• HEADLINES: India secures 20,000 mt of US soyoil; Combined FAS export sales largest of the year; Lack of cash related selling above market.

• Chicago futures are higher at midday with corn, soybeans and wheat pushing upwards on new speculative buying and concerning S American weather. The sale of 20,000 mt of US soyoil to India was a surprise. The sale helped confirm that US soyoil had become too cheap relative to other oils. The US cannot afford to make large soyoil sales overseas with renewable diesel demand ramping up in Q1 2022. And the US wheat market is waking up to the fact that crop was lost in the windstorms from yesterday which locally exceeded 100 MPH. There were 55 locations in the Plains/Midwest that reported greater than hurricane force winds. Blowout (as agronomists call it) will drop Plain’s crop conditions in early January when select states release ratings. The need for rain is elevated as HRW wheat root systems are exposed. The midday tone in Chicago is bullish with us expecting a rally effort into the weekend.

• Chicago brokers estimate that funds have bought 3,600 contracts of wheat, 4,200 contracts of corn, and 6,600 contracts of soybeans. In the products, funds have bought 4,700 contracts of soyoil and are flat in soymeal.

• The FAS weekly export sales report showed that the US sold 23.9 million bu of wheat, 76.7 million bu of corn, and 48.1 million bu of soybeans. Also noteworthy in that US sorghum sales were 13.1 million bu. All combined, the US sold an impressive 161.8 million bu of all grain and soybeans, the largest looking backwards for a year. Biweekly price drops produced new demand.

• For their respective crop years to date, the US has sold 1,516 million bu of corn (down 123 million or 7.5% and the second largest US corn sales total as of early December. The US has also sold 559 million bu of wheat (down 163 million or 22%), and 1,474 million bu of soybeans (down 498 million or 25%). The US soybean sales pace has been picking up against last year. The WASDE 2021/22 export total is still high, but it is becoming likely that the difference won’t be more than 100 million bu or 1,950 million bu. This helps solidify that US 2021/22 soybean end stocks will not surpass 400 million bu.

• The USDA announced the sale of 20,000 mt of US soyoil to India. The sale was unexpected, and it will add to the US export pace which is too large relative to the build-up of domestic renewable diesel demand. India has now secured 80,000 mt of US soyoil and shipped out 30,000 mt. Commercial traders have raised their Indian purchases of US soyoil to 100,000 MTs in 2021/22.

• Someone in China issued a “green light” for their feed industry to secure US sorghum in November. This week’s US sorghum sales were a marketing year high at 13.1 million bu. And cash sources indicate that China is still buying.

• China is expected to rapidly draw down US sorghum stocks which will boost US corn feeding as its price premium to corn grows. Like 2020/21, China is back on a mission to import larger amounts of feedgrains. US sorghum does not need a GMO certificate to be imported into China.

• The midday GFS weather model is consistent with the overnight run.  Limited rain is offered for the crop areas of S Brazil and Argentina over the next 10 days. A ridge of high pressure produces heat/dryness with high temperatures ranging from the mid 80’s to the lower 100’s. Northern Brazil stays well-watered with rainfall 3.50-8.00”. Unfortunately, S American crop yield risks are rising with excessive rains in N Brazil and a deepening drought for S Brazil/N Argentina. The overall S American weather pattern is stable.

• Chicago futures rose easily with limited selling noted above the market. End users and importers are willing to support breaks, it is the selling above that is limited with US/S American farmers not wanting to add to their sales. Adding weather premium is the new mantra with S American crop estimates in retreat. Funds are now short of wheat and have substantially reduced their long in soyoil. Our view stays bullish.

• HEADLINES: NOPA report surprises on large November soyoil demand; Midday S Brazil/Argentine forecast hot/dry into January; Wheat falls on chart selling.

