Farm Futures writers Jacqueline Holland and Ben Potter are on assignment at the Business Summit this week. Conner Bridgman, Ag Risk Management Advisor for Advance Trading, Inc., provides guest commentary below.
China rumored to be buying U.S. beans fueled rally. The market continues to digest the Russia-Ukraine tensions with Biden stating that Russia ‘will move in’ to Ukraine and that a ‘major incursion’ will warrant a strict and swift response.
Strong heat and limited rainfall affect southern Brazil, Paraguay, and far-northern Argentina over the next week as upper-level high pressure persists, followed by occasional t-storms within Jan. 27 - Feb. 3 after a cool front dislodges the high (marking a slightly faster end to heat). The setup causes energies to flow around the high and produce heavy rain in central and southern Argentina within the next three to seven days, followed by a drier but seasonable to slightly-cool-period for at least one week. Central and northern Brazil was very wet until recently and stays fairly dry through Tuesday, followed by a faster return of occasional t-storms next week.
Bean strength had little effect on corn as March Corn closed slightly down -0^2 and December Corn closed down -3^2.
The market continues to monitor Ukraine-Russia tensions. Ukraine currently holds around a 16% share of the global corn trade.
The weekly EIA Ethanol report showed 1.053 mbpd, up 47 week-to-week and 40 K more than the trade average. Inventories again surged, rising 681 K to 23.592, more than 400 K above the trade.
Could Brazil’s exportable corn surplus be dwindling? This week’s corn vessel line-up fell 31 to 51mbu but is still 21 million larger than in the year-ago period. South Africa’s agricultural regions have brought widespread flooding and raised fears of crop damage and planting delays for the key corn crop. Corn said to be 90% planted but in the Free State and North-West, the pace is 5-10 points behind normal. For what it’s worth, the USDA’s production estimate is 17.0, up 100 K from last year; exports are steady at 3.2 million.
March Soybeans broke through recent highs of 14.15 and closed up -33^2 at $14.24^4 on rumors of China looking to buy old crop beans as its Brazil crop concerns increase.
The USDA’s office in Brazil trimmed its estimate of the soybean crop by 3, down to 136 MMT which is 3 less than last week’s WASDE figure. Perhaps more significant, the attaché’s 88 MMT export estimate is 6 less than the WASDE total. Some analysts are of the opinion that additional reductions of AT LEAST 2.5 and 2.5 MMT are needed for the Argentine and Brazil crops, respectively.
Palm Oil prices also made new highs today on the Bursa Malaysia as top producer Indonesia concentrates on supplying the domestic market and a resumption of Chinese palm oil buying in an attempt to quell surging domestic vegetable oil prices.
While we’re seeing weather issues persist in the south, early soybean yields are generally good in the top producing state of Mato, Grosso, Brazil. Even with a slightly smaller Brazil soybean crop, total South American soybean exports during January-March this year could be 30-35% greater compared to a year ago. This would equate to 200 mbu more vs. 2021.
Technical selling pushed wheat slightly lower with march wheat closing down -7.
Tensions between Russia and Ukraine continue to test markets. Russia and Ukraine account for 29% of the world wheat exports. Commodity Weather Group is indicating that up to 20% of the U.S. winter wheat crop could be exposed to winterkill this week as a result of the recent cold snap and further net drying. Canada’s southwestern Prairies continue to miss badly needed precipitation and snow events as the drought conditions remain very serious from here southward into Montana along with the western-more regions of the Dakotas.
CBOT Prices as of 2:02 p.m. CST
Conner Bridgman is an Ag Risk Management Advisor for Advance Trading, Inc. The risk of trading futures and options can be substantial. All information, publications, and material used and distributed by Advance Trading Inc. shall be construed as a solicitation. ATI does not maintain an independent research department as defined in CFTC Regulation 1.71. Information obtained from third-party sources is believed to be reliable, but its accuracy is not guaranteed by Advance Trading Inc. Past performance is not necessarily indicative of future results.
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