While there continues to be plenty of speculation on the ultimate size of Brazil's soybean crop, with guesses ranging from the mid-140-million-metric-ton level to the USDA's own lofty 157-mmt estimate, just since regular rains began in mid-December, Brazil's edge versus U.S. Gulf values on an FOB basis has widened dramatically. As of last Friday, Brazil's FOB discount at the port of Paranagua was close to $1.80 per bushel to U.S. Gulf soybean offers. With U.S. soybean export sales running 18% below those of a year ago, it seems the window for U.S. soy sales is closing faster than most had expected.
The other side of the coin to the bearish influence of the expanding Brazil harvest above is the fact that managed funds continue to increase their bearish bet on beans. As of last Tuesday, funds held a 96,000-contract net short -- the largest since 2020. That could light a bullish fire under the market at some point, but right now funds seem to be in control. A convincing close under $12.00 would likely lead to a test of the $11.50-$11.60 level; but at midmorning Monday, that area looks to be supporting.
Early Monday, March corn futures fell to within 3/4 of a cent of the contract low. Corn surely has more reason to be weak than soybeans with the highest U.S. ending stocks in years. However, corn export sales, unlike beans, have been running 35% higher than a year ago.
The corn chart looks like its headed lower from here, depending on the return of rain in Argentina next week. Managed-money funds have increased their bearish bet on corn, with the net short reported by the CFTC as of last Tuesday, Jan. 23, at 265,000 contracts. That is the largest net short in more than 3 1/2 years and will be a bullish catalyst at some point. However, right now, the trend is the friend of fund managers.
Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of commodities, futures or options involve substantial risk and are not suitable for everyone.
Dana Mantini can be reached at Dana.Mantini@DTN.com
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