Soybeans soar as wheat drops

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Soybeans soar as wheat drops

Soybeans were sharply higher on commercial and technical buying, ending the session close to multi-month highs. South American weather continues to favor Argentina over southern Brazil and Paraguay. Most forecasts have a return to hot, dry conditions across key growing areas in South America next week. A number of private and governmental bodies have slashed their outlooks for South American soybeans because of La Nina impact. That’s also slowed down farmer selling in the U.S., Argentina, and Brazil. The higher prices and slower farmer selling in Brazil have tightened China’s crush margins. The USDA’s next set of projections is out February 9th, with CONAB’s updated outlook for Brazil due on the 10th. There was also some spillover from soybean products, palm oil, and crude oil. Soybean products were up on renewed commercial demand, linked to concerns about South American production. Additionally, energies are focused on potential trade disruptions due to tensions between Russia and Ukraine.

Corn was higher on commercial and technical buying. Corn is also watching weather in South America, with better chances of rain in Argentina than southern Brazil. Some yield potential is completely lost, but the big test for South America will be the performance of Brazil’s second crop, planted after soybeans are harvested. Prospects may be improving as La Nina conditions wane, but that is a long way off. Additionally, corn is monitoring developments in the tensions between Russia and Ukraine. Ukraine has become a major corn exporter in recent years. The U.S. would pick up at least some business if there is a disruption and U.S. corn holds a price advantage over competing nations. Ethanol futures were unchanged. The U.S. Energy Information Administration says U.S. ethanol stocks last week were 24.476 million barrels, the largest since May 2020 and up 884,000 on the week and 848,000 on the year, while production averaged 1.035 million barrels a day, 18,000 less than last week, but 90,000 more than last year.

The wheat complex was sharply lower on profit taking and technical selling. The complex took a breather after a couple of days of strong gains, but there’s been no real change to those tensions in the Black Sea region. A Russian invasion of Ukraine and any attendant conflicts would most certainly disrupt export business out of the Black Sea and throw the global wheat market into disarray. Much of that business would likely be picked up by the European Union, with the U.S. catching a smaller part of new sales. Expanding drought continues to in an issue in parts of the U.S. Plains even after recent snowfall, with those conditions stretching from southern and southwestern portions of the region to northern and northwestern growing areas. That’s lowering winter wheat condition ratings and would also impact spring wheat planting. Spring wheat production in the U.S. Plains and Canada was hit hard by drought last year. Portions of the eastern Midwest are generally faring better, but some areas have limited snow cover, potentially damaging crops during cold snaps.