CORN:
Some weather forecasters are leaning toward dry weather for South America in March, with their monsoon possibly ending a bit early. If realized, this could be concerning for the safrinha corn crop getting started in Brazil. Traders and importers are aware of the calendar, which seasonally the grains tend to put lows in during February. So, we could turn a corner by seeing more export business at these price levels. Which could possibly trigger the heavily short fund traders lifting out of short positions to take profits. It is still too early to talk about US weather and crops, but attention could flip quickly to the abnormally record high temperatures seen across the Midwest this winter, and a lack of normal moisture. After months of corn futures dropping, with funds building massive, short positions, it’s hard to get overly bearish at this point. This market continues to be choppy as it finds its way to spring.
SOYBEANS:
Areas of South America have dealt with weather challenges this growing season, especially Brazil. Currently some forecasts are pointing to another stretch of dry weather going into March. Traders have turned away from concerns for the crops in South America for the most part this winter, assuming they will still produce record crops, and assuming there will be a large build in supplies. China’s economy has hit a soft bump coming out of their long covid lockdown, which has also magnified the assumption that large soybean supplies are a given. There are now many firms including CONAB that continue to lower their estimates of the Brazilian soybean crop. These estimates are all notably much lower than where the USDA currently has their estimate of this crop. In part traders are looking at how big the US soybean crop turned out last fall versus predictions due to the weather conditions. But it could be dangerous to “assume” one outcome will mirror another. Export sales may be an indication that concerns are real for Brazil, as reports of China booking 6-8 cargoes of soybeans this week, from Brazil. Prices are at the lowest they’ve been since last May and if there are potentially less soybeans grown in Brazil, then it makes sense a big exporter like China would want to secure cargos at lower prices while they can. The outcome of this South American crop is still in question as we head into March, and in due time we will see how aggressive China is in buying up more cargos.
WHEAT:
Ukraine is following the path of Russia in aggressively pricing wheat for sale, to help fund the war there. With both countries competitively offering up wheat at discounted price levels, it will be hard for the US and other world countries to get a piece of the export pie. There are reports that Russia is on track to export more wheat in February than it has the last three years for this month. January 2024 was also a very large wheat export month for Russia. The Black Sea inventories are expected to be large this spring, pushing competitive pricing.
CATTLE:
Cattle futures were highly anticipating another jump in cash bids for the cattle trade late last week. But instead, the average cash trade actually dropped 80 cents from the previous week. Packers are pushing to get cash cattle bought lower to manage their poor margins, but with supply levels tight, this could prove challenging. Feedlots are not expected to give in to the lower cash bids this week. The April live cattle futures contract is approaching resistance, and the next level is the gap left from October on the chart at 190.37.
HOGS:
The cash market continues to lead and support futures prices in the lean hog contract. The April hog futures contract is now trading higher than it did since last June. The Commitment of Traders report shows traders in hog futures are exiting short positions along this path of higher prices. The USDA export report last week did show a shocking supportive number, that was later announced as a mistake and will be corrected in this week’s report. It will be interesting to see how the corrections are reflected in this next report and if it will affect prices when they show it.
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