Quiet end to the week for soybeans, corn, wheat
Soybeans were mostly lower, adjusting spreads and taking profits, but closing firm for the week. Recent rainfall in Argentina has been disappointing, but there is more in the near-term forecast. Conditions in Brazil generally look favorable, with early harvest activity ongoing. Yield projections have been lower than expected in parts of southern Brazil due to drought, but that’s expected to be offset by yields in central and northern growing areas. That spells even more export competition for the U.S., especially with China, which has an increasingly favorable trade relationship with Brazil. China officially resumes business on the 30th after the break for the Lunar New Year. Soybean meal was lower on the rain prospects for Argentina and bean oil was mixed, adjusting spreads. Domestic crush margins remain in positive territory, reflecting solid demand.
Corn was mostly lower on spread trade and profit taking, while still posting modest week-to-week gains. Corn is watching weather in South America with a slight increase in Argentina’s crop condition ratings. Export demand is expected to get better in the coming weeks as Brazil waits for the second crop to get planted, Argentina remains uncertain about total production, and Ukraine’s exports slow down ahead of another likely smaller crop due to the war with Russia. The Ukraine Grain Association is projecting a combined crop of 50 million tons in 2023, less than half of the 2021 total. Domestic demand for ethanol use has been impacted by slower consumer gasoline demand, and ethanol blending demand, due to relatively high prices. However, the national basis remains near multi-decade highs, despite the demand woes. The USDA’s next round of supply and demand estimates is out February 8th.
The wheat complex was mixed, still ending the week with gains. The Drought Monitor did show some improvement in parts of the Plains, but the drought isn’t over. Even though recent winter weather events brought snow to parts of the region, it missed some areas and there’s a chance for winterkill with bitterly cold conditions in the forecast. Export demand is slow with Russia holding most of the market share. Ukraine is still exporting grain despite stepped up Russian attacks, but the volume has dwindled due to slower inspections. The USDA’s attaché in Canada estimates 2022/23 wheat production at 33.824 million tons, up sharply on the year thanks to improved weather in the Prairies, with exports seen at 26 million tons, compared to just over 15 million last marketing year. The USDA’s office in Australia 2022/23 wheat production was 37 million tons, the third year in a row with a record large crop, with exports expected to be 28 million tons, which would be an all-time high. Crop quality in Australia was impacted by heavier than normal rainfall during late development and early harvest activity in some areas.