More pain before February WASDE

More pain before February WASDE

Overnight- Corn and soybean futures bounced back from their overnight lows after Conab reported lower expectations for Brazilian production.

They lowered total corn production by 3.9 MMT to 113.69 MMT

Soybean production was dropped 6.2 MMT to 149.403 MMT.

These cuts were more aggressive than expected and could counteract any slow play by the USDA with their SA numbers which will likely be higher than Conab’s.

Yesterday- Corn and soybean futures were lower again with corn off 4.5 cents and soybeans off 10.5 cents in the March contracts.

Some rains had started in Argentina with even better forecasted for Fri/Sat.

Funds have continued to add to their net short positions with no fear.

There was a report that the Rosario Grain Exchange dropped their Argentine soybean production by 30% but that only bumped soybean prices for a short time before moving back lower.

Feb WASDE today at 11AM

We are looking for USDA to cut Brazilian production but there should be little change to domestic numbers.

US corn demand estimates are in line with ethanol grind possibly growing later this year.

US soybean exports are lagging behind lower USDA estimates for the year and cut be cut further down the road but seems too early to do it now with shrinking Brazilian production.

Soybean crush should be raised in the future as well but will not offset the shortfall in exports.

Bottomline

So far this week, March corn is down 9 cents and March soybeans are off 21 cents as of yesterday. Funds are standing on these markets and pressing their short positions. The Conab numbers could be the first step to building a base in these markets. We expect a neutral to bearish USDA report, but it should be priced in and we will trade flat to higher into next week unless the numbers contain a bearish surprise.

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