Written Commentary
The Ghost in the Machine Q1 2024
March 19, 2024
MORNING OUTLOOK
Grains are mixed to lower. SF is down 1 cent and near 11.89. SMF is near 398.5. BOF is near 37.82. CH21 is down 1 cent and near 4.24. WH21 is unchanged and near 6.11. KWH21 is down 1 cent and near 5.69. US stocks are marginally lower. US Dollar is lower. Crude is higher. Gold is higher. Biden transition and vaccine news continues to lift US equities and energy markets. Talk Biden wants to restrict US fracking is also helping Crude oil prices.
Yesterday was an interesting day in the soybean complex. Rumor China was cancelling US soybean sales sent futures lower. December open interest liquidation weighed on soyoil. Rumors China was switching palmoil sales to soyoil sent palmiol futures and soyoil futures lower and triggered liquidation of long soyoil short soymeal spreads. Overnight palmoil futures are higher. There are new rumors today China bought US and Brazil soybean on the break. Most of China open US soybean sale are basis only and still have to be priced in futures. Key to soybean prices is South America weather which for now suggest less rains in 2021 than normal.
Corn dropped sharply yesterday in part on the news China was cancelling soybean sales and liquidation of December open interest. The drop in prices also triggered liquidation of long corn and short wheat spreads. Goldman Sachs estimated China 2021 corn imports at 33 mmt and 2023 at 55 mmt. Ukraine corn export ae only 4.5 mt to date versus 6.1 last year at this time. US corn export prices are the lowest feedgrain in the World. Key remains demand for US exports and South America weather.
Liquidation of long soybean and long corn short wheat spreads pushed wheat futures higher and highest close in 4 weeks. Drop in US Dollar to 30 month lows was also supportive. There are rumors of China buying US white wheat. Matif what futures started lower but closed higher and at new contract highs. Black Sea wheat politics still an unknow, But US HRW export prices ar narrowing versus Black Sea and French prices. July-June World wheat trade is equal to last year to date and goes against fears of lower demand due to Covid.
On Tuesday, Managed funds were buyers of 11,000 contracts of SRW Wheat, sold 10,000 Corn; sold 2,000 Soybeans, bought 2,000 soymeal and sold 5,000 lots of soyoil. We estimate the funds are net long 32,000 wheat, 284,000 corn, 230,000 soybeans, 80,000 soymeal and 109,000 soyoil.
CBOT grains will be closed tonight and tomorrow for holiday and reopen Friday morning at 8:30 am and close early at 12:05 pm. Weekly US ethanol date today. Weekly US export sales delayed until Friday. Weekly CFTC commit of traders report delayed until Monday. This holiday was the best while I was growing up on the farm. Harvest was over and farmers were happy. My grandmother made the best feast. Everyone was together. This year we have to be apart. But talk of a vaccine gives up hope. Happy Thanksgiving!
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