- HEADLINES: US wheat futures rise on five fresh world tenders; Corn/soybeans sag on weekend Argentine rainfall; US wheat exports tepid.
- Chicago futures are mixed at midday with corn/soybeans weaker while wheat futures recover on a building line up of world export demand. The volume of trade has been holiday reduced with this week’s corn/soybean low expected to be forged by Tuesday’s close. Key support in March corn rests near $5.80 and March soybeans at $12.50. The US cash market on the processor side of corn and soybeans is strong and margins are strong too. We doubt that a bearish price phase is beginning. Rather, Chicago values are consolidating with the better-than-expected rains that fell across Argentina this weekend, and likely will drop across Southern Brazil in the next 12-18 hours. A consolidating Chicago is expected with improved S American weather causing the need for another 10-14 days of dryness before real drought arises.
- Chicago brokers estimate that managed money has sold 6,300 contracts of corn and 4,900 contracts of soybeans, while buying 1,900 contracts of wheat. In soy products, funds have sold 3,200 contracts of soymeal and 2,600 contracts of soyoil. Open interest in soyoil and soymeal rose on Friday suggesting new fund length in meal and end user price covering of soyoil.
- The break in world wheat price has caused end users to step forward and extend their coverage. Algeria, Iraq, Iran, and Turkey are all seeking wheat over the next week which amounts a combined 1.5-1.7 million mt. And there is talk the Egypt’s GASC will also be tendering for wheat for February. Important is that French wheat is the cheapest into Algeria and the EU wheat market needs to slow future wheat exports based on tightening supplies. Prices have reached levels that has returned import/miller demand.
- Moreover, Brazilian millers and Government officials are meeting over GMO Argentine wheat today with a decision on how to manage the risks expected sometime by Tuesday’s close of business. Brazilian millers do not want GMO wheat and if testing finds such genetic material in a truckload or trainload, what is the correct legal response. Parties are trying to work out a protocol.
- US export inspections for the week ending December 9 were 31.9 million bu of corn, 63.4 million bu of soybeans, and 9.0 million bu of wheat. The wheat export pace was on the lower end of trade expectations. For their respective crop years to date, the US has exported 402 million bu of corn (down 74 million or 15%), 935 million bu of soybeans (down 252 million or 21%), and 418.6 million bu of wheat (down 86 million or 17%). The US soybean export pace is slowly improving and catching up with last year. World soybean demand has been record large since September, a trend worth nothing. As before, USDA’s 2021/22 soybean exports are 50-100 million bu too high with normal S American weather. The big question is S American weather during La Niña, it only takes a modest loss to rally March to $13-13.50.
- Commercial sources indicate that China has booked 9-12 million mt of Ukraine corn in the 2021/22 crop year. This purchase tonnage added on top of known US sales takes China’s 2021/22 corn purchases to 22-25 million mt. And China has yet to activate 7.2 million mt of TRQ’s that will likely boost world corn imports to over 30 million mt. Just like last year, China is on a mission to secure more feed than many early in the export season are willing to understand.
- The midday GFS weather forecast has widely scattered showers across RGDS in the next 36 hours before a lengthy period of dry weather returns. The forecast models have Argentina/Southern Brazil in a below normal rainfall trend with heavy totals for Northern and Central Brazil of 3.50-8.00” into Dec 24. The heavy rain initially favours the reproducing soy crop if sunshine/drier weather returns in January.
- The rain across Argentina/S Brazil has sparked Chicago long liquidation. However, strong US cash basis underpins the break and causes a recovery into the weekend. The Argentine rain produces another week of market consolidation. World wheat values will rise on improved import demand.