Soy and currencies: rain brings relief to farmers but pushes prices down in Chicago

The oilseed lost more than 1% of its value and added its fourth negative session after closing at US$547.6 per ton. More rain is expected to fall in the coming days, which might ease production losses.

The rains that have fallen in recent days have brought (some) relief to farmers, especially in the core production zone, which needed to improve its soil moisture profile in order for agricultors to finish the soybean and corn planting work and to facilitate good crop development. But not all the news is good, since Chicago market operators immediately removed the climate premium from grain prices. Thus, both the oilseed and the cereal closed on a downward trend this Monday, at their lowest value in two weeks.

The oilseed closed at US$547.6 for the March contract and US$546 for the May contract, which marks a decline of more than 1% compared to the previous session. Sources at Granar consultancy explained: “Soybean prices fell for the fourth consecutive day in Chicago. Some of the more relevant negative factors for the US market were the rains that have fallen since last Wednesday in a good portion of Argentina’s agricultural areas and the forecasts of new rainfall for the second half of this week, which would keep alleviating the effects of the prolonged water deficit that already caused major and inevitable losses over the harvest expectations”.

The progress of the soybean harvest in Brazil, which is on track to deliver more than 150 million tons, also exerted a downward influence. In this regard, AgRural consultants surveyed the harvesting progress over 1.8% of the planted area, compared with 4.7% at the same time in 2022 and the five-year average of 2.8%.

The good news for Argentina is that the rains of the next few days could mitigate the losses in soy production and thus achieve a harvest of between 37 million and 41 million tons in the best case scenario. The bad news is that with a super harvest in Brazil and cautious demand from China, the value of the oilseed could gradually fall back from the peaks it has been reaching at this point in the season.

The corn situation is a carbon copy of that of soybeans, and the harvest could also exceed 40 million tons if the moisture profile of soils in the core zone improves. In short, not everything is lost, but time is not favoring crops that need a quick injection of water.

The price of the cereal after the rainfall of the last few days closed for the position that expires in March at US$262.29, which represents a decline of 1.48% or US$3.94 compared to Friday’s trading .

The other bearish fundamental that continues to affect US corn is Brazil’s strong competition in the export market, after ending 2022 with record sales and the removal of barriers that restricted the entry of Brazilian grain into China.

Wheat prices also closed with drops in Chicago, Kansas and the European market. “The main reason for the bearish trend, with funds in another batch of contract liquidation, was Russia, due to its agile exports, whose fundamentals are a very weak currency, abundant stock and little competition from the European Union and the United States. The fact that shipments from the three ports in Ukraine enabled for this purpose have returned to evolve without major setbacks after the slowdown we saw between late 2022 and the second week of January, also added to the bearish trend”, detailed sources from Granar.

Thus, in Chicago, the grain lost almost US$8 per ton for the March position, closing the session on Monday at US$264.55.

Originally published in / Translated by Agustín Mango


All Right Reserved.  Buenos Aires Herald