• Chicago futures are lower at midday with the sinking of US wheat futures helping to pull corn off a 5-month high. Hot/dry Southern Brazilian/Argentine weather underpinned corn/soybean futures in early day trade, but energy/stock values declined ahead of an expected policy announcement of a more hawkish US Central Bank. The US Fed is expected to taper more quickly and lay a roadmap for interest rate hikes for 2022-2023. The less accommodative Fed is causing investor anxiety. The US Fed appears to be in a quandary of whether it should fight inflation or provide ongoing stimulus due to the Covid pandemic.

• Corn initially charged higher, but wheat capped the rally and dragged Chicago downward. We note that pre hedging of the index fund rebalance has been ongoing for the past 3 days which includes the selling of wheat/soyoil and the purchase of soymeal. It is the rebalance pre hedging that has sparked the big rally in soymeal with traders estimating that index funds need to secure 42-45,000 soymeal futures based late November values. This is the last full week of trading in 2021 which will complete the pre hedge of the index fund rebalance with cash grain fundamentals returning to popularity early next week.

• Chicago brokers report that funds sold a net 3,300 contracts of corn, 1,200 contacts of soybeans, and 11,100 contracts of wheat. Fund managers sold 3,600 contracts of soyoil and bought 1,600 contracts of soymeal. The wheat break should entice Egypt’s GASC back for a tender either on the weekend or this afternoon.

• US weekly EIA ethanol production consumed 320 million bu of corn, down 500,000 bu from the previous week, but up 14% on last year and up 2% on 2019. The weekly US ethanol grind has been well above the pace that is needed to reach the WASDE annual grind forecast of 5,250 million bu. Research argues that WASDE should raise their ethanol grind forecast by 150 million bu to 5,400 million bu as the US is consuming 9.5 million more per week than forecast. The additional corn consumed would lower 2021/22 US corn end stocks to 1,350 million bu. This would make the NASS US January corn yield and export program highly important to the marketplace.

• The NOPA Nov soybean crush rate was 2-3 million bu below expectations at 179.4 million bu with soyoil stocks falling to 1,832 million pounds, an unexpected decline from October. The Nov soyoil yield fell to 11.76lb/bu which argues that WASDE was right with their Dec yield forecast at 11.75lb. Last year the US soyoil yield was 11.69lb/bu. Research maintains that soyoil values are too cheap relative to coming demand.

• The midday GFS weather forecast offers limited rain for the crop areas of S Brazil and Argentina over the next 14 days. A ridge of high pressure produces heat/dryness with high temperatures ranging from the mid 80’s to the lower 100’s. And heavy rains of 3.50-8.00” will fall across the northern half of Brazil. The current La Niña weather pattern is stable heading into yearend. Unfortunately, S American crop risks are rising with excessive rains in N Brazil and a deepening drought for S Brazil/N Argentina. Our concern over S American weather is rising daily.

• Market volatility is elevated with corn/soybean futures sliding from early day gains on macroeconomic selling. The index fund pre hedge of the rebalance is having a bearish impact on soyoil/wheat futures and a bullish impact on soymeal. Parana’s Derail indicated that its corn/soy crop conditions are the worst on record for mid-December and another 2 weeks of hot/dry weather is forecast. It is early in the crop year for Argentina, but the extended forecast is dry. We cannot advise new sales with key support offered at $5.80 March corn, $12.40 March soybeans, and $7.75 March KC wheat. Long term lows are being formed in soyoil.

• HEADLINES: March corn forges reversal up on arid S Brazilian/Argentine weather forecast; Massive meal/oil spreading by funds.

• Chicago futures are higher midday in a mini reversal of yesterday’s trade. Order flow and charts have been the driver of Chicago values with funds active in making new soymeal/corn purchases. Soyoil has declined on meal/oil spreading. We note that soymeal open interest has risen 14,000 and soyoil 13,000 contracts in the past 2 days which indicates that someone is putting on a large reverse crush position.

