At the beginning of the week, the CBOT grain market showed mixed trends. Wheat futures rebounded continuously due to worsening drought in the U.S. southern plains and tensions between Russia and Ukraine. The leading contract KEK24 surpassed 610 cents/bushel, reaching the highest level since February 26. In contrast, corn and soybeans were pressured by weak exports and fund selling, with discrepancies between spot basis and futures prices. Soybean oil saw fund coverage due to expected biofuel policy support, while soybean meal continued to weaken due to lower-than-expected crush volumes.
Wheat: Supported by Weather and Geopolitical Risks, Fund Short Covering
The drought area in the main U.S. winter wheat producing regions is expanding, with Kansas's good-excellent rate dropping to 48% and 63% of Oklahoma's crops in moderate or worse drought. As a result, the leading KC hard red winter wheat contract KEK24 broke through the 600-cent mark, closing at 610.4 cents/bushel on March 18, attracting speculative funds. Position data showed that funds net bought 3,500 wheat contracts on March 17, with a cumulative net long increase of 6,500 over five days, reversing the previous net short of 4,000 contracts.
International demand provided support, with Iran purchasing 120,000 tons of Russian wheat, and Syria and Jordan issuing new bids for 220,000 tons each, while Russia's March export forecast was revised downward. If precipitation is insufficient during the critical growth period in April, the U.S. wheat/Russian wheat price gap (currently about $0.60/bushel) may narrow further.
Soybeans: Weak Exports, Declining Crush, Divergence Between Soybean Meal and Oil
Despite issues with U.S. river transportation pushing the Gulf of Mexico soybean FOB premium to 92 cents/bushel, futures were weakened by pressure from Brazilian supplies. The 2024/25 Brazilian soybean harvest progress has reached 70%, the fastest level in 14 years. Fund positions showed a net short increase of 22,500 contracts on the 30th, with a brief covering of 500 contracts within five days, reflecting fluctuating market risk aversion sentiments.
There was a divergence between soybean meal and oil. NOPA data showed the U.S. soybean crush in February fell to 177.87 million bushels, the lowest in five months, leading to soybean meal inventory buildups. The Illinois soybean meal basis weakened to a $3.50/ton discount. By contrast, soybean oil got support from funds with a single-day net buy of 1,500 contracts due to expected expansion in renewable diesel capacity. The market is watching April's U.S. biofuel blending mandate draft, which could be a key factor affecting the oil-meal ratio (currently 2.45:1).
Corn: Falling Exports, Fund Selling Pressure, Tightening Cash Liquidity
The latest USDA data showed weekly corn export inspections fell to 1.659 million tons, down 10% week-on-week, weakening confidence in export recovery. The futures market exhibited a "weak futures, strong basis" pattern, with the main CBOT corn contract ZCK24 falling to 461.2 cents/bushel, nearing the crucial 460 cents support level. Meanwhile, ethanol plants in the Midwest raised prices to quickly collect cash, with Indiana plant basis jumping 9 cents/bushel in one day.
Fund position data showed net short positions expanded to 60,500 contracts on the 30th, indicating that the market is still digesting the impact of South American second-corn supply shocks. Notably, U.S. farmers' reluctance to sell increased, causing cash liquidity to shrink, with Mississippi River barge freight rates soaring to 475% of the tariff. If April's planting progress is delayed by weather, it may trigger a synchronous rebound in both spot and futures markets.
Soybean Oil: Biofuel Policy Expectations Encourage Fund Coverage
Although funds still held a net short position of 22,000 contracts, a single-day net long increase of 1,500 on March 17 reflected the market's heightened sensitivity to policy. With renewable diesel capacity deployment exceeding expectations (expected to add 450,000 gallons/day capacity in Q1 2025 YOY), the U.S. soybean oil stocks-to-use ratio dropped to 9.8%, the lowest in three years. Technically, the May soybean oil contract is forming a double bottom at 42.00 cents/pound, and the trend of fund coverage is evident.
Soybean Meal: Declining Crush Combined with Weak Demand, Price Under Pressure
NOPA data shows U.S. soybean meal stocks have risen to 875,000 short tons, up 18% YoY. Meanwhile, feed demand was suppressed by the avian flu epidemic and slowed pig inventory growth. Position data showed that funds increased their net short by 3,500 contracts over five days, resonating with the cash market's "basis steady-futures decline" pattern. As April sees increased arrivals of South American soybean meal, the Gulf of Mexico FOB premium may face a downward revision pressure of $15-20/ton.
Market Outlook
Overall, wheat continues to rise, supported by weather and geopolitical factors, while corn and soybeans are under pressure from weak exports and fund selling. However, there are still supportive factors in the cash market. The market's future focus is on the critical weather window period in April and adjustments to U.S. biofuel policies affecting the soybean oil market.
