- HEADLINES: Row crops sag ahead of Brazil precipitation; GFS weather forecast trends drier in Brazil in 6–10-day period; Brazil boosts biodiesel blend mandate.
- Ag markets at midday are mixed as wheat finds additional speculative short covering and row crop markets shed risk premium ahead of Brazilian rainfall, which is scheduled to begin late Wednesday. Radar maps also show regional activity in Mato Grosso currently. However, we note the GFS forecast has trended much drier in the 6–10-day period, and so keeps any meaningful/lasting pattern change in northern Brazil backloaded, and consistently confined to the 11–15-day period. Weather-based volatility will be heightened into the New Year as the major forecasting models fail to agree on 10-day Brazilian forecast and as the need for any/all rain has become immediate in the major producing states of Mato Grosso do Sul, Mato Grosso and Goias.
- Storm damage at Argentina’s Bahia Blanca port over the weekend is variable, but certain terminals are now estimating they will be closed/restricted for an unknown period of time. Bahia Blanca is a major hub for Argentine wheat exports in Dec-Jan, and on balance Argentine flows of winter crops will be reduced.
- Brazil’s government has approved the mandatory use of 14% blended biodiesel, vs. 12% currently. Brazil’s mandated blend rate in 2025 jumps to 15%. This bolsters Brazil’s soybean crush industry, allows meal production to increase but strips a measurable quantity of oil from the global marketplace. Work suggests the increase in mandated blend volume will boost Brazilian soy crush 2 million mt in calendar year 2024. Tight old crop soy carryover in Brazil and rising domestic use imply production changes have a direct impact on Brazil’s exportable soybean surplus.
- FAS announced that US exporters this morning sold 132,000 mt of soybeans to an unknown destination for 2023/24 delivery. This validates rumours of recent Chinese interest, with additional sales announcements expected before the week’s end. The Jan-Mar Chicago soy spread has narrowed 11 cents in the last week.
- The US dollar index is down 0.3%. Crude is up $1.11/barrel at $73.60, $5.90 above last week’s low. The Dow at midday is up 200 points. Spot corn in Brazil remains perched above $6.20/bu, with Brazilian poultry trade groups concerned about the need for imports from neighbouring S American countries. Our message is that fresh input does seem bearish, but rather it is all about expectations for a normalisation of Brazilian rainfall Thursday onward. Key will be the performance of late week precipitation in northern Brazil, with Mato Grosso’s Sep 1-Dec 19 deficit from average now at a massive 11.5”.
- The midday GFS weather forecast is drier in parts of Mato Grosso and Mato Grosso in the 6–10-day period, and the model maintains that this week’s rain is not yet the beginning of a lasting pattern change. Light/moderate but steady showers blanket central and northern Brazil Thurs-Mon, with accumulation pegged at 0.75-1.50”. Totals above 1.00” will be confined to northern Mato Grosso, Goias and Minas Geras in the north and RGDS in the south. Warmth/dryness resumes in northern Brazil and excessive rainfall returns to southern Brazil Dec 25-29. We expect the EU weather model to stay wet in northern Brazil in this afternoon’s release, and so weather uncertainty remains elevated.
- Sustaining bearish price trends is challenging in Dec-Jan. This remains a highly abnormal year for weather in the heart of Brazil’s soy belt.