** Sharply lower energy prices and a continued decline in world freight rates initially pressured CBOT futures amid a concern of weakening world economic landscape. However, news that China was back securing US cash soybeans at the Gulf/PNW rallied the CBOT at mid-morning. Wheat/corn followed to the upside.
It should not be a surprise that China is back booking US cash soybeans with ARC hearing that China has purchased another 2-2.5 MMTs for June-September. This should be close to completing their Thursday promised purchase of 5 MMTs.
The shipping period is later than Friday’s with the sales slated for the June-September time frame. And the sale is being split between the Gulf and PNW with the September purchases coming off the PNW. The Chinese cash demand is rallying CBOT and offering support to basis.
The grains are following the rally in the complex awaiting fresh export demand. Short covering heading into Friday’s USDA report is expected.
** CBOT brokers estimate that funds have bought; 3,200 contracts of soybeans, 1,200 contracts of corn while being flat in wheat. In soy products, funds have bought 2,000 contracts of soymeal and 2,700 contracts of soyoil.
** US weekly export inspections for the week ending January 31st were; 35.5 Mil Bu of corn, 35.8 Mil Bu of soybeans, and 16.2 Mil Bu of wheat. US corn and wheat exports were a tad disappointing. For their respective crop years to date, the US has shipped out 884 Mil Bu of corn (up 298 Mil Bu or 51%), 788 Mil Bu of soybeans (down 487 Mil Bu or 38%), and 545 Mil Bu of wheat (down 67 Mil Bu or 11%). The US soybean export pace is well below the WASDE forecast.
** Brazil has harvested 19% of its soy crop with variable yields amid the reduction of rain during December/January. This compares to 6% last year. Winter corn seeding has reached 35% and the area planted to corn is expected to expand via the earlier seeding date.
** USDA reported that 612,000 MTs of soybeans were sold to China during the current crop year. This sale reflects the cash buying that occurred on Friday.
** EU wheat exports of 9.4 MMT is down 27% vs last year’s 12.8 MMTs as exports continue to badly lag USDA’s forecast. The current pace of EU wheat exports argues for an annual total of 17.25 MMTs vs the WASDE forecast of 22.0 MMTs. With world wheat trade steady with the WASDE December forecast of 176 MMTs, the EU wheat export losses will have to be pushed to other destinations.
** Midday GFS South American Weather Discussion: The midday GFS is a tad drier with diminished rain chances across the southern 1/3 of Brazil. Northern Brazil has better rain chances with 10-day totals of 3-7.00”. The new N Brazilian rain should help finish off the soy crop and aid winter corn seeding. A drier forecast is offered for Argentina which is initially helpful to crops. Any heat will be centered on Northern Brazil where high temps reach the mid to upper 90’s. No extreme Argentine heat is foreseen, and the crop prospects here are vastly improved from last year’s dire drought. Confidence on a 55 MMTs plus Argentine soy crop is increasing.
** AgResource Market Analysis: China has secured some 2-2.50 MMTs of US soybeans (this AM) which should take their total purchases since Friday near 5 MMTs. US soybean export inspections are abysmal and WASDE should cut the 18/19 US soy export estimate on Friday. Notice that March KC wheat is gaining on July as the spread narrows to 15.50 cents. US cash bids for HRW wheat are improving in the Plains. A close above $5.17 (100 day moving average) March KC is needed to confirm a new demand led bull market.