Ag Market View for Jan 19.23
Mch-23 soybean did violate yesterday’s low on an intraday basis, however recovered to settle nearly $.06 off the low. After breaking out to the upside yesterday, Mch-23 soybean oil slipped back to the midpoint of the 62.00 – 64.00 range it was in the first 2 weeks of the month. It looks to have built some good support at the 62.00. I wouldn’t be surprised to see tested again soon. There were no export announcements today. The combined speculative long position in the soybean complexed had recently swelled to 350k contracts before backing off last week. MM’s continue to sit on a record long position in soybean meal. With Argentine weather improving, demand shifting to SA, combined with China’s economy slow to gain traction I’m guessing we’ll see further fund liquidation. First support in Mch-23 soybeans is $15, followed by the 50 day MA, currently $14.74 ½. China has indicated they intend to expand soybean plantings again in 2023 with hopes of expanding production to over 20 mt. While over 80% of their needs will still come from imports, their goal is to reduce imports from the US and Brazil. If achieved, I’ve got to think it would come at expense of lower corn acres. Export markets remain quiet as Brazilian soybeans are being offered at a healthy discount to US supplies, however the inverse in old crop spreads have jumped. US farmers seem reluctant to sell, while perhaps some concern harvest across north central will remain slow going. Export sales tomorrow expect 25 – 45 mil. bu. soybeans, soybean meal 0 – 300k mt, and soybean oil 0 – 15k mt.
Mch-23 closed down $.04 at $6.77 1/4, just above key support at the 100 day MA, currently $6.74 ½. Spotty rains provided some benefit to areas of Argentina yesterday. Much better coverage and precipitation totals are expected with the next system tonight through the weekend. 2 more rain events are expected over the next 10 days providing cumulative 2”– 4” rainfall totals. Over the next several weeks the market will try to access the overall impact on production as earlier planted crops have no doubt suffered irreversible yield loss.The USDA announced the sale of 195k tons (7.7 mil. bu.) of corn to Mexico. Weekly ethanol production jumped to 1,008 tbd last week, up from 943 tbd the previous week. In addition stocks fell to 23.4 mb, down from 23.8 mb the previous week, the lowest in 6 weeks. The production pace was still slightly below the pace needed to reach the current USDA corn usage forecast. Gasoline demand last week was down 2% from YA. This is the 15th consecutive week of lower demand compared to YA, however the gap has narrowed to its lowest level since late Sept-22. We had expected the USDA to lower their corn usage forecast for ethanol in last week’s WASDE report. Today’s production figures support holding steady. Futures weekly production figures will tell us if we’ve turned the corner or not. Egypt announced they purchased 50k mt of corn from Romania (likely Ukraine origin). Rumored price was $336/mt cf. The lowest offers form US were $338 and $345/mt cf. The BAGE lowered their Argentine corn production forecast 5.5 mmt to 44.5 mmt, well below the USDA’s 52 mmt forecast last Thursday. The BAGE est. came out before today’s close. Planting progress rose to 6% to 89% complete. Export sales tomorrow are expected between 15 – 35 mil. bu.
With the exception of nearby MGEX contracts all 3 classes of wheat closed lower in 2 sided trade. Chicago and KC both pretty much closed on their lows down $.07 – $.10. Mch-23 and May-23 MGEX both closed higher, while deferred contracts were slightly lower. Filipino importers purchased 110k tons of Australian wheat, final price not yet known. Russia’s Ag. Minister stated they expect 2022/23 gain exports to range between 55 – 60 mt with no plans to lower the countries export quota. US winter wheat areas in a drought held at 59% the past week, the lowest in 4 months and down from a 74% peak in Nov-22. Spring wheat areas in drought slipped 2% to 64%, lowest since Oct-22 and down from peak of 79%. As a major winter storm finishes moving across the nation’s midsection I’d expect the drought figures to decline again next week. No doubt drought still exists, particularly the SW Plains, however the declining numbers are a step in the right direction as the winter wheat crop moves closer to breaking dormancy. Export sales tomorrow are expected to range between 5 – 15 mil. bu.
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