Grain Spreads: New Inputs

Sean Lusk General Commentary

Commentary

This morning’s soybean crush came in at 182.2 million bushels this morning, well below the average 186.7 million bushel (mbu) trade expectation, and down from December’s 186.4 mbu (the record crush for any single month), and 184.7 mbu last January. Trade estimates ranged from 183.7- 188.5 million bushels. Crop scout Agro-Consult this morning estimated 2021/22 Brazilian soybean production at 125.8 MMT after a crop tour, down 8.4 MMT projected before the tour, with yields pegged at a six-year low of 51.7 60-kilogram bags per hectare, or 41.6 bushels per acre. This comes after Pro Farmer slashed their Brazilian soybean crop estimate by 6 MMT to 124 MMT, saying conditions in southern Brazil are worse than expected and there may be additional yield losses due to drought. They also lowered their Argentine soybean crop forecast by 2 MMT to 40 MMT. “Record high or near record high temperatures coupled with scant rainfall over the past several months have resulted in a catastrophe for soybean producers in southern Brazil and the growing season is not over,” Pro Farmer said in a weekly report. I included a weekly continuous soybean chart below chart below. 1540 represents 15 percent higher for the year, while the ten percent threshold sits all the way down at 14.77. While those levels are wide, due to this steep rally, I wouldn’t rule out a significant retreat of prices of that size should funds liquidate. Trendline resistance is up at 16.00 in my view. A close over and next resistance is just above at 16.07, the twenty percent higher on year threshold sits at 16.07, then next trendline resistance at 1643. A close over that level and its last years high at 1667. It seems for now threats of war in Eastern Europe have been subdued at least for the day. The energy sector along with wheat and corn saw sizable losses today giving back some of the rally late last week and yesterday’s push higher. The geo-political situation can flip flop at any moment, therefore caution is warranted here.

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Sean Lusk

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