Soymeal Leads CBOT Higher on Argentine Supply Concerns

Feb 13, 11:01 am | Mid-day Commentary | Share this:

** Soymeal continues to pace the CBOT advance on declining Argentine crop prospects amid threatening weather forecast amid months of declining soil moisture. CBOT traders have been stung before on just in time rains, but with the Argy soy crop in the reproductive stage, the time for rain is immediate, and a needed soaking rain is not in the offing.

  Private Argentine soy crop estimates range from 45-47 MMTs on soybeans and 34-36.5 MMTs on corn, which is slowing producer cash selling (along with Carnival). And there is talk that RGDS soybean yields could also be impacted via the dryness while Parana soy yields, are less than last year in the early stages of harvest. Too much rain and too little sunshine is the reason for yield shortfall across Parana. However, Brazilian traders are now discussing a 114-115 MMTs final crop estimate from CONAB.

  AgResource maintains that CBOT summer row crop futures have reached a new point in where the losses in the Argentine crop surpasses the gains in Brazil – tipping the balance in favor the bulls.

** CME traders report that funds have bought 1,900 contracts of wheat, 3,300 contracts of corn, and 4,500 contracts of soybeans. In soy products, funds have bought 2,400 contracts of soymeal while being flat in soyoil.

 ** The US NOPA crush report will be out Thursday with a strong December crush rate of 166.5-168 Mil Bu and soyoil stocks of 1.629 Bil pounds. The report will confirm strong domestic crush of US soybeans and the best board crush margins at $1.36/Bu since mid 2016. The US crusher is seeing strong domestic and export interest for soymeal and short bought end users chase the rally. These users are going to have to get covered into late spring or early summer before a top is set. The next upside price target for spring meal is $171-176 basis March futures. Argentine crushers struggle to secure cash beans from bullish Argentine farmers.

 ** The USDA Outlook Forum starts next week with WASDE to release their new and updated 2018/19 Balance Sheets on Friday AM. ARC looks for WASDE to adjust their 91 Mil acre corn and soybean balance tables from their initial November estimates, but to hold on their bullish view on 2018/19 US soybean exports amid the Argentine soy crop shortfall.

 ** Russia has shipped out a record 3.0 MMTs of all grain for their ports during January. This was up 26% from last year, and included 2.2 MMTs of wheat. The export pace for Russian wheat to date calls for a 2017/18 CY exports of 36-36.5 MMTs.

3n** Midday GFS South American Weather Forecast Discussion: The GFS is similar to the overnight forecast for Argentina and Brazil. GFS rainfall totals for the next 10 days are attached. Notice Argentina will hold in a below normal rainfall pattern with heat returning for the remainder of the week (and weekend). Highs will return to the 90’s to lower 100s. A few lite showers are possible during the first half of next week, but totals are expected to range from .1-.6” with coverage no better than 50%. The importance of rain is dramatically ramping up as Argy crops are in the reproductive phase and more than 80% of the Argentine crop area is short to very short.

 The Brazilian forecast features better rains for the harvest areas of Northern Brazil and dryness for RGDS. No extreme heat is foreseen.

** AgResource Market Comment: A close above $10.045 March soybeans turns the trend upwards on the charts with an upside target of $10.40 – last summer’s high. Corn and wheat look to follow amid parched Plains weather. December corn futures will find resistance as it nears the $4.00 level as US farmers look to advance new crop sales. Note that meal spreads are tightening on demand.