• Research argues that soyoil is well under fair value based on tightening world vegoil stocks and the coming Q1 increase in renewable diesel demand. Simply stated, soyoil sets up a longer-term purchase opportunity for end users. Corn/soybeans are reacting to drier/warmer Southern Brazil/Argentine midday weather forecasts. Most of Argentina and Southern Brazil is offered limited rain over the next 14 days under a high-pressure ridge.

• March corn has formed a bullish daily chart reversal with a close above $5.905 enticing new fund buying. As December corn futures expire, the lead contract becomes March which is breaking out to the upside. Corn will be the most responsive on the upside should an Argentine and Southern Brazilian drought deepen. Producers in RGDS in far Southern Brazil report that if rain does not fall in the next week, that yield losses of 40-50% will occur. Southern Brazilian farmers are contemplating tearing up their first corn crop to plant late season soybeans or waiting for rains to seed a second corn crop in January/February. Interior cash corn prices in Southern/Central Brazil have risen above $7.00/bu which is causing exporter woes in sourcing supply to export out of the Northern Arc. Weather is taking Brazil out of world corn trade with the winter harvest not starting until July.

• Chicago brokers report that funds have bought 5,400 contracts of corn, 7,300 contacts of soybeans, and 7,200 contracts of soymeal. Fund managers have sold 3,600 contracts of soyoil and a net 1,200 contracts of wheat.

• Cash rumours have China seeking US corn, but sales or tonnages are unavailable. The cash rumours developed on the opening break but have since been silenced by the rally. China appears to be under the marketplace in their trying to extend forward feedgrain coverage. China remains active in booking Ukraine corn and last week was a sizeable buyer of Australian feed wheat.

• The US will NOT gain any of the pending 1.5-1.7 million mt of world wheat tenders due to high world ocean freight rates. However, the EU has a good chance of securing the Algerian demand and its price must rise to limit future demand. EU corn imports are down 27% so it is the feed market that must be fulfilled.

• The midday GFS weather forecast is drier with limited meaningful rain for the crop areas of S Brazil and Argentina over the next 14 days. A ridge of high pressure sets up producing heat with high temperatures rising to the mid 80’s to the lower 100’s. And heavy rainfall of 3.50-8.00” will fall across the northern two thirds of Brazil with few breaks in the cloudiness over the next 2 weeks. The La Niña weather pattern is stable heading into yearend. Unfortunately, S American crop risks are rising with excessive rains in N Brazil and a deepening drought for S Brazil/N Argentina. This is not the way that S American grain farmers wanted 2021 to end.

• Fund demand for meal and their sales of soyoil is pushing the meal/oil margin spread out to levels that has not been witnessed since summer. December soymeal is expiring and its trade above $400/ton is the best spot price since June. The warming/arid S Brazilian/Argentine weather forecast could harm corn yield potential. It does not require much yield loss to justify $6.20-6.40 March corn or $13.00 March soybean futures. US corn export sales are likely to be 2.5-3.0 million mt on Thursday. Corn/wheat remain the Chicago bull leaders on world demand/SA weather.

• 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.

• Russia set its wheat export tax at a record high $91/mt for any new fob sales in the December 8-14 period. The barley tax was set at $78.70/mt with corn at $54.40/mt. The wheat tax was up $6.10/mt from the opening week of December. The Russian tax gain occurred even as world wheat prices fell as the Moscow Exchange changed the way it calculates the weekly tax, dropping prior fob sales from its calculation. We maintain that the USDA is too high with Russian wheat exports at 36.0 million mt due to Moscow restricting trade to lower domestic flour/food costs. We forecast that Russia will export 31-32 million mt of wheat in 2021/22, not the 36 million projected by USDA.

• Russian interior wheat and flour prices are not retreating. Russia’s domestic wheat market this week is unchanged in Rubles and slightly higher in US$. Wheat replacement in southern Russia’s export corridor is calculated at $217/mt, which along with a continued rise in the export tax there will keep Black Sea fob offers supported at $340-345/mt. This in turn makes US Gulf wheat competitive on a fob basis below $7.85/bu basis Mh. Strong fundamental support lies just below the US wheat market.

