Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
SOYBEANS
The soybean complex closed mixed. Spot soybeans were up a few cents, while deferred contracts were steady to lower. Soybean meal was down $4 – $5, with soybean oil surging 100 – 140 higher. May-23 soybeans recovered after holding support at its 100 day MA at $14.77 ¾. Prices firmed late, closing slightly higher after the BAGE lowered their Argentine production forecast another 4 mmt to 25 mmt. This compares to the Mch-23 USDA est. of 33 mmt. Would have to go back decades to find a crop lower than 25 mmt. Crop ratings held steady in G/E at 2%, while poor/VP ratings increased 4% to 75%. Argentina is already forecast to import a record 7.25 mmt of beans in order to support their soy crush industry. Look for these imports to climb another 3 – 5 mmt. Soybean exports were supportive at 24 mil. bu. Old crop commitments at 1.813 bil. are down 8% from YA, vs. USDA down 7%. Combined sales to China/unknown were 10 mil. bu. with shipments of 7 mil. Outstanding sales to China/unknown increased 3 mil. to 152 mil. bu., still well below YA at 229 mil. Old crop soybean meal sales were decent at 220k tons. YTD commitments are down 6% from YA, vs. USDA forecast of up 1%.
CORN
Prices were up another $.04 – $.06 in old crop, while new crop was $.01 – $.02 better. The Black Sea Corridor remains open, however still no confirmation on an extension of the BSGI. Both Ukraine and the UN insist on a 120 day extension, while Russia stays firm with only 60 days. For the 3rd day in a row the USDA announced a large sale to China. Today’s purchase of 641k tons (25 mil. bu.) brings the weekly old crop purchases to 75 mil. Spot corn has now rebounded $.25 bu. since late last week when news of Chinese buying first surfaced. Old crop export sales at 49 mil. bu. were strong. YTD commitments at 1.255 bil. are down 39% from YA, vs. the USDA forecast of down 25%. Next week’s report will be large with this week’s announced Chinese business. It may be too early to argue the USDA will have to reverse course and increase their export forecast, however last week’s 75 mil. bu. cut seemed a bit steep. We were looking for a 50 mil. bu. cut. The BAGE lowered their Argentine production forecast another 1.5 mmt to 36 mmt, vs. the USDA forecast of 40 mmt. With Argentine corn stocks already historically tight any further reductions in production will have to be offset by lower exports, as it was in the Mch-23 WASDE, both down 7 mmt. That continues to bode well for US demand. Corn ratings were mixed with G/E up 2% to 7%, while poor/VP increased 1% to 60%.
WHEAT
Prices were lower across the board in all 3 classes. Chicago and MGEX were both down $.03 – $.05 while KC was steady to $.01 lower. Export sales at 18 mil. bu. (12 mil. – 2022/23 MY, 6 – 23/24) were at the high end of expectations of 6 – 18 mil. Old crop commitments at 652 mil. are down 5% from YA, vs. the USDA forecast of down 3%. The IGC forecasts 23/24 global wheat production at 787 mt, down 1.7% from 22/23. The lowest offer for Egypt’s GASC tender was for 60k mt at $279.50/mt FOB from Ukraine, roughly 298.70/mt CF. Next lowest offer was from Russia which ranged from $303 – $330/mt FOB. US wheat areas in drought continue to shrink. Winter wheat areas in drought are now 53%, down from 55% last week and well below the peak of 75% last fall. Spring wheat area in drought slipped to 49%, down from 55% last week and below the fall peak of 79%.
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