CBOT agricultural futures surged in the past week on anticipated reduction of crops in South America as a result of hot and dry weather, Chicago-based research company AgResource noted.
With worldwide supplies tightening and demand from China increasing, AgResource stays bullish on agricultural futures.
March corn scored a new rally high as the global feed market readjusts to account for sharply lower South American supplies. AgResource suggests that the U.S. Department of Agriculture must lower South American production by another 12-18 million metric tons to account for current crop health in Argentina, Paraguay and Southern Brazil. And concern over soil moisture in Southern Brazil ahead of winter corn seeding is elevated. Reduced South American supplies will curtail spring/early summer exports. There are just no meaningful feed import alternatives available other than U.S. corn between now and July.
The weekly chart shows limited resistance above 6.20 dollars with the highs of 2021 possible with a weather scare to Brazilian winter corn production. The weekly chart shows that corn has been in an uptrend looking backwards to August.
U.S. and European wheat futures ended higher slightly with limited hope for a resolution to Russian-Ukrainian geopolitical tension. However, very little will be known until the situation is resolved, and AgResource maintains that speculative short covering will be ongoing into the end of winter. There is still no sign of needed rain/snow across the Southern and Central Plains into early February. North Africa also stays dry.
Wheat’s outlook is bullish as exporter supplies fail to match global consumption growth. Nearby, U.S. dollar weakness and soaring global corn values lend support to wheat on breaks.
AgResource holds that May Kansas wheat below 7.80 dollars is a buy. U.S. wheat will become more competitive in world trade.
Soybean futures rallied 45 cents in a holiday-shortened trading week to close above 14 dollars, the highest price since August. The market continues to price in smaller South American crops as the recent weather has been hot and dry. Crops in Southern Brazil and Northern Argentina continue to roll yield outlooks lower.
Brazilian FOB premiums rose sharply this week. Nearby Brazilian offers are one dollar over Chicago or unchanged from last year. U.S. soybeans are competitive in the world marketplace beyond mid- to late July.
Inflationary threats will drive investment flow to CBOT crop markets in the weeks ahead. The world has lost 21-24 million metric tons of South American soybean production since Oct. 1, which has completely altered the outlook. The market needs to secure record large U.S. soybean seeding this spring. A lasting bearish soybean trend is not expected until a record large U.S. yield is affirmed in August.