• The world wheat market has experienced its first meaningful correction of the bull market as price digests record large Australian production, and slightly higher than expected crop sizes in Russia, Europe, and Canada.

• The extra supply is nothing more than a nuance. We maintain a bullish wheat outlook that is cantered on rising global trade and Russian government policy.

• The pace of actual exporter wheat shipments to date is up 5.8%. The USDA in its Dec report projected wheat trade to rise 4.5% year on year. Import demand will be boosted another 4-5 million mt in coming reports, which more than offsets Thursday’s increase in exportable supply.

• Wheat prices have a demand rationing role on tightening EU stocks. 2021/22 world wheat trade is record large and will grow even more into March as world importers are close bought. A first quarter world wheat top is forecast between $9-9.40 basis Chicago March.

• The USDA has gaps to fill in its world trade matrix. The pace of Russian shipments has not improved as exporters are unable to manage tax burdens.

• China is believed to have booked a considerable amount of feed wheat from Eastern Australia with some pegging the tonnages involved at 1.25-1.75 million mt. We doubt that the wheat involved is milling. The reason for the US corn market decline today could be the recognition that Aussie feed wheat works into SE Asia, and that China is taking feed wheat as a feed alternative to corn. We also expect Egypt’s GASC to tender for late winter/early spring supplies in the coming days following wheat’s recent correction.

• January soybeans closed at $12.68, up 3 cents. Concerns are growing over crop prospects in Southern Brazil and Argentina. January soyoil closed at 53.54 cents, down 1.20 cents for the day. Palmoil futures were higher on lower stocks data and steady exports. January soymeal jumped over $7 to close at $367 as the 200-day moving average was breached somewhat easily which sparked additional chart and fund related buying.

• The line-up of ships waiting or scheduled to load US soybeans is 2.77 million mt (102 million bu). That is up 10% from the previous week.  This week’s soybean export inspections could be 1.925 million mt (71 million bu). That would be down 14% from this previous week. There were 42 vessels to-be-nominated. That is up from last week. US soybean export commitments to China are 20.98 million mt. That is up 593,000 mt from the previous week but below last year’s record 30.35 million. This year’s commitments to China does not include any of the 5.525 million mt of sales to “unknown” destinations. US soy demand is robust.

• Soybeans are rangebound between $12-13.00. A rally on cash related demand would push March to $13-13.25. It is far too early to be concerned by dry Southern Brazilian dryness.

• Chicago corn futures ended unchanged in thin volume. Trade participation is winding down for the holiday season and fundamentally it will remain difficult for breaks and rallies to be sustained. Dry Argentine/S Brazilian weather, along with strong end user demand offers support. Yet, it is weather late December and beyond that determines yield more directly. March corn will struggle against $6.00.

• Brazil’s cash corn market has become proactive in adding premium amid eroding crop health in Rio Grande do Sul, Santa Caterina and Parana. Yield loss in these states will be pronounced (20%+ relative to trend) if soaking rain fails to materialise by late month.

• Most important is that corn in Brazil is quoted at $7.00-7.20 for spot and March delivery. Spot Paris corn settled this week at $7.10. Dalian futures in China have found support at $10.50. Amid firm Black Sea feed wheat prices and delayed seeding in Argentina, importers will be funnelled to the US market if Argentine yield losses are confirmed. Corn futures could wallow for a while with the market having one eye on S American weather into late December. Support will be offered below $5.75 March.

• US wheat futures ended 1-10 cents higher, led by Chicago, with Paris milling futures similarly firm. The recent correction based on larger export production has been dramatic, but the market certainly can’t afford to encourage additional demand. Egypt is expected to return to the world marketplace for late winter supply next week. Will Saudi Arabia return for old crop supplies following its new crop purchase last weekend. Downside risk from current values is limited.

