The key question for the market is Argentine and S Brazilian crop sizes, and will the coming dry weather period have a sizeable negative yield impact?

The South American forecast offers a lasting period of dry weather for Argentina and S Brazil into Feb 25th. A few lite daily showers are possible on the weekend and next week, but rain totals will be less than .50” which will allow for a sizeable draw on soil moisture. However, there is no evidence of extreme heat with high temps ranging from the 70’s to the lower 90’s.

ARC’s concern for South American crops stays elevated with regular rains to drop across N Brazil that will slow the harvest while limited rain maintains parched soil moisture profiles across S Brazil and Argentina.

 In non-US ag markets, Paris March wheat futures is down €.25 at €226.25/MT while March Malaysian palmoil futures rose 130 ringgits to 3,818 RM/MT on tightening domestic supplies. China’s May Dalian corn futures fell $.09/Bu to $10.85/Bu while Dalian May soymeal futures rose $1.70/MT to $541.50/MT.

CBOT open interest totals for Monday have corn gaining 2,831 contracts, but soybeans falling 3,937 contracts with wheat off 6,902 contracts. It is a tad concerning that Monday’s rally was mostly short covering ahead of the report.

The Russian Gov’t has formally signed off a formula-based export duty to combat domestic inflation. The duty will start on June 2nd with a tax of 70% above a base export price of $200/MT for wheat.

Good Luck with the USDA report later this morning with traders wanting to fade the data. Its South American weather/crop size that’s key going forward - follow Brazilian soybean yield data and weather forecasts closely in the weeks ahead.

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

 It was dry overnight across Argentina and S Brazil with any rainfall limited to far Western Cordoba – east of the Andes Mountain chain. High temps ranged from the 70’s in Southern Argentina to the 90’s in Northern Brazil.

 The attached 10-day rainfall forecast from the GFS model (EU model similar)  which offers limited rains for Argentina and the southern ½ of Brazil over the next 10 days. A blocking high pressure Ridge in the W Pacific shunts weather systems either north or south of key Argentine and S Brazilian cropping areas.

The only good news is that this arid Argentine pattern does not feature any above normal temperatures. Highs will hold in the 70’s to lower 90’s across Argentina for the next 10 days. Soil moisture will be in fast retreat adding stress to developing corn and soybean crops. There are hints in the 11-15 day forecast of some rains for C Argentina, but our confidence this far out is low.

Near to above normal rain will drop across N Brazil which will slow the harvest. 10 day totals are estimated in a range of 3-7.00” with isolated heavier.

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