Rain and snow hit a healthy bit of the Midwest over the first weekend of spring — a welcome sight for farmers dealing with drought conditions. However, until planting begins, focus remains on South America.
Jack Scoville, market analyst with Price Futures Group, said soy traders are watching Brazilian basis levels fall, and strong production levels in South America may be cutting into Chinese demand.
“Reports of great export demand in Brazil provide some support,” Scoville said. “Reports indicate that China has been a very active buyer of Brazil soybeans this season. Ideas that South American production is taking demand from the U.S. have pressured futures lower.”
Basis levels in the U.S. appear to be firming, Scoville said, as prices haven’t been incentivizing farmer sales. The same basis action can be found in corn as well.
“Basis levels have started to firm in the U.S. as processors look for supplies amid tight farmer holding patterns,” he said.
Corn has found good demand at lower prices, he said, as the short-term trend is higher overall. Scoville said markets have already taken into account conditions and an overall large supply of corn, which could help futures markets.
“Futures have been very oversold,” he said. “Futures are much lower than just a few months ago, and a short covering rally is increasingly expected and might be under way.”
The weather forecast in South America is for drier conditions following last week’s rains, as Brazil’s reports show “rapid progress,” Scoville said, indicating much of the winter crop is planted.
News continues to be negative for wheat markets, but there has been a slight gain recently despite lower prices in Russia and Europe.
“Export sales remain weak on competition from Russia, Ukraine and the EU as those countries look to export a lot of wheat in the coming period,” Scoville said. “Big world supplies and low world prices are still around.”