The soybean market gave up all it gained Friday and then some as weather forecasts have held on to heavy rain and a possible hint towards a significant pattern shift in the drier portions of South America. Corn was off a touch as well, as forecasts would help to support corn production potential out of Argentina, while wheat was up a bit as folks who had been selling wheat and buying beans or corn started to unwind their positions.
It feels a bit like the market is starting to experience South American weather fatigue as all we've discussed these last handful of weeks is what forecasts indicate and how it will impact overall production potential. With Rio Grande do Sul and Argentina both still working to plant soybeans, the idea that it is too late to save the crop is a bit of a fallacy, though it is obvious earlier planted crops will likely see significant yield reductions.
We will get updated production estimates from Brazil's version of the USDA this morning, with many pre-report estimates indicating traders are expecting a 1.5 mmt or so reduction in corn production expectations, down to 115 mmt, with soybean production estimates expected to come in some 7 mmt lower than last month, down to 135 mmt.
Many analysts are quick to point out both CONAB and the USDA tend to be a bit slower than private groups when it comes to making significant production adjustments, so it is possible the soybean number could come in a bit higher than expectations as the group waits for more harvest data.
Early harvest yield reports are definitely showing the contrast between the areas that have gotten rain and those that haven't. Areas where weather has been nearly ideal for production are reporting yields in the 65 to up to 90 bushels per acre range, while the driest parts of Parana are reporting 15 bushels per acre or so on ground that would usually produce around 50.
The concerns surrounding dry weather and the idea that markets must move higher has basically shut off farmer sales in both Brazil and Argentina. Interesting to note, the Brazilian farmer had sold nearly 60% of their soybean crop a year ago as the market rallied, this year it is estimated they have sold around 37% of their crop, below the typical 40% or so we would normally see for this time of year.
The reduction in farmer sales in South America has impacted the cash market, firming basis and limiting export offers. This move impacting meal offers as well, especially in Argentina where the bulk of their beans are exported as meal.
Outside of South American production we continue to watch what is happening in China closely. The country continues to stand by its zero Covid policy and we are now starting to see this approach impact and limit inter-province travel and shipping. With the Olympics set to start in less than a month the world will continue to watch developments closely as Omicron continues to spread like wildfire just about everywhere else.
We got updated export inspection figures yesterday with soybeans seeing a reduction in volume versus the pace seen in the first quarter of the marketing year, though that is to be expected as corn shipments start to take center stage and Brazil's new crop gets closer to filling the pipeline.
Corn shipments came in at a 12-week high, recovering significantly from last week's pace, but still lagging what is needed to ship each week to meet USDA expectations. China was in taking shipment on 10.8 million bushels for the week.
Wheat shipments continued to lag, coming in below expectations and again less than half of what is needed to ship each week to meet USDA projections.
With arguably the biggest USDA report of the year out midday tomorrow we will likely see some position squaring continue today. For the most part traders aren't expecting much in the way of surprises, but with final production figures set to be released as well as quarterly stocks, winter wheat acreage and updated supply and demand numbers, there are a lot of places a surprise adjustment could pop up potentially changing the trajectory of the market as we move ahead.
Corn 1 to 2 higher
Beans steady to 1 lower