CORN HIGHLIGHTS:

• Despite firmer trade in other grains, corn futures failed to find any footing on Tuesday. March corn closed 4 cents lower and posted a new contract low close at the end of the session.
• The strongest selling pressure was in the front month contract, March. Monday’s weak export inspections, and the possible increase in grain movement with warm weather across the Midwest, is likely putting pressure on the front end of the market.
• Argentina weather is a market driver in the near term. Crop growing regions in Argentina are experiencing above-normal temperatures, but weather models stay more friendly for key precipitation over the next couple weeks. The amounts and coverage will be closely monitored.
• Brazil’s 2^nd (safrinha) crop corn planting is off to a good start with the earlier soybean harvest. As of last Thursday, 27% of the expected corn area was planted, up from 11% the previous week. This represents the fastest pace for the second crop corn since 2013. The earlier planting window should help the corn crop target key weather windows throughout the growing season.
• The USDA will release the next WASDE report on Thursday, February 8. The focus of the market will be tied to any demand adjustments in the US corn balance sheet, but a key emphasis will be adjustments made to the Argentina and Brazil soybean and corn crops. Prices may stay choppy into that report.

SOYBEAN HIGHLIGHTS:

• Soybeans closed higher for the second consecutive day as futures traded within a range of 1180 and 1220. Yesterday’s export inspections report was encouraging to traders with a significant amount of soybeans heading to China.
• Soybean meal closed lower today and has been consolidating since the beginning of January after finding lows last week. Soybean oil closed higher today, but has been in an overall lower trend despite higher crude oil prices. Crush margins have improved recently incentivizing processors.
• This Thursday, the USDA will release its February WASDE report and US ending stocks for soybeans are estimated to rise slightly by 5 mb to 285 mb, while exports are expected to fall by 13 mb to 1,742. Argentina’s production is expected to increase slightly to 50.8 mb and Brazil is expected to fall to 153.7 mb. World ending stocks are expected to decline slightly.
• Total South American production is expected to be larger than last year, and the ongoing harvest and prospect of large supplies has weighed on prices. Argentinian weather has been dry, but is expected to turn around this week, while Brazil has been receiving scattered showers throughout the country.

WHEAT HIGHLIGHTS:

• Wheat finished mostly higher in all three futures classes. Bull spreading was a noted feature of both Chicago and KC contracts, in which the front months traded higher compared to the deferred. This may indicate that funds are covering some of their short position before the USDA report on Thursday.
• Any significant rally in wheat is likely to be limited by the uptrend in the US Dollar Index, as well as lower EU and Russian prices. According to IKAR, Russian wheat FOB values are now said to be as low as $228 per mt. This is $7 per mt lower than last week’s high and is reportedly a result of higher production estimates. Additionally, with tensions increasing in the Black Sea and Middle East, freight costs may continue to be affected.
• Texas reported their winter wheat crop ratings yesterday, and the good to excellent category increased by 4% to 46%. There was also a 2% increase in the fair category, and poor to very poor declined by 6% to 20%. This is indicative of the rains in the southern Plains easing drought conditions. By area planted, Texas is the second largest winter wheat producer in the US.
• Wheat in Brazil has taken a backseat to the corn and soybean crops that producers are currently focused on. However, according to Secex (Brazil’s foreign trade secretariat), exports are still progressing well, with Brazil having shipped about 812,000 mt of wheat through the fourth week in January. For reference, January shipments last year were roughly 561,000 mt.

DAIRY HIGHLIGHTS:

• No dairy content today

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Author

John Heinberg