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We kickoff the day with MBA 30-Year Mortgage Rate, MBA Mortgage Applications, MBA Mortgage Market Index, MBA Mortgage Refinance Index, and MBA Purchase Index at 6:00 A.M., Building Permits Prel, Housing Starts Building Permits MoM Prel, and Housing Starts MoM at 7:30 A.M., Redbook YoY at 7:55 A.M., NY Fed Treasury Purchases 22.5 to 30 yrs. at 9:30 A.M., 17-Week Bill Auction at 10:30 A.M., 20-Year Bond Auction at 12:00 P.M., FOMC Minutes at 1:00 P.M., API Energy Stocks at 3:30 P.M., and Fed Jefferson Speech at 4:00 P.M.

The National Association of Homebuilder’s Housing Market Index rose 2% in January. To 47, the highest level in 9 months and the 5^th consecutive month the index was unchanged or higher. Compared to a year ago, the index was up 7% marking the 4^th month of annualized gains. The index is comprised of several sub-indexes. The index for current sales conditions gained 3 points for the month to 51, while the index for prospective buyer traffic was up 2 points at 33. At the same time, the index for sales expectations within 6 months fell 6 points to 60 due to still elevated interest rates. 30% of homebuilders reported cutting home prices in January, which has been the trend since July, while the average dales price decrease was 5% in January. 61% of homebuilders reported that they used sales incentives to move inventory during the month which was consistent with the elevated rate over the last 6 months.
 

South American Weather Pattern Discussion

South American Weather Stays Favorable; No Sign Northern Brazil Monsoon Ends:

The South American pattern into March 5^th offers near normal rainfall and near normal temps in all but far eastern Brazil. A favorable mix of rain & sun lies ahead. Most importantly, drought eases further in Buenos Aires and Cordoba as soaking rain returns in 6-10 days. Brazilian dryness into the weekend allows soybean harvesting & safrinha seeding to continue at a ear-record pace, while monsoon rainfall resumes in N Brazil after Feb 24^th . The EU models 1-5 & 6-10 day forecast shows that the precipitation forecast right on the money and a routine South American climate pattern into early March. In March, the focus is solely on the intensity of northern Brazil’s rainfall, where safrinha corn will pollinate from April to mid-May. Soil moisture there is abundant. And long-range guidance has lowered the odds of a premature exit of the wet season. Large South American crop harvests are ahead. Meanwhile, operational models feature steady precipitation in C & N Brazil in the 6-15 day period.  An expansion of rain is even forecast in Mato Grosso do Sul and Sao Paulo, where it is most needed, in early March. IRI’s updated Mar-May [probability forecast in major crop areas shows the risk of prolonged dryness has been eliminated, Additionally, La Nina is likely to end by Mar/Apr. Ag Resources (ARC) suggest that global feed markets will breathe a sigh of collective relief if regular rain persists in Mato Grosso and Goias in April. Barring adverse weather in N Brazil , South American corn production in 2025 will be up 100-125 Mil Bu year-over-year.
 

Corn Comments and Analysis

CBOT Corn Score New Rally High; Market Begins Shifting Demand to Other Origins:

March CBOT corn settled above $5.00 for the first time since May 2024 amid strong US export disappearance and rising domestic prices in Brazil. ARC’s fundamental maintains that enlarged US seeding (+3 Mil Acres) and regular rains in Brazil are needed before bulk liquidation occurs, but clients should prepare for a normal seasonal correction after winter. Also, not that fob premiums in Ukraine and Argentina are more actively probing for demand. Spot fob basis in Argentina this week was quoted at $.70 over CBOT, vs. $.85over two weeks ago. US fob Gulf quotes exist well above those in the Black Sea & Argentina. This won’t change the pace of physical US export disappearance immediately, but the risk at the $5.00 spot is one confirmed seeding expansion in the US and trend safrinha yields in Brazil. Catch up on ’24 and ’25 hedges at the market. It’s just normal for US exports & prices to peak in early spring. Uncertainty over US trade policy keeps volatility abnormally high. Pay attention to corn open interest and fund buying for early signs of a market peak. CBOT open interest peaks before prices.

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