The late Sunday runs of the two primary weather models are predicting direct opposites when it comes to rainfall this week in Argentina. The European Centre for Medium-Range Weather Forecast (ECMWF, aka European Model) calls for widespread general showers whereas the Global Forecast System (GFS, aka US model) sees no rain at all. One week of rain or no rain is not going to change Argentine yields significantly.
However, rain of any amount in Mato Grosso (MT) is much more important. MT is where the soybean harvest is delayed by persistent rainy days, which also delays the safrinha corn planting. Nick and Eugene update the rain day chart below every day just before they send this report. Check how many of the next ten days rain is predicted for the first three locations, which is where farmers are trying to harvest soybeans and then plant corn.
Last week’s China’s Lunar New Year celebration is over. Give them a couple days to sober up as they travel home and they will get back to business. Given rain fell every day last week in MT, there is a good chance China will buy more US beans this week for immediate shipment.
Usually, there are twice as many calls on the books as puts for the soybean, corn, and wheat markets. As of Friday afternoon, CBOT numbers showed there are almost twice as many soybean puts as there are calls. That means traders will be more “brave” to buy futures since they own downside protection with the puts or it means soybean producers around the world are afraid of the downside risk. In either case, twice as many puts as calls is not bearish.