Grains close higher:
May Corn +7 1/4 cents/bu (6.20 3/4)
May Soybeans +3 cents/bu (14.94 1/4)
May Chi Wheat +11 3/4 cents/bu (6.96 1/4)
Cdn $ +0.00300 (73.165 cents)
WTI Crude Oil – 3.23/barrel (71.54)
Corn:
This morning, the USDA confirmed the sale of 612,000 tonnes of U.S. corn for delivery to China in 2022/23. This is the first flash sale of U.S. corn explicitly to China since Aug. 9 (133kt) and the largest since April 28. The market was fired up last week/the week before about China demand (to the extent of 1.5 million mt being sold), yet we are only just seeing a percentage of that now.
Arlan Suderman has an interesting perspective on the current corn market noting that he believes, “U.S. corn sales are definitely picking up in recent weeks, including to China” and that, “ I still believe that USDA overdid it when they cut U.S. exports for corn.”. He also noted that he thinks that we should look for solid last half of the year for corn demand. US corn values are the cheapest in the Western Hemisphere currently, a recent change and the first time since last Spring. Brazil has no real offer and Argentine offers are at a premium due to crop loss and no farmer selling. Ukraine offers remain cheaper than US values, but maximum logistical capacity remains a concern.
Soybeans:
Beans hovered around zero today as grains did the lion share of the movement today. Extremely light volume occurred today with no soybean futures contract trading over 100k in volume.
NOPA crush for February will be released tomorrow, and trade expecting crush to finally start showing record rates with new capacity coming online (last two months have been lagging).
Charts show May meal futures again bouncing off the 40-day moving average. Soybean complex appears to be a technically driven market short term. Despite the crop declines we continue to hear about in Argentina, the trade is getting “Argentina fatigue” after a five-month rally
addressing production issues there. Meanwhile, Brazilian bean harvest continues to advance with over 50% of the crop harvested there.
Wheat:
Wheat was higher today with a common theme: Uncertainty regarding the timeline for the Grain Corridor deal. A Russian news agency reported Monday afternoon that Russia is willing to extend the Black Sea Grain Initiative but for a shorter period than previous terms. Russia is willing to extend the deal for 60 days vs. the previous two terms of 120 days. Ukraine says that the original agreement states that extensions shall be for 120 days, and they will not be ready to sign a 60-day report. Turkey and the United Nations continue to negotiate with both parties to bring them to a consensus, with the end of the current agreement coming due this weekend. The grain deal is expected to be extended Saturday if no party formally objects, which has not yet happened.
Despite wheat prices being significantly lower than they were in 2022 with the war risk being virtually removed since then, the actual risks are perhaps higher today than they were a year ago. Today it was reported that there was a U.S. drone downed by a Russian jet in the Black Sea.
Overall Economy:
It was a roller coaster of a day for stocks yesterday as the market continued to absorb the failure of two banks and the government’s efforts to keep those failures contained. Some stocks were buoyed by the notion that the Fed might stop raising interest rates due to the potential for a banking crisis. But bank stocks, especially regional ones, took a big hit, even though several regional banks told news outlets that they weren’t experiencing the big deposit pullouts investors feared. Given the current fragility of the banking sector, some economists predict that Powell will change his strategy to put the health of banks above all other considerations. Goldman Sachs, which previously projected a rate increase of 25 basis points at the Fed’s meeting next week, now expects no rate increase, citing “stress in the banking system.” While the Japanese bank Nomura made an even bolder prediction yesterday: a rate cut at next week’s Fed meeting. Fed fund futures are pricing in a 25-basis point rate hike with 78% odds currently. No rate hike in the next Fed meeting is at 22% odds. A 50-basis point increase was expected a week ago.
The consumer price index data came in pretty much as expected this morning, allowing Wall Street to give a big sigh of relief. Inflation is still a problem, but at least there weren’t any more surprises. The CPI rose 0.4% month-on-month in February, matching analyst expectations and down from 0.5% the previous month. Today's CPI data shows that little has changed regarding inflation, which is still focused primarily on the shelter and services sectors. That inflation is not abating at all.
Funds were thought to have been mostly buyers today with corn expected to have been a buyer of 5,000 (long 156,000), soybeans are expected to have been even at (long 158,000), and a buyer of 3,000 (short 117,000).