While I cannot imagine it is because they are excited that the Winter Olympics got underway over the weekend, but bulls are certainly revved up as we begin to trade in the grain and soy markets this week. Gaps higher in corn, beans, and soymeal, with the latter two pushing into new highs for the swing. Yes, South American weather concerns remain front and center, but the is really little else that would be considered fresh in the news that would explain this bought of new energy. Could we be witnessing exhaustion gaps and a run for a peak? The possibility exists, but we will need to remain patient for a day or so to either confirm or deny that.
Those of you who watched the Olympic coverage over the weekend may have noticed that much was made of President Xi and President Putin’s meeting prior to the events. It would seem that there was no doubt that this pow-pow was intended to send a message to the United States that they were are united in thumbing their noses at our opinion of world affairs. While I would not go so far as suggesting they have developed some type of nefarious agreement to support each other’s plans to take over territory they consider rightfully theirs, i.e., Ukraine and Taiwan, they did obviously talk shop, and it was announced that China will now accept wheat and barley from all regions of Russia. While this will probably have the most direct impact on Canada, the EU, and Australia, it could disrupt trade in other parts of the world as well.
Tomorrow, Washington is scheduled to release the tallies for Chinese imports of U.S. Ag products under the Phase 1 deal, and most expect that they will have fallen short of promised imports in the neighborhood of 30% to 40%. Granted, there appeared to have been enough “language” within that document to allow the Chinese an out if the numbers were not met, which makes enforcement difficult, if not impossible. The official comment from Beijing was that they have worked to implement Phase 1, “despite the impact of Covid-19, global recession and supply chain disruptions.” In other words, we tried out best, but…
We have begun the week with the announcement of a new export sale. Unknown destinations purchased 507,000 MT of beans, of which 249,000 are for the current crop year, and 258,000 are for 2022/23.
We do have a crop report to contend with this week and to help set the stage, here again, the trade estimates; Domestically, corn carryout is expected to come in at 1.512 billion bushels, which would be down 28 million bushels from last month. Bean carry out is expected to be reduced 40 million bushels to 310 million, and wheat is expected to climb 1 million to 629 million. The average estimate for Brazilian beans sits at 133.65 MMT, down from 139 last month, and corn at 113.6, compared with 115. Argentine bean production is expected to be cut by 2 million to 44.5 MMT and corn reduced to 52.16 MMT versus 54. Global ending stock for corn is expected to be lowered nearly 3 MMT to 300.3 MMT, beans taken down 3.7 million to 91.5 MMT, and wheat left virtually unchanged at 279.9 MMT.
According to the CFTC, Large Specs were the driving force again last week. During the week ending the 1st, they purchased nearly 13,000 contracts of corn, almost 42,000 beans, just over 10,000 bean oil, and 15,500 soy meal. They were sellers of around 15,000 wheat. As of that date, it is estimated that Managed Money is now long 372,551 contracts of corn, which makes one question just how much more money they may commit to that market. They were long, not quite 154,500 beans.
We are not seeing much feature in the macro world this morning. Energies are mixed lower, metal higher, financial instruments are flat, Bitcoin is higher, the dollar is flat, and equities are mixed.