Roundup: Chicago agricultural commodities end lower over the week

Chicago Board of Trade (CBOT) grains futures close lower over the week which ended Feb. 24, mostly on favorable South American growing conditions.

CBOT corn futures settled lower for a second consecutive week. New bullish fundamental input remains lacking, and this week's trade was plagued by both the United States Department of Agriculture (USDA) and ongoing favorable South American growing conditions.

The USDA's Outlook Forum this week featured US new crop acreage at 90 million, below expectations but unchanged from the baseline release, but end stocks will remain in excess of 2,000 million bushels assuming trend yield.

Analysts hold that the loss of world market share beginning in mid-2017 is just as important as US acreage, and indeed South American crop size estimates suggest a massive rebound in South American exports beginning in Jun/Jul.

Argentine crop estimates have been inching higher, and rainfall across the heart of Brazil's safrinha corn belt will be near double that of a year ago. All indications point toward a South American exportable surplus some 22 million tonnes higher than in 16/17, and it'll be difficult for the US to compete.

Note that Gulf basis for May/Jun is at a multi-year low, yet Argentine offers are still 0 .10 dollar per bushel cheaper. Most analysts' strategy remains to use rallies (whether due to weather hiccups or fund inspired) to advance forward cash sales.

Wheat followed corn lower this week and aside from ongoing concern over dryness across the Southern and Western US Plains, fresh news is lacking. Most importantly, the multi-week rally in Black Sea cash prices seems to have paused, and interior Russian values are again weaker.

Even in U.S. dollar terms, domestic Russian wheat in key areas of the south are down 3-4 dollars per tonne on the week, and down 5 dollars per tonne from a peak in early February.

Without firm cash markets, the US market is left to trade massive end stocks and a lack of needed demand. Recall the Australian crop was raised last week, and Argentina's Agriculture Ministry this week suggested their crop could be as high as 18 million tonnes, vs. the USDA's projected 15 million tonnes.

Southern Hemisphere exports through spring/summer will be record large, and as stock estimates continue to rise in Russia, analysts expect rallies through summer to be limited to periodic short covering events. A close eye will be kept on world weather, and it' s April and May that are the key 2 months in determining world wheat yields, and whether another record large crop is developing? World wheat farmers will be shedding old crop supplies into spring.

Soybeans slipped lower through the holiday shortened trading week, with the market under pressure rising yield expectations in Brazil and then larger than expected new crop acreage estimates from the USDA.

Fundamentally, US soybean stocks are record large while export demand is now quickly being shifted down to Brazil. The Jan-Feb Brazilian soybean export pace will be record large, and shipment totals look to gains speed into April.

Technically, spot futures fell back to trend-line support, with May soybeans dropping back to the contract's 200 day moving average.

Analysts' view has turned more bearish as the Brazilian harvest advances and yields exceed expectations. The USDA estimates that US farmers will raise their soy acreage by 4.6 million acres to a record large 88 million. Spot futures need to hold against 10.00 dollars or risk a deeper decline to 9.50 dollars. Enditem