3/1/21

Morning Commentary 3/1/21

Dry Argy Weather Forecast Spurs Early Week Rally; Massive KC March Wheat Deliveries of 1,200 Contracts by ADM; Brazil Ships Out 2.5 MMTs of Soybeans

6:30 AM CBOT Prices: May soybeans are up 13.00 cents at $14.1725, May corn is up .50 cents at $5.48 while May Chi wheat is up 4.00 cents at $6.6425.

AgResource AM CBOT Comment & Analysis: Good Morning! CBOT futures are higher on Monday morning after starting the week sharply higher on concerning South American weather. Soybeans have led the early week charge on tightening world supplies. Brazil looks to have exported 2.5 MMTs of soybeans last week, so their export pace is quickening as their new harvest arrives at port.

Yet, ARC Research doubts that the CBOT markets are in a gap-and-go position as traders try to gauge the size of the Brazilian soybean crop (against Argentine losses) – against the potential slowing Chinese demand amid reports of a new scourge of African Swine Fever (ASF) that is impacting their hog herd. Following last week’s sharp late week fall in prices, fund managers are going to be more cautious about chasing a rally.

Friday’s CBOT interest totals fell 17,742 contracts in corn, 4,874 contracts in soybeans, and 4,646 contracts in wheat. Friday’s open interest decline indicates that the bulls were banking profits ahead of the weekend.

There were 1,200 contracts of KC March wheat put out by ADM over the weekend with the total delivery of KC wheat being 1,288 contracts. The stoppers were Wells Fargo at 810 contracts and JP Morgan at 400 contracts (Cargill?).  Also, there was 6 contracts of March meal and 121 contracts of March oats tendered. There were no deliveries of March corn, soybeans, soyoil or Chi wheat.

In non-US grain future’s trade, May Paris wheat futures is up €3.00/MT at €332.50 while Malaysian April palmoil futures fell 64 ringgits to 3,856 RM/MT. Dalian May corn fell 4 cents/Bu to $10.96/Bu while May soymeal fell $8/MT to $531.30/MT. May Dalian soybean futures rose to a historic high at 6,058 Yuan/MT or $25.55/Bu on tightening domestic soybean supplies.

The N and C Brazilian weather forecast calls for ongoing near to above normal rainfall with 10-day totals of 3.50-8.50” which will slow the soybean harvest and seeding of winter corn. The near to above normal rainfall trend continues into mid-March which is likely to curtail winter corn seeding as producers fret about the start of the dry season in early to mid-May.

The Argentine weather forecast is arid with any rain being limited for the next 10 days. An isolated T Storm complex did produce unexpected rainfall over SE Cordoba and W Buenos Aries overnight with totals up to 1.25”. The Argentine and far Southern Brazilian weather forecast calls for sunny/well below normal rain with high temperatures reaching into the upper 80’s to the mid 90’s. The heat & dryness has the potential to lower crop condition ratings on Thursday.

Brazil shipped out 2.5 MMTs of soybeans last week with February shipments likely to reach 4.5-5.0 MMTs. This was under early expectations of 7-7.5 MMTs, but the active export season has now started for Brazilian soybeans.

Fundamental crosscurrents impact CBOT price direction this week. In wheat, it is all about old crop Russian wheat exports under a €50/MT tax that starts today - will Russia export 35.5 or 39.5 MMTs? CBOT corn is about the shipping pace of US corn sales to China and the draw on cash supply while soybeans rise and fall based on the latest assessment of South American crop sizes. The result is acute market volatility heading into the March 9th WASDE report. The safest focus is to await sharp breaks in new crop corn/soybeans futures for purchases heading into a new US growing season.

South American Weather Pattern DiscussionThe primary weather models agree that above to much above normal rain will drop across N Brazil while Argentina and far Southern Brazil stay dry. Rising temperatures look to increase crop stress across Argentina over the next 10 days.  

The model forecasts are consistent in keeping 2 high pressure Ridge Centers – one across NE Brazil and another over SC Argentina. The Ridges keep a wet profile over N Brazil while producing an arid and increasingly warm temperature pattern for Argentina. Most days will feature Argentine high temps in the 90’s.   

The attached 10-day rainfall forecast from the GFS model. The forecast offers below to much below normal rainfall for Argentina/S Brazil with 10-day rainfall less than .75”. High temps will be in the 90’s – some days mid to upper 90’s which will accelerate soil moisture loss. The 11-15-day period offers moderate rain with totals in a range of .25-1.00”.

A near to above normal rainfall pattern holds across N Brazil which will slow the harvest and seeding of the winter corn crop. Rainfall totals are estimated in a range of 3.50-8.50” with some localized heavier amounts. The wet weather pattern lasts into mid-March- a worrisome change.

Threatening Heat Builds Across Argentina over the next 2 Weeks; High Temps Normally in the 90's.

Limited Rainfall for Argentina into mid March; Flash Drought Expands and Deepens:

Argentine Soil Moisture Draws Reach 1-2" over the next 10 days;

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