Abundant moisture over the Plains, Russia selling old crop wheat supplies into the world market, a record large Brazil crop and CoronaVirus have all offset any potential increase in China grain imports.
We have been in the camp since December, that drought easing rains in northern Brazil and a potential huge amount of exportable soybeans out of South American, could likely put the breaks on any sustainable rally in soybeans.
How did we forecast improved weather for South American soybeans and coffee close to two months ago? The great rainfall was one reason that coffee futures also fell some 40% from the November highs? It has to due to the previous positive Indian Dipole, and what we feel is still a weak El Nino signal.
Our CLIMATE PREDICT long-range weather forecast program (above) shows the forecast for December-February for a wet Midwest, dry west African cocoa and wet Brazil. This forecast has indeed come to fruition.
Wheat and Soybean Fundamentals
There is always a host of global fundamentals affecting the wheat market. Soft-red wheat stocks are the tightest in several years and with US acreage down this year, any weather problem could spark a spring or summer rally in wheat. However, for now, one can see the great rains all winter in the Plains, while the soft-red regions from Missouri to Illinois and Indiana are too wet. This could potentially some disease issues to the soft red crop, if there was to be a wet spring.
With respect to soybeans. The only weather concern that might be an issue would be with too much rain in northern Brazil for the harvest. It is way too early to worry about US weather problems, but one thing is for sure, that we will not be concerned about drought in the Midwest, at least through the spring.
There have been several years (1988, 2011, 2012) in particular, in which a dry winter and spring caused a bullish reaction in corn and beans prices quite early–even before planting. However, this will likely not happen this spring. A rally in grains will have to come from either wet spring weather and harvest issues and/or stepped up Chinese buying and an easing in the CoronaVirus scare.