** It has been a widely mixed morning at the CBOT with soybeans leading an upwards charge while wheat futures sink following the wake of bearish data from the USDA January report. Long wheat/short soy spread unwinding has been active with funds wanting to be on the long side of the complex via less than perfect South American weather. ARC looks for a mixed CBOT close with a firm cash HRW wheat market offering support while the $9.72 area offers resistance to March soybeans on rallies. The market is still looking for a more bullish fundamental catalyst amid funds holding record or near record net short grain positions.
** CBOT floor brokers estimate that funds have bought 2,800 contracts of soybeans and 3,100 contracts of soymeal, while selling 3,600 contracts of corn and 4,200 contracts of wheat. In soyoil, funds have sold 2,200 contracts with March looking to test key support at $32.50.
** US weekly grain inspections for the week ending January 11th were; 23.0 Mil Bu of corn, 45.2 Mil Bu of soybeans, and 13.5 Mil Bu of wheat. All inspection totals were on the low end of trade expectations. For their respective crop years to date, the US has shipped out 266 Mil Bu less than last year, 183 Mil Bu less of soybeans, and 40 Mil Bu less of wheat. ARC expects that US corn and soybean exports will make a recovery in the last half of the year amid diminished South American corn/soybean exports.
** Brazil is considering lifting its duty on US ethanol if the US would lift its objection to the import of Brazilian fresh beef. No one knows for sure whether Brazil or the US will ever reach an agreement, but the stage is favorably set for a positive decision. The US blocked Brazilian beef in 2017 following the Brazilian scandal on food safety concern. Brazil has already resubmitted all of the material required by the US to restart beef trade. Brazilian cash ethanol prices have been rising sharply and we are sure that the US ethanol will pressure the administration to advance the proposed deal.
** The trade is questioning on how much faith to place in extended US or EU weather forecasts beyond the next 10 days? The reason is that the extended forecast offers rain chances for B Brazil and Argentina beyond the next 12 days. However, the track record of the extended 10-15 day models has been poor, and in some cases, no better than a coin flip. As such, ARC research argues that clients should place their attention in the 10 day forecast — and see of the rain in the extended range is pulled forward?
** Egypt’s GASC secured 295,000 MTs of Russian wheat in an overnight snap tender. The average price was $211.92/MT CIF, or some $4/MT more than their last tender. The purchase confirmed a rising trend of Russian wheat prices.
** Midday GFS South American Weather Forecast Discussion: The GFS forecast is little changed from the overnight model, and likely is a little too wet in the extended range. Limited rains are expected across Argentina and N Brazil for the week ahead with the exception being Parana and Santa Caterina. Temperatures warm to the mid 80’s to the mid 90’s by the weekend. The best chance of rain returns during the middle of next week (Jan 24-25th) from a weak frontal pass. This system increases the chance for moisture across NE Brazil, but leaves much of S Argentina parched.
** AgResource Market Comment: A 50% correction of KC March wheat comes in at $4.185 with key support noted below $4.20. Corn prices appear trapped as Friday’s large fund selling could not push prices lower. South American weather will gain in importance, but the extra US 2018 winter wheat seedings will likely curtail ‘18 US soy seeding. Don’t turn bearish as values bottom!
