TFM Midday Update 02-05-2024

CORN

Over the weekend there were attacks by the US on Houthi positions in Yemen. Markets appear largely unfazed by this news, but it could potentially lead to more aggression against vessels in the Red Sea as well as US positions in the Middle East.
This week’s USDA report is expected to have relatively few changes, but US grain exports could be reduced due to strong global competition.
Argentina was hot and dry over the weekend, but both the American and European weather models are in agreement that Argentina will have good chances for rain later in the week.
Private exporters reported sales of 155,000 mt of corn for delivery to Mexico for the 23/24 marketing year.
Funds are said to be short about 280,000 corn contracts as of last Tuesday. This is their largest short position in corn since 2020.

Despite trying to stimulate it, China’s economy continues to lag. This is also cause for concern that they will have lower food demand and import less feed and protein.
CFTC data showed that the fund’s short positions in the soy complex continued to grow, adding to pressure on futures. If they begin to exit these positions, it could lead to a short covering rally, but so far they have little incentive to do so.
Brazil’s soybean production is estimated to be 157 mmt by the USDA and 155 mmt by CONAB. However, private estimates continue to be lower than both, ranging from 135 mmt to 150 mmt. This could mean that the USDA will lower their estimate on this week’s WASDE report.
The next 10 days or so are forecasted to by wet for key growing regions of Brazil. This may slow soybean harvest there. However, harvest pace is still above the five year average due to earlier dryness that led to quicker maturity. According to Ag Rural, Brazil’s soybean harvest is 16% complete.

The US Dollar Index continues to rise after last week’s jobs report, putting more pressure on the wheat market.
Ukraine is said to have targeted an oil refinery deep within Russian territory, increasing tension in the Black Sea. Despite the tensions, large volumes of wheat continue to be exported out of that part of the world.
Russian wheat export values are reported to have declined again, to $229-$231 per mt FOB. Until the US export market picks up, it will be hard for wheat to rally in any significant manner, and with the cheap values out of Russia, that will be a difficult task.
Rains hitting the US west coast are leading to flooding in California, with what is being called a potentially historic storm. That system is expected to move east this week, bringing more moisture to the winter wheat regions. The crop is already in much better shape compared to last year, but this may further improve conditions.

Brandon Doherty