CBOT agricultural futures scored new multiyear price highs in the past week.
Chicago-based Ag research company predicts higher agricultural futures as the U.S. dollar continues to slide.
The experts expecting new funds rushing into agricultural markets in coming weeks.
In fact, a short trading week did not prevent a continued rally in the oilseed complex, where adverse weather forecasts in South America have only added to bullish market fundamentals.
Corn prices were pushed higher due to poor growing conditions in Argentina.
South American weather continues to be in focus, as the US carryout size will be a function of south American crop and exports.
If the dryness persists, soybeans and the rest of the oilseed complex will continue to be supported.
So, overall primary fundamental themes to watch for remain always the same, i.e., developing weather in South America, demand for US production from China, and expected USD weakness on the back of continued quantitative easing resulting in higher commodity prices.
Maybe the US Agency is overestimating the South American crop size and, in turn, underestimating the potential world demand.
So it’s possible that prices will be pushed towards higers again this week on US COT, even if we will have a delayed release due to a short trading week due to new year holiday, so we expect a bullish consensus view among the funds.
Wheat prices rallied too last week.
Spot CBOT wheat futures rallied to a fresh six-year high.
World cash markets continue to rise to meet Russian offers.
Moreover, the pace of U.S. export sales implies the U.S. Department of Agriculture 985-million-bushel forecast is 15-25 million bushels low.
U.S. winter wheat seedings are expected to rise 1.0-1.2 million acres in 2021.
However, U.S. wheat stocks will be contracting amid reduced carryover supply.
U.S. hard red winter (HRW) wheat stocks are projected to fall another 100-120 million bushels even with normal weather.
There’s very limited room for Northern Hemisphere wheat yield loss in 2021.
The wheat market will be closely following Russian weather conditions in April and May.
In this context, Black sea wheat prices are moving higher, by Russian wheat offers, helped make the world wheat prices higher.
The lack of offers from Feb onwards, is pushing the market higer.
In fact, this has started pricing a tighter world supply from mid-Feb onwards while the domestic wheat prices in Russian continue to be a concern.
However, the primary reason for this week’s rally in wheat was the strength in corn prices.
Persistent risk of a further rally in corn spilling over to wheat remains.
The rally Corn prices continue to be in function of the pace of Chinese demand for US corn and South America’s developing weather.
In fact, corn prices rallied higher over the week, in line with weather forecasts for South American corngrowing regions and Chinese demand.
Maybe the US Agency has overestimated Argentine corn production fixing it at 49mmts vs. average market expectations at 45mmts.
Drought in Argentina is worsening and soil moisture reserves available for safrinha corn seeding in Brazil in late February will be at the lower end of normal.
Meanwhile, a new threat to global supply and demand has emerged as the Argentine government has suspended new sales of corn between now and March 1 , this alone will add 115-140 million bushels to 2020-2021 U.S. exports.
More importantly, this opens the door to further government intervention if Argentine crop fails to reach 44-45 million metric tons.
If the drought in Argentina continues into February, final 2021 Argentine corn production will be 40 million metric tons.
And a new crop drop in production could add over 100mbu to exports from the US.
In fact, US Corn is still competitive in the world export market, and the US likely estimated carryout would continue to reduce, acting as a support for corn prices.
In addiction, long term forecasts are not favorable to the crop in Brazil.
In this context, spot CBOT corn found a new 6.5-year high and easily traded through chart resistance at 4.65 dollars per bushel.
And traders holds that the next resistance lies at 5.00-5.20 dollars, which may be tested in the next 30 days.
On the oilseed complex hand, short term impact of the Argentine strikes has now been resolved, the larger fundamental issues still remain, which would continue to support the market.
Maybe soybean oil will further upside given fundamentals of alternative oils are getting supportive.
As long a crude oil prices remain in a range or trade higher, soybean oil can potentially trade a lot.
Soybean futures finished above 13.00 dollars, the best monthly close since June 2014.
The coming January USDA crop report will be the arbiter of speed that U.S. demand rationing needs to occur.
The marketplace cannot withstand any fall in supply.
In this context traders stay bullish.
So, daily South American weather forecasts and potentially U.S. demand rationing will be watched closely.
