Soybean Morning Update & Commentary: Bull spreads are firm despite the lower flat price.

Overnight grain markets started lower but are trying to float back as we head toward the break.  Wheat is leading the charge with a reversal higher on falling S Plains crop conditions while the bull spreads in corn and beans are firm despite the lower flat price.  Soybean basis has been steady/firm as bids have rolled out to the May, barge basis at the Gulf is steady at +75.  Fund selling/liquidation has been a fixture to the trade the past couple of sessions and whether that has been exhausted or not will be important to the grain's attempt to stabilize and prevent the momentum from shifting to the downside.

South American weather is threatening to soybean crops in Argentina/S Brazil with the pattern returning to mostly hot/dry for the next 10-14 days. March is the main pod filling month for Argentina's bean crop so the absence of moisture is not ideal - see US August 2020. Brazil continues to deal with too much moisture in the center to north but harvest progress and planting progress are still being made, just very much behind normal timings. Yesterday's crush report after the close was not a surprise but did once again highlight the record pace of processing through the first four months of the marketing year with no signs of slowing domestic soybean demand.

In the product trade, bean oil is trading slightly higher while meal is $2-3 lower. Bean oil continues to consolidate near 50 cents where its PriceCount was met last week while the meal chart is deteriorating as we break down the recent sideways range which would suggest further weakness without a turnaround day. Canola is trading -1.5 lower in a mixed early performance while Malaysian palm oil followed through to the downside closing -1.14% after yesterday's key reversal trade.

World Weather Inc:
• Mato Grosso into southern Goias will see frequent rain during the next two weeks while a mix of rain and sunshine occurs elsewhere with Paraguay and southern Brazil seeing more sunshine than rain.
o Rain in northern Brazil will slow harvesting of soybeans and planting of second season corn as well as threatening some soybeans with quality declines while the moisture is supportive of developing crops.
• Argentina will see dry conditions most often through the next two weeks with warm to hot temperatures and rapid drying in place for at least the next week.
o Some rain will fall in west-central and northern areas later this week, but outside of those areas significant drying will occur and stress to crops should rise in the many areas that did not receive significant rain during the past weekend.
? Crop stress should be greatest from central Santa Fe to central and southern Entre Rios where soil moisture is lowest. Portions of western Buenos and La Pampa are still quite dry, despite some rain Saturday night and Sunday
o Increases in crop stress should become more widespread next week as soil moisture from rain during the past weekend is lost to evaporation and if rain does not increase soon yield potentials should decline more significantly.

Patria Agroegocios reports Brazil's soybean lineup waiting to load/ship has reached a record 19 mmt due to harvest delays and strong demand for new crop supply.

Cordonnier took his Brazil soybean production est. up 2 mmt to 132 mmt with a neutral to slightly higher bias going forward while leaving his corn est. unchanged at 105 mmt with a neutral bias. He left his Argy soy and corn production estimates unchanged at 46.0 mmt and 45.5 mmt respectively, with a neutral bias going forward.

USDA census crush report showed processors crushed 196.5 mb in January compared to the avg. trade guess of 195.6 mb, up from 193.7 mb in December and comes in slightly below the record all-time monthly crush of 196.6 mb from October 2020. Oil stocks grew to 2.305 bln lbs, just shy of the avg. trade guess for 2.315 bln lbs and an increase from 2.219 bln lbs in December. Meal stocks ballooned to 512,393 short tons from 358,134 in December. This report is not a big surprise, but it is friendly to beans as it shows processors are not rationing demand to this point and continue to run at a record pace. The top three highest monthly crushes on record have taken place this marketing year which also holds four of the top five of all-time. It is also negative to the products as oil stocks grew to an 8-month high and meal stocks grew to multi-year highs (from what I can tell).

Overnight deliveries: Corn 0, SRW 0, HRW 77, Beans 0, Meal 7, and Oil 0.

In the news:
• On Tuesday, grain traders said Egypt's GASC set Thursday, Mar 4 as offer deadline in a tender seeking at least 30,000 mt of Soyoil and at least 10,000 mt of Sunflower oil. The vegoil is for delivery in first half May.
• Monday's USDA Fats & Oils: January 2021 Soybean crush 5.9 mln tons; expected 5.87 mln tons
• Monday's USDA Fats & Oils: January 2021 Soybean meal stocks 512,393 tons
• Monday's USDA Fats & Oils: January 2021 ending Soy crude oil stocks 2.305 bln lbs; expected 2.32 bln lbs
• USDA January 2021 Extra Long Staple Cotton Stocks On Hand (bales): 4,520 bales ; prior month revised to 3,649 bales from 3,955 bales.
• USDA January 2021 Extra Long Staple Cotton Stocks On Hand (pounds): 2,163,000 lbs ; prior month revised to 1,758,000 lbs from 1,897,000 lbs.
• On Monday, analysts with AgRural estimate the 20/21 Brazil soybean crop production at 133.0 mln mt up from their previous outlook at 131.7 mln mt. They estimate as of last Thursday the crop was 25% harvested up from 15% the prior week, but lagging the 40% pace in the year earlier period.
• Euronext Paris May rapeseed futures on Tuesday are trading +1.00 euro higher at 497.00 euros/mt
• Dalian May soybean futures on Tuesday traded +52 yuan higher ending at 6,043 yuan/mt; May soymeal futures lost -38 yuan ending at 3,396 yuan/mt
• Dalian May vegoil futures traded lower, soyoil lost -32 yuan ending at 8,796 yuan/mt, palm oil dropped sharply off -170 yuan ending at 7,452 yuan/mt
• Malaysian May crude palm oil futures on Tuesday traded -44 ringgit lower ending at 3,640 ringgit/mt
• Malaysian Apr/May/Jun cash offers on Tuesday traded -$17.50/mt lower at $950.00/mt and $952.50/mt, respectively
• Outside markets. Crude Oil +16c ; Gold +$4.50 ; Silver -29.8c ; US $ index +12 pts

Early spread action:
• Soybean bull spreads firm despite lower flat price.
• Board crush margins off 1 to 69 cents/bushel.
• Oil share 37.2%.
• New crop bean/corn ratio 2.60%.

Soybean Basis:
Location Spot
US Gulf steady +75
Brazil Paranagua steady +15
Cedar Rapids, IA steady -16k
Mankato, MN up 15 to -5k
Decatur, IL steady +18k
Claypool, IN steady +40k
Columbus, OH steady +10k