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CBOT prices closed stable/lower last week, indicating nuanced market trends.
Soybean futures saw initial gains on Monday due to concerns over Brazil, but retraced throughout the week, while corn remains short on significant fundamental shifts.
Bullish developments on Friday included the Biden administration's announcement supporting ethanol-based SAF for tax, and NOPA reporting higher-than-expected crushed soybeans.
Looking ahead, potential short-term rallies in soybean and corn prices may occur due to weather sensitivity in Brazilian soybean crops and speculative factors. However, a broader outlook leans towards bearish sentiments with expectations of good production in South America and a comfortable U.S. corn balance.
CBOT Recap: Weekly Shifts in Soybeans and Corn
Corn at CBOT ended last week at lower prices, while soybeans edged slightly up. However, focusing solely on the start and end points fails to capture the complete picture. Soybeans futures, for example, had a very bullish day on Monday (11) due to increased concerns over Brazil but relinquished those gains over the week as concerns diminished.
Corn has been walking sideways for quite some time, lacking shifts from the already-known fundamentals.
Still, Friday (15) brought bullish news for both. For corn, Biden’s administration announced that it would enable ethanol-based SAF to qualify for tax credits, provided a certain methodology is followed. The specifics of the methodology will still be updated until March 1, but it has been seen as a win for the corn lobby.
Meanwhile, NOPA reported the US crushed soybeans above the market’s expected range, providing some support during the last trading hours of the week.
Fig. 1: CBOT Corn and Soybean Futures – March-24 Delivery (USDc/bu)
Fig. 2: US Soybean – Crush (M ton)
Looking ahead, there are a few factors to keep on the radar
Since we are now in the middle of December, soybean crops in Brazil are entering the reproductive stages of development and will be the most sensitive to weather over the next 4 weeks.
At the same time, with the improved weather since the middle of December, Chicago soybean futures are not pricing as much risk as before. This combination may create the opportunity for rallies in the short term – especially if the weather forecasts turn suddenly drier for a couple of days.
However, given the current weather conditions and NDVI, we still believe Brazil should produce a plentiful crop, at 160M ton – smaller than initially expected, but still large. As such, in the mid-to-long term, we lean still towards the bearish side.
Similarly, on corn, we think that the comfortable US balance should keep a lid on prices. However, in the short term, there could be plenty of reasons for prices to rally.
Spec funds (money managers) are way too short on the corn market, and this tends to make them more sensitive to bullish news. The increasing concerns over Brazil’s winter crop (loss of planting window, lower margins...), as well as a possible interest rate cut, could lead to a reaction from the speculators.
Fig. 3: South America Soybean – Production (M ton)
Source: CME, NYMEX
Fig. 4: CBOT Corn – Money Managers Net Position (‘000 lots)
We believe in good production out of South America in 23/24 and, therefore, in lower prices in general. Still, a combination of market factors could add some support to both corn and soybean prices in the short term.
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