• HEADLINES: Argentine forecast details lean bullish; Crude scores new rally high.

• Chicago ag futures are mixed at midday with wheat and soy well off morning lows and corn turning higher. Wheat prices worldwide are viewed as undervalued as Black Sea cash markets stay unchanged and as EU fob prices are now quoted at substantial discounts to Russian origin. Russian wheat will not be getting cheaper until very late spring. And the details of Argentine forecasts are beginning to lean bullish as principal crop areas will stay arid for another 7-8 days. A temporary shift in S America’s upper air pattern does occur beginning early next week, but soaking rain in the next 10 days will be confined to 35-40% of Argentine ag areas.

• Additionally, Feb climate guidance is also trending warmer and drier in Argentina and Paraguay. Note that weather stays critical in Argentina this season into the first part of March given record late corn planting there. Ultimately, we maintains that additional sizable cuts to S American corn and soy production lies ahead, and longer term there is concern over soil moisture in Parana ahead of safrinha corn seeding in mid/late February. Parana in 2022 will account for 17% of Brazil’s total safrinha area.

• US exporters sold 100,400 mt of corn to Mexico for old crop delivery. Additional US corn demand lies ahead as importers through mid-summer can no longer turn to feed wheat and cheaper S American origin supply.

• Spot WTI crude is up $1.00 to $83, with RBOB gasoline posting a new two-month high at $2.41/gallon. Energy market outlooks stay bullish amid supply snarls and as global demand does not look to be materially impacted by Covid. This is important as spot Chicago corn as a percent of crude’s value today sits at 38%, right at the longer-term average. Soyoil as a percent of crude is 211%, the lowest since summer 2020. The biofuel production/demand growth story is intact and corn and soyoil are not expensive relative to US and global energy markets, particularly when accounting for renewable diesel tax incentives. Global vegetable oil price determination has been weighted more heavily to crude in recent years and this weighting will only increase in calendar year 2022.

• 90-day climate forecasts in the Central US are beginning to expand warmth and dryness into KS/NE and portions of the far Western Midwest. Immediate concerns are cantered on HRW yield potential, but in the long run the issue is whether these parameters are altered prior to summer. Cool Pacific temperatures and warm Atlantic temperatures offer high odds of warmth/dryness across the Plains and W Midwest, while too much rain is possible across the Southern Midwest. It is far too early to be concerned, but the burden being placed on US production in 2022 cannot be understated amid S American crop loss.

• Algeria was reported to have secured 600,000 mt of wheat this week. French origin was snubbed, with Paris milling wheat down another €2.00/mt today. However, global wheat demand has not begun its seasonal fade, and so we urge caution against chasing the recent correction in US and global values.

• The midday GFS weather forecast is similar to the morning run, but the outlook in Argentina is much drier than in recent days. Maximum temperatures stay in the 90s/low 100s into Monday. Moderate showers do expand into the principal ag belt Jan 21-24 but only after vegetation health worsens further. Previously, widespread rain was anticipated in Argentina beginning Jan 17-18. Without above-normal Argentine precipitation in Feb additional sizable production loss is assured.

• Long weekends do carry increased weather risks, in that that three full days of model output cannot be digested. Yet, an outright and lasting change in S America’s pattern is unlikely into very late winter. Note that La Niña is now forecast to linger into Jun/Jul. Breaks remain buying opportunities. Upside potential remains massive.

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