• There is still no evidence that Russian producer selling has been elevated by a rising export tax and a looming quota on shipments beginning in Feb. Cash prices in Russia in US$ are slightly higher this week, and the cost of trade execution there will be rising as the export tariff reaches upward of $100/mt in January.

• We would note that a more volatile market should be expected into spring. Our bullish belief continues to centre on the need for Europe to slow export demand substantially in early 2022, while upside risk in corn is sizeable if drought expansion occurs in Argentina in January. The cash market must lead rallies in futures moving forward. Funds in Chicago on this evening are estimated to be short a net 12,000 contracts.

• HEADLINES: USDA December report lacked statistical surprises; Now a waiting game into December; Will world wheat importers buy the break?

• The USDA December Crop Report was broadly neutral with WASDE deciding to wait until January to make any hard statistical decisions. WASDE held US 2021/22 corn and soybean end stocks steady at 1,493 million bu and 340 million bu, respectively.

• WADSE cut 2021/22 US wheat exports by 20 million bu (as expected) and imports by 5 million bu which raised 2021/22 end stocks by 15 million bu to 598 million bu. WASDE also made no change to S American corn or soy crop projections compared to November. Traders saw the report as lacking any bullish or bearish statistical impetus and the market’s focus shifts to S American weather and the flow of grain from the Black Sea amid rising political tensions.

• WASDE left US 2021/22 corn end stocks at 1,493 million bu, unchanged. WASDE decided against raising its industrial corn use estimate based on better than expected weekly corn grind. Another month of data should push WASDE to raise industrial corn use by 50-75 million bu. WASDE likely desires to see the final 2021 US corn crop size before bumping demand.

US End Stocks (million bu)

                    Nov        Dec

            2020        2021        2021

Corn            1,236        1,493        1,493

Soybeans        256        340        340

Wheat            845        583        598

• World 2021/22 corn end stocks rose by just over 1 million mt to 305.5 million mt, up 12.4 million from last year. China’s 2021 corn production was trimmed to 272.5 million mt due to the recent Stats Bureau update. China was forecast to import 26.0 million mt of world corn. The US/world corn data was non-exciting and neutral.

• In a surprise, WASDE held US soybean 2021/22 soybean end stocks at 340 million bu with exports holding at 2,050 million bu. US soybean shipments/sales have been improving, but the shortfall to catch up with last year is sizeable. We maintain that rising US soyoil demand will push the US soybean crush rate upwards by 15-25 million bu in the final count. US 2021/22 soy stocks will grow.

• 2021/22 world soybean end stocks declined by 1 million to 102 million mt based on a hike in world trade and diminished carry in supplies. Brazilian and Argentine crops were left unchanged at 144.00 and 49.50 million mt, respectively. WASDE soy data leans to be constructive with a rise in US soyoil yield being absorbed by greater industrial use. The average cash soyoil price was forecast at $0.65/lb.

• World wheat production grew by a less than expected 2.5 million mt with the Aussie crop up to 34.0 million mt, Russia up 1 million to 75.5 million mt, with Canada up 0.6 million. The Argentine crop held steady at 20.0 million mt. World wheat exports were hiked by 2.2 million mt to a record large 205 million. And WASDE is still too low with world wheat trade by 2-4 million mt in our view. We see US/French wheat futures at a bottom as WASDE is 4 million mt too high with Russian exports at 36 million mt.

Global End Stocks (million mt)

                    Nov        Dec

            2020/21    2021/22    2021/22

Corn            292.7        304.4        305.5

Soybeans        100.1        103.7        102.0

Wheat            289.6        275.8        278.2

• The midday GFS weather forecast is consistent with the overnight run for Argentina/S Brazil with heat noted next week. A weak system produces showers across La Pampa and the western half of Cordoba this weekend with rain totals of 0.25-1.25”. The southern third of Brazil holds in a dry weather pattern which is starting to harm the initial corn crop yield potential with pollination just starting. High temperatures this week range from the upper 70’s to the lower 90’s but rise to the mid 80’s to lower 100’s next week. The first real heat of the summer will be felt as soil moisture quickly retreats. The forecast is concerning for Argentina/S Brazil into 2022.

