Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
SOYBEANS
Soybean futures ended higher. SH is now near 14.75. SH has rallied from a low near 14.12 due to dry Argentina weather and sharp liquidation of long soyoil and short soymeal spread. Liquidation of spread was due to unexpected lower biofuel mandate. BOH lost 13.5 cents. SMH has rallied $60. Soyoil share has also dropped. March soybean crush margin has lost 46 cents. Argentina 2 week forecast is dry. Our weather guy hopes rains will begin early in 2023. Brazil soybean crop could still be near USDA 152 mmt vs 127 ly. China Oct-Nov soybean imports are down 15 pct from last year. Fact China is reducing some of their Covid restrictions. Many hoped they would buy additional soybeans from US.
CORN
Corn futures ended higher. Market was oversold. CH has dropped 76 cents from October high. Most of this due to concern about lower US export demand. Matif Corn has been down 22 of last 25 trading days and down 160 cents. Matif saw profit taking following the huge sell-off in November. US weekly ethanol data provided a sizeable surprise with a 6 pct bounce in production and just a 1.5 pct increase in stocks (although they remain 14% above last year). Taiwan bought 130k mt Feb-Mar Brazilian corn around $340. Most still look for Brazil to grow a 126 mmt corn crop vs 116 ly. Dry weather still questions USDA estimate of 55 mmt vs 51.5 last year. Only 25 pct of Argentina crop is planted to date. USDA est US 2022/23 total corn supply at 15,327 mil bu vs 16,333 ly. Feed and residual 5,300 vs 5,717 last year. Ethanol use 5,275 vs 5,326 ly. Exports 2,150 vs 2,471 last year. This leaves carryout at 1,182. Exports could be lower. Average trade guess for carryout is 1,237. Some est US 2023/24 corn supply at 16,435 mil by and carryout near 2,035.
WHEAT
Wheat futures ended higher. The 2022 WH high was 12.73. Higher World crops and lower demand for US wheat dropped prices to near 7.60 in August. Prices rallied to 9.62 due to concern about Black Sea exports due to Ukraine war and sanctions against Russia. Reopening of Ukraine export corridor dropped WH to yesterday’s low at 7.22. Wheat futures are oversold but doubt weekly US export sales or Fridays USDA report will help prices. There will be a significant drop in temps across Europe next week, with prospects of the coldest readings for 12 years. Russia cold temps are abating with crop impact unknown. Argentina crop is smaller. Australia could be new record.
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