USDA reported yesterday morning:
233,700 mts of old crop soybeans sold to unknown
66,000 mts of new crop soybeans sold to unknown
Much of Brazil’s time zone is three hours ahead of the Central Time Zone. At 9 AM their time, yesterday CONAB reported its estimate of Brazil’s soybean crop at 125.471 million mt, much less than the market expected and well below USDA’s estimate of 134 million mt issued Wednesday. That shot beans 25 to 30 cents higher. CONAB sees the corn crop at 112.34 million mt, down slightly from their January estimate of 112.9 million mt and well below USDA’s 114 million mt on Wednesday.
Buenos Aires Grain Exchange (BAGE) cut its forecast for the Argentine corn production by 6 million mt to 51 million mt. USDA was at 54 million mt Wednesday.
Victor Martins is with Hedge Point Global Markets. He works in the grain business of Brazil, China and the USA. Victor reported yesterday about noon our time that China was considering a cancellation of a “slew of cargoes” from Brazil due to high prices. March soybean futures went from 38 higher to 30 lower and finished 20½ cents lower.
When China buys grain or oilseeds, they do it by locking-in the basis for a specific loading port and date, but they do not lock-in the futures price with the supplier. Then China buys futures in their own account to hedge their purchase price.
Now think about it, if China had bought 100 million bushels of futures after locking in the basis at a loading port on 100 million bushels and futures go up $2, given that the cash price at the port also increased $2, what a great opportunity! Liquidate the long futures position on 100 million bushels, grabbing $200 million futures trade profit and then announce to the world the possibility of cancellation of soybean export contracts on the books because prices are too high! Soybeans crash 57 lower, scare all the longs out of the market, turn technicals negative and beans go down another 40 to 50 cents, load the ships and buy futures and then announce to the world the purchase contracts were not cancelled after all.
China cancelled soybean purchases twice early in Trump’s presidency. Twice Trump slapped stiff tariffs on Chinese imports. China quit doing that particular type of market manipulation.
Corn basis at the US Gulf was down 3 cents for February. The Gulf soybean basis was 7 cents lower for first half February, 2 cents lower for last half February, and 1 cent lower for last half March.
The US Consumer Price Index (measures inflation at the retail level) reported yesterday was 7.5% on an annual basis; the market expectations of 7.2%. Like last month, that is the highest inflation rate in 40 years.
Below is last week’s export sales tracker. Note that almost 2.5 million mt of US beans were old last and one third of them were new crop beans. The US is not supposed to selling beans for export in February. This is Brazil’s window. Last week’s old crop bean export sales were the largest in 9 weeks at 58.7 million bushels. Bean sales needed each week to meet USDA target is just 11.1 million.
Crude oil is at $90.08, up 0.2
The dollar index is at 95.9, up 0.35
March palm oil is at 5723 MYR, up 74. The contract high was made on February, 7th, at 5,876 MYR. Palm oil owns 32% and soybean oil owns 28% world market share.
March cotton is at $125.69, up 0.03. The contract high was made February, 1st at $129.37 per cwt. Cotton competes with soybeans and corn for acres.
March natural gas is at $4.010, up 0.051. The contract high was $6.132 at October, 6th, 2021. Natural gas is the primary cost to manufacture nitrogen fertilizer.
March ULSD is at $2.8266 per gallon, down 0.0006. The contract high was $2.9318 made 7 February.
Market conversation: cash versus basis and futures selling
Recently Roger participated in a FarmProgress.com webinar for a live marketing discussion. He'll explore the idea of separating the pricing of the basis from locking in futures and raising your risk management game. Roger will explain how you can boost your net selling price most every year – and it's not a gimmick.
Click the button or the image below to follow to our blog post to watch the video!
Technical Education: Measuring or Exhaustion Gap in Soybeans?
One of the technical indicators of significant value is a “gap” on the daily price chart of vertical bars showing the high and low price range traded for each day. A gap is created on the daily price chart when the highest price of one trading day is lower than the lowest price for the next trading day. On Friday, 4 February 2021, March 2022 soybeans made a high of $15.60¼. On Sunday evening, March soybeans “gapped higher” leaving a gap on the daily chart of 5 cents between $15.60¼ and $15.65¼ and went on settle $15.81¾, up 28 ¼ cents on the day. The next day, the gap was filled when March beans traded down to $15.59, but closed well above the top of the gap. March beans made a new contract high Monday and Wednesday. After the close Wednesday, our Wright on the Market technician wrote:
The soybean market has gained $4.15 since the Nov 9 low. Three months is historically a very big run for beans. Many reasonable folks feel like a significant correction is in order. Perhaps, but the truth is the market will tell us. The gap higher on the Sunday night opening is either an exhaustion gap, which means a correction of 2-4 weeks is in order, or it is a measuring gap that projects to either $17.79 or $19.74 in the coming few weeks to a few months, depending on which swing low is used. We should have a good idea by Friday’s close.
Thursday’s was a day some folks will long remember. The trading range for March beans was 67½ cents with a high of $16.33 and a settlement of $15.74¼, a whopping 58½ cents below the high for the day and down 20½ cents on the day. To me, after Wednesday’s close, that gap felt like a measuring gap, but after Thursday’s trade (tonight), that gap feels like an exhaustion gap. I am looking forward to tomorrow evening to see what our Tech Guy has to say: Exhaustion or Measuring Gap? Here is the chart after Thursday’s (February 10) trade.
Rain Days Update
Rondonópolis, Mato Grosso, in the heart of Brazil's most productive soybean area, received 0.4 inches of rain yesterday; 0 inches a year ago and 0.4 inches two years ago (one inch = 24.5 mm). Yesterday's high temperature was 80°F. Day time highs the next ten days will range from 82 to 89°F (100°F = 38°C). Yesterday, in the dry areas of South America: Santa Maria high temperature 103°F with 0 inches rain. Cordoba high temperature 98°F with 0 inches rain. Salto high temperature 102°F with 0 inches rain. Total rainfall and temperatures expected in the next ten days: Santa Maria 0.17 inches, 86 to 98°F. Cordoba 1.24 inches, 68 to 94°F. Salto 0.40 inches, 77 to 97°F.
The Western Corn Belt has 1 less rain days in the 10 day forecast than yesterday and the Eastern Corn Belt has 3 less rain days than yesterday.
Explanation of Rain Days
Every day, every place in the world has a ten day weather forecast issued many weather services.
By a "place", we mean a Findlay, Ohio; Arcadia, Minnesota; Atlantic, Iowa; Fullerton, Nebraska; Cordoba, Argentina; Craig, Colorado, Saratov, Russia and ten million localities we have never heard of.
The ten day forecast predicts the high and low temperature for each day as well as whether or not rain is predicted for each of the ten days, likewise cloudy, partly cloudy, sunny, etc.
We look at the ten-day forecast and if we see rain is predicted for 4 of the next 10 days, we record a "4" for that location on the chart for the today. It does not matter whether it is one-hundredth of an inch or 5 inches. We realize about half the days expected to receive rain never get rain that day, but we must be consistent in what we report each day and every day because rain makes grain a few key weeks of the growing season. Of course, we scan the temperatures and the amounts of rain just to see if anything is getting way out of the norm.