• HEADLINES: Soyoil pressured by fall below 200 day moving average; Wheat declines on larger Aussie wheat crop from WASDE; US corn ethanol grind solid.

• Chicago futures endured early selling pressure on speculative liquidation prior to the USDA December Report tomorrow. EPA biofuel mandate headlines produced active early selling in soyoil which caused early weakness in soybeans. In fact, March soyoil futures fell below its 200-day moving average for the first time in a year at $0.5577. The breaking of this key moving average added to the early soyoil pressure. Wheat selling is tied to the bigger Aussie crop.

• There was active end user buying in the forward cash soyoil market on the break. Sub $0.57/lb soyoil futures offers sizeable forward profit margins for renewable diesel producers. We hear that these end users were locking down future feedstock pricing. Renewable diesel producers have been in the energy business for decades and are extremely sophisticated as to margin hedging. If soyoil futures continues to decline, the rationing of tightening future supplies is going to prove to be extremely difficult as retrofitted refineries come online starting in Q1. Research sees no evidence that the bull market in vegoils is ending. Soymeal/soybeans rallied independently with strong cash basis bids underpinning valuations amid margin share liquidation.

• Corn tested but was unable to rally above $5.90 basis December or March corn futures. Charts reflect that a breach of this resistance would produce an upside price target of $6.80-7.00/bu. A breakout will have to wait until after the USDA crop report or when there is confidence that the hot/dry S Brazilian and Argentine weather pattern is adversely starting to impact yield.

• Chicago brokers estimate that funds have bought 5,500 contracts of corn and 4,600 contacts of soybeans, while selling 3,300 contracts of wheat. In soy products, funds have sold 4,900 contracts of soyoil while buying 4,600 soymeal.

• The USDA reported the sale of 1.844 million mt of corn to Mexico being broken down into 1.089 million of old crop and 754,380 mt of new crop. Mexico has purchased a record amount of US corn to date projected at 11.3 million mt (444 million bu). Mexico looks to import nearly 19 million mt of corn in the 2021/22 crop year accounting for nearly 750 million bu. Combined with Canada, the US neighbour total grows to nearly 1 billion bu. If China does import 20 million mt of US corn (as commercials argue), these 3 countries will import 1,750 million bu, or 70% of the 2021/22 WASDE forecast.

• US ethanol production rose to 320 million gallons, up 16 million gallons from last week. This weekly total was up 10% from last year and up 2% on 2019, and well above the weekly average needed to achieve the WASDE annual forecast. US ethanol stocks rose 6 million gallons to 859 million gallons. The weekly ethanol report is modestly bullish confirming that WASDE is being too conservative in its annual US corn grind forecast of 5,250 million bu.

• The midday GFS weather forecast is slightly drier than the overnight run for Argentina/S Brazil with heat noted late next week. The forecast remains concerning amid the fast decline in soil moisture levels.

• Corn/ soybeans have recovered from early selling, but long liquidation in wheat is pulling values lower on pre report risk reduction (bigger Aussie crop from WASDE). We see no reason for wheat to decline following the report and sees today’s weakness as temporary. Russia’s floating wheat export tax will rise on Friday as tax calculations exclude prior sales. Wheat fundamentals are bullish with key support below $8.00 KC March. S American weather is the focal point following the report with dryness concern building. Deral Parana crop condition ratings both declined in soy/corn again this week. Producers there report an acute need for rainfall.

• HEADLINES: EPA corn ethanol mandates supportive; Limited progress scored between Biden/Putin on troop build-up; US stock market soars on Omicron threat.

• Chicago ag markets continue to chop, with grains steady/higher and old crop soy futures down 10-14 cents at midday. Soybeans are sagging as rumours out of the Biden Administration suggesting that long awaited biofuel mandates will be released later today. The rumours have new mandates not making the US biofuel industry happy. Potential bad biodiesel mandate news along with Brazil being cheaper from February forward has caused the soy complex pressure.

