• HEADLINES: Markets lower at midday; NOPA crush record for Dec but slightly below trade guesses.

• Chicago futures are mostly lower at midday with corn, soybeans and wheat enduring profit taking ahead of the 3-day US weekend. Chicago will be closed on Monday for the Martin Luther King Holiday. The volume of Chicago trade has tailed off as China and Europe are enjoying their weekends. Chicago reopens Monday evening for the Tuesday trading session.

• Bullish traders are citing political/market risks and have been banking windfall gains. This has produced the moderate correction. For the week, Chicago soybeans are up around 45 cents, corn is up 35 cents, and wheat is up 27 cents. All have set new 6 to 7 year highs. The need for demand rationing is being maintained with ongoing strong demand. We look for a weaker to mixed Chicago close as the market had become overbought and needed a correction. However, there is no evidence that a seasonal high has been set or that demand rationing has started. Any break will likely be modest and short lived.

• Chicago brokers report that funds have sold 7,600 contracts of soyoil, 4,900 contracts of corn, and 6,400 contracts of soybeans. Funds have been modest buyers of soymeal of 1,200 contracts. We note that the decline in soyoil is based on the 2 day weakness in palmoil.

• Russia is expected to quickly sign/confirm a €uro50/mt ($1.65/bu) export duty that would start on March 1. The big question is which world wheat exporter is going to step in to fill lost Russian sales, and how will world wheat export managers manage the hefty Russian tax. We doubt that any Russian wheat exporter will offer wheat to Turkey in the weekend tender or to Jordan for shipment dates this summer. Russian sources maintain that Russia will roll forward their old crop tax and make it variable next summer. The reason is that this will prod the Russian farmer to sell old crop stocks. Russian farmers have not wanted to sell cash wheat into a declining domestic market.

• We believe that 7-9 million mt of Russian wheat may not be sold/exported due the €50/mt tax from March through June. The big question (repeated) is which major world exporter is going to step forward and fill this demand. USDA estimates that Russia was going to export 39 million mt of wheat. Most commercials now estimate that total to be lower around 31-33 million mt with that demand likely to be pushed elsewhere, maybe to North America. The US wheat could be the big benefactor with Canada, Australia, Argentina and the EU having largely sold their old crop stocks. And the only way for EU/Black Sea exporter operators can manage their forward market risk is to secure Chicago or KC wheat futures. This will at least assure today’s price.

• NOPA-member soybean crush in December totalled 183.2 million bu, below the trade’s guess of 185 million bu another record for the month. Sep-Dec NOPA crush sits at 711 million bu, up 7% from the last year. The USDA even following its upward revision this week projects US soy crush to expand just 2% year on year.

• The midday GFS weather forecast is drier in Central/Southern Argentina but otherwise consistent. Meaningful precipitation in Argentina over the next few days will be north of major crop producing areas. Complete dryness returns for an extended 7-8 days with warming temperatures. High temperatures will reach the 90′s to lower 100′s late next week across Argentina. The combination of heat/dryness will return crop stress/lower crop ratings.

• The models are mixed on whether Argentine/S Brazilian rain returns in the closing days of January. The often more correct EU ensemble model maintains a rather dry climate for Argentina and S Brazil which follows the La Niña weather pattern that has been in place for months. Research does not see any significant changes in the ENSO pattern for the equatorial Pacific

• Wheat prices are reacting to “sell the fact” trading amid Russia’s €50/mt export duty. We doubts that KC March wheat futures will fall too far below $6.35 as world importers reach for US wheat. KC wheat now has a new demand driver which could push spot futures to $7.50-8.00. Do not become bearish wheat is our message. Corn and soy demand bull stories are unchanged and higher prices are needed looking forward to February.

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