CBOT to Add Weather Premium for Deepening Argentine Drought

Feb 12, 7:18 am | Morning Commentary | Share this:

** 6:30 AM CST CBOT Prices: March soybeans are up 15.00 cents at $9.98, March corn is up 3.25 cents at $3.65, and March Chi wheat is up 7.25 cents at $4.5625.

 ** AgResource AM Grain & Oilseed Comment: Good Morning! CBOT grain and soy futures are higher overnight on the firming world equity markets and the  continued dry weather across Argentina. And heat will return later in the week across Argentina with highs in the 90’s to lower 100’s with the drought deepening. The market has been balancing the increase in potential Brazilian soy production against the loss in Argentina. But, now the loss in Argentina looks to expand and exceed a Brazilian soybean crop that many private forecasters peg at 113-114 MMTs. Such a crop would be up 1-3 MMTs from the current WASDE forecast. However, private crop watchers in Argentina now expect that their soy crop could decline to 45-46.5 MMTs as rain fails to materialize during the key reproductive cycle. Such an Argy crop estimate compares to the WASDE forecast of 54 MMTs. In fact, if the dryness persists into early March, the concern would be a Argy soy crop as small 40-42 MMTs!

  AgResource estimates the Argentine corn crop at 35.5-36.5 MMTs, which compares to the WASDE forecast of 39.0 MMTs of last week. Such a crop would reduce their 2018/19 corn export potential by 2-3 MMTs. The outlook for US corn exports is brightening.

  US export inspections for the week ending February 8th are estimated in a range of; 17-21 Mil Bu of wheat, 31-36 Mil Bu of corn, and 36-43 Mil Bu of soybeans. The Chinese continue to actively load out US soybeans.  

  The US dollar is steady/weak this AM with the Brazilian real priced at 3.28:1 and the Argentine peso at 19.98:1, and the Chinese yuan at 6.30:1.

  The US DOW is expected to be 225-275 points higher based on firming overseas equity markets and the expectation that President Trump will announce and infrastructure project this week that favors rural America. A budget is also expected which will again call for a cap on insurance subsidies to the largest US farmers. $20 Bil in new US infrastructure spending is to be announced.

  An arid forecast is offered for Argentina with limited rain chances over the next 2 weeks. Seasonal temps are offered early this week, but the heat returns by the weekend. A few lite showers are possible early next week, but otherwise any rains greater than .4” will be lacking. A high pressure Ridge returns during the last week of February, helping to fan additional heat/dryness.

  There is no indication of a needed precip for the Plains in the next 10 days. The forecast models offer some hope in early March, but our confidence such rain remains low. The Kansas wheat market will continue to add premium.

  Key will be if March soybeans can close above $10.04 and March corn above $3.66 resistance? Wheat is already in a bull trend and until needed moisture falls across the Plains, the next upside target rests at $4.85-5.00 March.