Written Commentary
MORNING OUTLOOK
Grains are higher. SH is up 21 cents near 13.68. SMH is near 440.2. BOH is near 44.47. CH is up 6 cents and near 4.97. CH tested 5.02. WH is up 2 cents and near 6.56. KWH is up 2 cents and near 6.10. Need to slow demand due to tightening US 2020/21 corn and soybean balance sheets may be pushing prices higher. US stocks are mixed. US Dollar is lower. Crude is higher. Gold and copper are higher. Successful vaccine could help rebound US economy and trigger increase inflation.
Grain futures are adding risk premium. US soybean, soymeal, soyoil and corn are making to new highs. US Dollar is at 3 year lows. Crude is at 1 year high. Matif corn and wheat futures are at new contract high. Palmoil futures are at ne 10 year highs. Panamax vessel freight is at 4 month highs. Managed funds are record long grains. Index finds are also adding to new record long grain positions. CME added margin requirements to soybean, soymeal, soyoil, corn, oats, wheat and hogs.
Long range Brazil and Argentina weather forecast calls for below normal rains. GFS model has rains over next few weeks although scattered and less than average. Many are dropping their estimate of South America soybean and crop estimates below USDA latest guess. Drop in Argentina could increase demand for US soymeal and soyoil. There is new concerns that drop in Russia Feb forward exports and EU exports could help push wheat futures higher. Some even feel lack of Russia export offers could mean that Russia prices no longer move US futures.
Corn futures may need to follow strength in soybeans to insure higher US 2021 acres. There is new talk that US spring wheat farmers could switch intended wheat acres to corn or soybeans. If that all is not enough there are forecast that La Nina could continue into 2021 and impact negatively north hemisphere 2021 weather including a drier than normal US summer. One multinational grain company could see US 20210/21 soybean carryout below 100 mil bu and fact most farmers are sold out of 2020 soybean crop could limit downside in prices. The could see soybean futures trading over 16.00.
On Tuesday, Managed funds were net buyers of 11,000 wheat, 25,000 corn, 30,000 soybeans, 8,000 lots of Soymeal, and; 12,000 lots of Soyoil. We estimate Managed Money net long 47,000 contracts of SRW Wheat; long 382,000 Corn; net long 252,000 Soybeans; net long 99,000 lots of Soymeal, and; long 128,000 Soyoil.
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