- HEADLINES: Chicago volatility stays extreme with grain recovering Monday’s losses; Argentina to update its new economic policies; GFS weather forecast drier next 7-8 days across N and C Brazil.
- Chicago grain futures are sizably mixed (again) with the grains higher and soybeans lower in a reversal of Monday. The volume of trade is holiday restricted with it not taking much order flow to create a meaningful impact on price. Corn/wheat futures have recovered most of Monday’s losses.
- WTI crude oil futures have fallen to $2/barrel losses which has pulled soyoil futures lower in sympathy with January again targeting $0.50/pound. Soymeal futures are holding firm which has underpinned soybeans. March soybean futures have traded to a 20-cent premium vs January late last week which has narrowed to a 16-cent premium today. Midwest cash soybean basis has been weak but is firming as US farmers slow down on their old crop sales cash flow needs. We note that the Mato Grosso/Goias cash soybean market has become hard to define with farmers halting sales while end users do not want to pay up amid the uncertainty surrounding crop size. Northern Brazilian soybeans are struggling under irregular and sporadic rainfall while several crop regions have recovered, but others are enduring worsening stress.
- Visual assessment is showing that crop size is in decline with rainfall/temperatures in the next 3 weeks having a significant impact on yield. Latest estimates put the 2024 Brazilian soybean crop at 155.3 million mt with a downward bias.
- Managed money has bought 5,200 contracts of wheat, 4,700 contracts of corn, while selling 4,900 contracts of soybeans. In the soy products, funds have sold 4,100 contracts of soyoil while buying 2,600 contracts of soymeal.
- The USDA reported the sale of 198,000 mt of US soybeans to an unknown destination for the 2023/24 crop year. There are cash connected rumours that China continues to ask for US soybean from the PNW for February. No new sales can be confirmed. US weekly export sales will reflect massive US wheat sales of 1.2-1.5 million mt, soy sales of 1-1.3 million mt and corn sales of 900,000-1.2 million mt.
- Tunisia has bought 100,000 mt of soft wheat, 75,000 mt of durum and 50,000 mt of feed barley for shipment from Dec 25 through Feb 5. The soft wheat was sold at $278.70/mt basis CIF which works back to an estimated fob value of $253.
- Argentina’s economic minister, Luis Caputo, is set to announce the shock treatment for the Argentine economy with President Milei’s initial policy moves. The announcement is planned after financial markets close to lessen their impact. Traders will watch for grain export tax changes.
- The midday GFS weather forecast is drier in the 7-day forecast for Northern and Central Brazil with widespread 90’s and lower 100’s. The GFS model keeps backloading the forecast with rain, which is in low confidence due to recent forecast failures. The model does break out moderate rain after December 21 (day 9) and continues with daily rain chances in the 11–15-day period. Our fear remains that the extended range forecast is too wet and that needed soaking rain is never pulled forward.
- S Brazil/Argentina will enjoy near to above normal rain and near normal temperatures with highs in the 80’s/90’s. There is no indication of adverse weather for Argentine crops, which favours their yield potential as crops are planted.
- Holiday thinning volume exacerbates Chicago price moves into the end of the year. It also produces more questions than answers on daily trade. Today’s wheat, soyoil and corn futures activity reflects the light volume and the fund impact. We hear no new demand for US wheat, while Brazilian weather is drier with rainfall being pushed backwards in time (again). NOPA is out Friday which keys soyoil price direction. We would prepare for rising volatility as the AI/algo machines don’t understand that it is the holidays. Daily price volatility will very likely be sizeable into early 2024.