Corn futures jumped 2% and soybean futures by a steeper 4% towards Tuesday’s market close, as an ongoing dispute between the Argentine government and key agriculture lobbies over a ban on corn exports, falling soybean crush margins, rising crude oil prices and a weaker US dollar combined to re-ignite support across the complex.
March corn futures were trading at $4.922/bu by 1700 London time, up close to 2% having reached a high earlier in the session of $4.96/bu, the highest levels since April 2014.
And the March soybean contract was trading at $13.57/bu, up by more than 3% from Monday’s close of $13.13/bu with the contract at one point hitting a high of $13.73/bu, the highest level since July 2014.
Tighter soybean supply in both the US and Brazil, following record levels of buying by China, has left both countries largely sold out until the new harvest comes online from February and March according to market sources.
And falling US Board crush margins could also point to a need to slow down the pace of crushing in the US, as fears grow that there may be a looming domestic shortage of beans similar to that experienced by Brazil in the fourth quarter of last year.
“It feels like two things have happened here [with soybeans], we have run out of natural sellers with Brazil and the US farmer now largely sold out and traders are looking at board crush margins, which are down 25 c/bu, [which points toward] bigger commercial operators thinking we might run out of beans and need to slow the crush,” Charlie Sernatinger from ED&F Man told Agricensus.
For corn, as well as rising crude oil prices - with the front month Brent contract jumping 4% on planned OPEC cuts - continued problems in Argentine logistics also raised supply fears.
The country’s government announced a ban of old crop export registrations at the end of last year, leaving the US as the main supply origin for at least the next two months.
However, key farming and agriculture industry lobbies in Argentina have protested against the old crop export ban and have threatened to conduct strike action through January and February, potentially suspending all deliveries, exports and logistics for at least two months, including those already registered on the export register.
“It seems farmers will stop everything - no farmer selling, no transportation (even to domestic destinations), no anything - while the government refuses to reconsider the corn export suspension. And the government says it will not reconsider anything at all,” a Brazil-based market source told Agricensus.
As a sign of Argentina’s corn export prowess, over 1.2 million mt of corn export licenses were registered overnight in one of the busiest days for several weeks, with all the registrations booked against the upcoming crop which is scheduled to begin loading from March 1, 2021.