Mixed finishes as corn and soybeans adjust spreads

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Mixed finishes as corn and soybeans adjust spreads

Soybeans were mostly, modestly higher on commercial spread adjustments. Contracts started higher, turned mixed fairly quickly, and are overbought, but the trade is trying to ration demand. Rain is beneficial in South America, aside from delaying harvest activity in parts of southern Brazil and the attendant quality concerns. AgRural says 0.7% of Brazil’s crop is harvested as of last Thursday, compared to 4.2% a year ago. Argentina will need more timely rainfall, which is an uncertainty because of the prevailing La Nina pattern. For now, the best global source for soybeans continues to be the U.S. Unknown destinations bought 126,500 tons of old crop U.S. beans Wednesday morning and China picked up 132,000 tons of new crop. The USDA’s weekly sales numbers are out Thursday morning. The trade is also watching domestic demand with a lot of talk about crushers booking beans month in advance. Dry weather is a concern in parts of the U.S. ahead of widespread planting, with the first acreage estimates of the season out next month. Soybean meal was mostly lower on commercial spread adjustments and bean oil hit contract highs, supported by strong global vegetable oil demand.

Corn was mixed, mostly weak, on commercial spread trade, with nearby months up and deferred contracts down. Corn started higher, then consolidated, watching crop development conditions in Argentina and the slow soybean harvest is Brazil, which would delay second crop corn planting. That’s Brazil’s biggest crop and the source of most of their exports. China purchased 680,000 tons of old crop U.S. corn, for a two-day purchase total by Beijing of 2.04 million tons. Tuesday’s sale to unknown could turn out to be China when it’s time for delivery. There’s more talk about Chinese interest in U.S. corn over the next few months, thanks to their demand and the competitive price of U.S. supplies. There’s also been a lot of talk about China buying large amount of U.S. ethanol. The USDA’s attaché in China estimates 2020/21 corn imports at 22 million tons, 4.5 million more than the last official guess, with sorghum imports of 6.5 million tons, 900,000 less than the official USDA estimate because of the availability of cheaper feed replacements. The USDA’s attaché in South Africa estimates 2020/21 corn production at 16 million tons, up 14% from 2019/20 thanks to better weather, with export potential of 3.0 million tons, compared to 2.5 million last marketing year. The next official set of estimates is out February 9th. Ethanol futures were unchanged. The U.S. Energy Information Administration says ethanol production last week averaged 933,000 barrels a day, down 12,000 on the week and 96,000 tons the year, the lowest weekly average since mid-October 2020, with stocks of 23.602 million barrels, a decline of 26,000 from the previous week and 642,000 from this time last year.

The wheat complex was lower on profit taking and technical selling, along with higher trade in the dollar. The rally for wheat was done without any real fundamental backing, aside from expectations for better export demand because of Russia’s tariff. Traders bought Moscow’s confirmation Tuesday before taking those profits Wednesday. The complex is also waiting to see if Ukraine enacts similar measures following Tuesday’s announcement of a corn export cap. U.S. prices are competitive, but freight rates are limiting demand. Near-term forecasts have more precipitation in some U.S. winter wheat growing areas, but more will be needed this spring to ensure the crop’s yield potential. The trade is also monitoring overwintering conditions in the European Union and Black Sea region, along with harvest activity in Australia. The USDA’s attaché in Canada says that since the 2020/21 marketing year started in July, wheat exports are 33% ahead of 2019/20.

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