Written Commentary
SOYBEANS
Prices recovered nearly all of yesterday’s losses as Mch-23 close $.14 higher at $15.34 ¼. Deferred contracts were up $.10 – $.12. Soybean meal closed $5 – $7 higher establishing new contract highs in old crop. Soybean oil finished slightly higher. Export sales were neutral to bearish. Old crop soybean sales at 27 mil. bu. were below the 42 mil. from last week. YTD commitments are up 5% from YA, vs. USDA forecast of down 8%. Abiove kept their Brazilian production forecast unchanged at 152.6 mt. They also maintained their crush and export forecasts at 52.5 mt and 92 mt respectively. All are in line with the USDA estimates. Earlier this week the EIA released their Monthly Biofuels Capacity & Feedstock Update. It showed 943 mil. lbs. of soybean oil was used in the production of biofuels in Nov-22, up 4% from Oct-22 and up 15% from Nov-21. In the first 2 months of the 2022/23 MY cumulative bean oil usage has reached 1.849 bil. lbs. up 12% from YA, in line with the USDA forecast. Interesting how crush to date has been weak, however bean oil usage for biofuel production is matching the current USDA usage forecast, with several new biodiesel facilities coming on line this year. Meanwhile soybean oil product share at 38% is at a 2 year low. With Argentine conditions improving, a record crop in Brazil, and nearly record speculative long in soybean meal I look for soybean oil to gain on meal while also being a seller of Mch-23 soybeans over $15.25. BAGE reports Argentine soybean conditions improved again this past week. G/E improved 5% to 12%. Fair improved 3% to 42%. Poor/ VP fell 8% to 46%.
CORN
Despite a strong export sales report, including new sales to China, corn prices reversed closing near their lows at its 100 day MA support of $6.74 ¾. New crop futures were down $.01 – $.02. Overnight strength was largely attributed to a weak US $$ and a return to dry conditions in Argentina for the next 7 – 10 days. The US $$ sunk to new 9 month lows yesterday afternoon following the Fed’s 25 bp increase in the Fed funds rate and after comments from Fed Chair Jerome Powell suggesting a pause in future rate hikes may be near. The US $$ reversed course today after the European Central Bank raised key interest rates by 50 bp’s. I maintain spot corn is range bound between $6.50 – $6.90, until we have a better handle on US 2023 acres and Brazil’s 2nd corn crop. Old crop exports at 63 mil. bu. were well above expectations and the 2nd highest of the MY. YTD commitments are down 43% from YA, vs. USDA forecast down 22%. 425 mil. bu. of corn was used in the production of ethanol in Dec-22, down 5.5% from Nov-22 and down 11% from Dec-21. YTD usage in the first 4 months of the MY is down 6% from YA, vs. the USDA forecast of down 1%. While we are below the pace needed to reach the USDA forecast, I think the USDA will hold off from making a change next week. Production rates are on the rise while gas consumption was up 3% from YA. To reach the USDA forecast ethanol production will have to exceed YA by 1.75% Jan thru Aug. Brazil exported 6.35 mmt of corn in Jan-23, well above the 2.73 mmt from Jan-22. BAGE reports Argentine corn conditions improved again this past week. G/E improved 10% to 22%. Fair slipped 3% to 46%. Poor/VP fell 8% to 31%.
WHEAT
At close wheat prices were mixed. Chicago was up $.01 – $.03. KC and MGEX were steady to down $.03. The Mch-23 contracts in all 3 classes made new monthly highs before settling back. Export sales at only 6 mil. bu. were below expectations of 10 – 20 mil. YTD commitments at 594 mil. bu. are down 6% from YA, vs. the USDA forecast of down 3%. US winter wheat areas in drought slipped 1% this past week to 58%, well below the fall peak of 75%. Jordan is seeking 120k of optional origin milling wheat for late Spring shipment with a Feb 7 tender deadline. The lowest offer for Egypt’s most recent wheat tender at $322.80/mt CF, will likely be sourced from Russia.
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