Monday, March 20, 2023
Closing Markets: Corn -1. Beans +9. Wheat -11.
Trade started out the week in the red as negative news from the outside markets continued to deter buying interest in commodities. We did see several of the banks that suffered the heaviest losses last week taken over by other firms but at sharply discounted values. Tightening global credit is also becoming a major concern, especially for a commodity importer. Managed money interest is now on the gold market where values have hit new highs. The Black Sea corridor has been extended but for how long remains a question. Russia is holding to 60 days while all other parties claim the extension was 120 days. Russia claim no formal disapproval to a 60-day extension was received so that is the new timeline. Interesting to note this will coincide with the next Turkey presidential election. China’s President Xi and Russian President Putin held talks today surrounding the war in Ukraine, but also expanding trade with Brazil. If these three entities enter into a trade agreement is will further reduce the US share of global trade. Not much has changed on the weather front in the US nor in South America. No daily sales were announced today indicating China’s shopping spree is over. Given the high uncertainty in the marketplace many traders are simply moving to the sidelines ahead of the month end reports from the USDA.
Corn futures struggled today as buying interest in the complex remains light. The current fund position in corn leaves plenty of room for buying, but we have yet to receive the catalyst to make this happen. Last week’s buying from China added 81 million bu (mbu) to yearly demand totals, but these are still short of USDA projections. The sales may prevent another reduction to yearly estimates in the next WASDE report, however. China’s February imports on corn totaled 5.33 million metric tons (mmt), a yearly increase of 60%. Of this total 2.35 mmt came from the US which was up 22% on the year. Last week’s cattle on feed report verified low livestock numbers and brings up more doubts over future feed grain demand. The extension to the Black Sea corridor will allow corn exports to continue out of Ukraine at a discount to the US. Even if the agreement ends in 60 days it will help bridge the gap for many buyers until the Safrinha crop is ready in Brazil. The firm Informa pegged US 2023/24 acres at 90.9 million today, up 400,000 from their previous estimate.
Soybean futures struggled early in today’s trade but managed to post a moderate recovery by mid-session. Soybeans posted a new low for the move early in today’s trade and this uncovered buying interest, but not enough to totally erase all losses. The spot contract found the most support as reports of previous sales being shifted from Argentina to the US supported that contract. Soybean basis in Brazil continues to erode with their advancing harvest making their offers even more affordable than those from the US. Brazil’s harvest is now at 63% and the pressure is unlikely to lift anytime soon. Even with some production concerns in Brazil we are still hearing reports of 100+ bushel yields which is tempering market reaction. China’s February import data shows they took in 16.2 mmt of soybeans, an increase of 38.4% on the year. Of this 11.59 mmt came from the US which was a year-to-year increase of 15.4%. China is expected to import 9.3 mmt of soybeans in March with most coming from Brazil. China is also buying domestic soybeans to build reserves and help support values. Crush margins in China are deeply negative which is hampering their buying interest. The firm Informa pegged US plantings at 88.2 million acres this year, up 200,000 from their last estimate.
Wheat futures struggled today even with the complex already being heavily oversold. Ongoing exports from the Black Sea continue to pressure the US market as this wheat is being offered at a sizable discount to the US. This pressure is expected to linger for at least another 60 days or as long as the Black Sea corridor remains open. China imported 1.52 mmt of wheat in February, an increase of 124.1% on the year. Much of this was used as feed to offset corn demand. Improved rainfall in Europe is seen as beneficial for their crop, but we continue to see drought in the US. The private firm Informa is reporting this year’s wheat acres at 49.24 million.
Export inspections for the week ending March 16th were all higher than the week before. Corn loadings totaled 46.8 mbu, an increase of 17.1% on the week. Soybean loadings totaled 26.3 mbu, up 13.1% from the week before. Wheat inspections increased a large 45.7% on the week at 13.75 mbu. The main destinations on the week were China for soybeans and wheat and Mexico for corn. Year to date export loadings are down from last year by 36.1% on corn and 1.6% on wheat, but up 2.9% on soybeans.
The March cattle on feed report came out mostly as expected by trade. The total number of cattle on feed on March 1st totaled 11.64 million head, 4% less than a year ago. February cattle placements were 93% of a year ago at 1.73 million head. Marketings in February also came in at 1.73 million head, 5% less than in February 2022. These numbers are supportive for cattle futures but indicate we will see less feed grain demand for the next several months. Beef demand has slipped lower in recent weeks though, which may limit trade reaction to lower cattle numbers.
Have a great evening!
Emery Manager & Originator:: Topflight Grain Cooperative, Inc.
593 Emery Rd :: Maroa, IL 61756
This material should be construed as market commentary, merely observing economic, political and/or market conditions, and not intended to refer to any trading strategy, promotional element or quality of service provided by Topflight Grain Cooperative, Inc. Topflight Grain is not responsible for any redistribution of this material by third parties, or any trading decisions taken by persons not intended to view this material. Information contained herein was obtained from sources believed to be reliable but is not guaranteed as to its accuracy. Contact Topflight Grains designated personnel for specific trading advice to meet your trading preferences. These materials represent the opinions and viewpoints of the author, and do not necessarily reflect the viewpoints and trading strategies employed by Topflight Grain Cooperative, Inc.
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