• Corn/wheat futures were initially tugged lower and have recovered. A bilateral discussion between US President Biden and Russian President Putin yielded limited progress with Russia blaming their troop build on Ukraine, they are the one building troop numbers along a mutual border. The Biden/Putin talks failed to lower political tensions with key US intelligence sources suggesting that Russia could invade Ukraine in late December or early January. Chicago bears would not want to be short of grain should any fighting develop. Russia and the Ukraine are in the world’s top 3 grain exporters. We doubt that US/NATO member economic sanctions will change Russia’s aggression. Note that US President Obama placed sanctions on Russia on their taking of Crimea in 2015.

• The Crimea sanctions pushed Russia to increase its own livestock industry and import less of EU/US meat and dairy goods. Russian raw materials stretch over 11 time zones, and even ending Russia’s ability to wire money abroad is not expected to have much economic bite. Embargoing Russian energy or grain would just add to world inflationary pressures. This leaves the west weak on having an economic stick to fight Russian aggression.

• October Trade data showed that China imported record monetary values of US ag products at $5.23 billion with US ag exports also record large for any month at $17.6 billion. This reflects the need for feed/food within China. US ag exports are strong and this along with heady ethanol/soy crush demand will underpin Chicago. Following the injury inflicted by Hurricane Ida in early September, US ag exports have been strongly recovering. The October data will cause WASDE to be timid with further cuts in US 2021/22 soybean/wheat export estimates on Thursday.

• US stock markets are soaring as the Omicron variant is not as dangerous to human health as Delta. It is “risk-on” in the financial markets, a trend that will not go unnoticed by grain traders following the USDA December Crop report. The US/world economic outlook is brightening in that Covid will likely be a waning influence in 2022. This raises confidence that record large US grain demand will persist and that spot Chicago soybean futures will hold key support at $11.75-12.00 during the coming Brazilian harvest.

• The EPA set ethanol mandates at 12.6 billiuon gallons for 2020, 13.8 billion for 2021 and 15 billion for 2022. The 2022 mandate is supportive with the EPA suggesting that it will reject a significant number of small refinery waivers. No news was offered on biodiesel/advanced biofuel mandates which will be out later this afternoon. Unless you trade RINs, few really care about 2020 or 2021 ethanol/biodiesel mandates as usage is already determined. The 2022 ethanol mandate of 15 billion gallons amounts to nearly 5,300 million bu of US corn grind. We expect that it will reach 5,400 for 2022 on strong profit margins.

• The midday GFS weather forecast is slightly drier than the overnight run for Argentina/S Brazil with heat noted late next week. The forecast remains concerning amid the fast decline in soil moisture levels.

• Expected bearishness over the biodiesel mandate has pressured Chicago soybeans/soyoil at midday. Just getting past the rumours that extend back for years will aid soyoil. Corn/wheat will closely follow S Brazilian/Argentine weather next week. The forecast is concerning into yearend. Our view is bullish of grain on breaks.  March soybeans should find support below $12.40 on strong US crush margins and strong cash basis bids.

• HEADLINES: Backing and filling should produce a turnaround Tuesday; Biden/Putin to talk Tuesday; US soybean exports hold steady.

• The pending USDA December report and the expectation that it will be slightly bearish for soy/wheat has caused Chicago to give back some of Friday’s gain.  Midday volume has slackened following active early day managed money selling in corn, wheat, and soymeal futures. We look for a mid-range Chicago close today as bullish or bearish passion is lacking.

• “Backing-and-filling” best describes today with exceptionally strong cash markets underpinning values near the morning lows. US ethanol and soy crush margins are historically strong for early December, and processors are paying “overs” for nearby cash which is producing $6.00 Midwest corn bids.

