- HEADLINES: Chicago stays firm; Argentine forecast still too dry; Brazilian corn market finds support.
- Chicago corn, soy and wheat futures are once again testing initial chart-based resistance, with soybeans and soyoil pacing the advance on concern over dryness in Argentina and far southern Brazil. We have previously suggested that there is little room for the loss of Argentine oil output given ongoing expansion in the US renewable diesel industry. The midday GFS weather forecast keeps meaningful rainfall in Argentina into Jan 1 largely away from the core of corn and soy production, and updated USDA maps shows little/no subsoil moisture there currently. A close above $14.93, Jan soybeans, and $6.54, March corn, attracts additional market length, but this resistance has been firm since early December.
- The US dollar index at midday is down 0.6% and has retraced a majority of last week’s rally. The Brazilian Real has rallied to a two-week high, which keeps spot and March corn futures there at $7.10-7.45/bu. March corn in Brazil’s premium to Chicago has widened to $0.95/bu, and one feature this week has been a steady increase in S American cash corn prices. The question is just how much demand is funnelled to the US in winter and spring. The performance of exports sales January onward will be important.
- Other breaking news is absent. European grain contracts have struggled amid a rising €uro, but even in US dollars spot corn and wheat futures in Paris have been unable to rally from multi-month lows. European corn imports remain sizeable. Brazil is expected to ship a record 6.6 million mt of corn in December, which along with Ukrainian exports will keep the EU feed market adequately supplied nearby. Europe has been able to manage grain flows so far in 2022/23 despite crippling drought last summer.
- Spot WTI crude has reversed morning loss and is down $0.50/barrel at $74.70. The Dow at midday is up 100 points. FAS’s daily reporting system was void of new export demand.
- The Central US weather forecast is consistent with the morning run. The heaviest snow fall in the next 72 hours will favour the eastern Great Lakes Region, where totals in E WI, IN and MI will reach 6-15”. Southern KS, OK and TX stay barren. The risk of sub-zero lows in KS and far western OK remain intact.
- The midday GFS weather forecast is slightly wetter in Northern Argentina in the 8–14-day period, but soaking precipitation is not indicated into Jan 3-4. A cooler temperature pattern will be established just after Christmas, but the need for rain is immense. Closer attention will also be paid to Rio Grande do Sul in far Southern Brazil as moisture deficits there widen. Recall RGDS is projected to account for 20% of first crop corn output in Brazil.
- Conditions in Central and Northern Brazil will be nearly ideal into early Jan.
- Thinning volume, uncertain/changeable weather in Argentina and southern Brazil and NASS’s looming Dec 1 stocks release keep markets choppy nearby. There is no immediate change to our longer-term bearish corn/soy outlooks, and so weather-inspired rallies are selling opportunities. Wheat has stabilised as Russian shipments slow and amid adverse US weather.