Following a bounce in the wake of a mostly bullish USDA supply-demand update last week, Chicago corn and soybean futures have quickly refocused on South American growing conditions.
“The primary thing right now is South American weather,” said market analyst Tom Lilja of Progressive Ag in Fargo, North Dakota.
Near-term forecasts call for more heat and dryness in drought-plagued Argentina, although the longer-term outlook is for wetter conditions. The weather in Brazil has more favourable throughout the 2022-23 growing season, although southern areas are still trending drier while the early harvest in the country’s central region is being interrupted by rain.
“Argentina does continue to be the biggest concern amongst the trade,” said Lilja, noting that production estimates out of the country continue to be revised lower.
From a technical standpoint, Liljja said the soybean market has developed into a “decent looking uptrend.” Corn futures are trying to establish an uptrend, but he said the March contract would need to see a sustained move above US$6.95/bu in order enter an uptrend of its own. Such a break higher could be a challenge though, given the poor export demand US corn has experienced lately.
Meanwhile, uncertainty over Chinese buying interest going forward is overhanging both soybeans and corn.
“Somedays they’re saying China will open up, and two days later there’s another COVID outbreak. But if China does open up, that would be a very supportive factor in the market,” Lilja said.
The ongoing conflict in Ukraine is also leading to day-to-day volatility, especially in wheat with that market still very sensitive to news out of the region.
“Australia had a good wheat crop, which will keep a lid on things,” said Lilja, adding that rising production estimates out of Russia were also weighing on prices, although talk that the country may introduce export quotas could be supportive.
Movement in crude oil will also be a factor providing direction for the grains and oilseeds. Lilja said he believes oil prices have likely bottomed for the time being.