** It has been a deeply green morning with CBOT corn, soybeans and wheat pushing to sharp daily gains. The rally has been paced by soymeal as tight Argentine supplies (nearby) is pushing demand to other world exporters including the US. Argentine crushers are struggling to secure cash soybeans as farmers fret over crop losses due to drought, and they want to hold onto old crop supplies as a hedge against inflation. Argentina exports some 50% of all world soymeal trade and amid reduced Indian exports, the supply shortfall is having a noticeable impact as meal end users scramble for supply.
Moreover, China soybean importers/crushers are seeking soybeans ahead of their Lunar New Year Holiday which starts later this week. Their short-bought position is concerning amid arid Argentine weather forecasts that is sharply cutting corn and soy yield potential. A push and close above $10.045 in March soybeans and $3.66 in March corn will turn all price trends upwards. ARC looks for an acceleration of the rally as Argentine crop losses accelerate.
** FAS reported that China canceled 455,000 MTs of US soybeans with 314,000 MTs sold to unknow destinations and of which 198,000 MTs where for the 2017/18 crop year and 116,000 MTs for the new crop year. China has been active in the Brazilian marketplace taking as many as 5-6 cargoes of soybeans this AM.
** CME traders report that funds have bought 3,900 contracts of wheat, 6,400 contracts of corn, and 6,500 contracts of soybeans. In soy products, funds have bought 6,000 contracts of soymeal and 2,100 contracts of soyoil.
** Iraq grain imports look to enlarge this year based on dry weather and a crop shortfall. No actual amounts of import need was provided, but traders also assume that Iran will have larger import needs of wheat in the crop year ahead. The larger Iraq/Iran imports should help offset some of the demand decline coming from favorable weather and large crops across North Africa.
** The US stock market is up nearly 300 points on fresh investor demand as the recent landslide in valuations has temporarily ended. However, a test of the recent highs and decline below last week’s low would confirm a longer term top. ARC maintains that the stock market is a mature bull, and that rally efforts will have difficulty being sustained.
** Wheat crop ratings are expected to decline farther in state by state ratings due out later this month. Producers report limited growth amid the deepening drought. Climate forecasts look worrisome into spring.
** Midday GFS Sooth American Weather Forecast Adds Rain in Days 9-10, We are doubtful: The GFS added shower potential to the Argentine weather forecast in days 9-11 with amounts of .2-1.00” (which we doubtful of). The track record of the GFS has been poor and due complex upper air features, the extended weather forecast of rain is doubtful. ARC notes that there is limited rain expected over the next 7-8 days with building heat. The extended range forecast beyond the next 7-8 days has been no better than a coin flip, and confidence in the GFS model is low. Brazil will see near to above normal rainfall across the north. The EU model run that is released before the CBOT close will be watched more closely amid the GFS new showers in 9-10 days.
** AgResource Midday Market Comment: The slightly wetter extended GFS model has caused $10.045 basis March soybeans to hold once again. March corn has found resistance at $3.66. Our bet is that the CBOT awaits fresh confirmation of the extended range Argentine forecast before pushing to new highs. We remain bullish on sliding Argy crop prospects.