• And December corn futures are priced at a rare 1.5 cent premium to March. The December premium to March is a record looking backwards for early December. In 2012, December corn traded at a 15-cent premium to March during the heart of the summer drought. This year the US corn crop looks to be the second or third largest on record and it is demand that is pulling cash corn and futures spreads upwards. This is a demand led Chicago rally in the summer row crop futures.

• USDA reported that China booked 130,000 mt of US soybeans. Cash traders indicate that the 2 cargoes were sold for late January. Traders are also discussing that China has issued TRQ’s in November but has not activated them.  Friday’s cash connected rumours that a private Chinese buyer took 5 cargoes of US corn is likely correct. Often, private Chinese importers secure grain ahead of TRQ issuance/activation. China (through TRQ’s licenses) must secure 7.6 million mt of world corn and 9.4 million mt of world wheat to follow their 2001 WTO pledge.

• Chicago brokers estimate that managed money has sold 3,000 contracts of wheat, 5,500 contracts of corn, and 4,500 contracts of soybeans. Funds have also sold 4,700 contacts of soymeal while buying 1,200 contracts of soyoil. The fund selling was active in the first 20 minutes of the morning opening.

• US weekly export inspections for the week ending Dec 2 were 29.9 million bu of corn, 82.5 million bu of soybeans, and 9.0 million bu of US wheat. The wheat export total was less than trade expectations while corn/soybeans were in line. We note that the US is now consuming 130-140 million bu of soybeans each week, which amounts to nearly 6.5 billion bu annually. Seasonally, the US will see a significant decline in export loadings in February. The recent string of large US weekly soybean exports will cause WASDE to be slow in cutting their 2021/22 soybean export estimate.

• USDA is not expected to change their S American soy or corn crop estimates in Thursday’s December WASDE report. It is too early in the growing season for CONAB/WASDE to be exact on S American corn/soy yields. It is the reason why S American weather forecasts have diminished importance until mid-December. It is the February and forward S American CONAB/WASDE crop estimates that matter.

• Russia has amassed 175,000 troops on the border with Ukraine, surpassing last spring’s build up by early 70,000. And additional troops and armaments are on their way from Moscow. President’s Biden and Putin will be talking Tuesday, but most sources doubt that Putin will back down. Sanctions will likely include the world banking system and some ban on ag/energy exports. Neither would help EU/world inflation and would be bullish to world corn/wheat values.  It is important to monitor the situation closely.

• The midday GFS weather forecast is slightly wetter than the overnight run for Southern Brazil including the state of Parana. Yet, high-pressure ridging aloft across Argentina/Southern Brazil will restrict the flow of moisture. Temperatures are variable highs ranging from the 80’s to the mid 90’s. Crop-critical weather lies ahead with S Brazilian soil moisture in retreat. It is the forecast following Thursday’s USDA report that becomes critical.

• It is just too early to get overly bullish on dry S Brazilian/ Argentine weather. However, that view will change in a few weeks with stress on Southern Brazilian crops increasing. US President Biden has decided to diplomatically boycott the Beijing Winter Olympics for human right abuses, which harms the political atmosphere. Yet, we doubt it will change China’s demand for US ag goods. Don’t sell breaks on tightening US cash supplies and the growing concern that the US/NATO will place economic sanctions on Russia.

• HEADLINES: Wheat falters as offers submitted to Saudi in weekend tender; China still securing Ukraine corn, China TRQ’s coming.

• It has been a summer row crop rally in Chicago this morning as corn/soy futures rises, while wheat sags on the fading hope that US HRW wheat will be included in the Saudi tender while Russia continues to discuss its export quotas for wheat (and all Russian grains) which will start on February 15. The tone of Chicago is bullish for corn/soybeans on Southern Brazilian and Argentine weather worry. We look for a mixed Chicago close with market volatility staying high on thinning volume ahead of the end of the year amid high prices and tight cash supplies. A widely swinging Chicago will persist with volume tapering off even more following next week Thursday’s USDA Crop Report.

• Chicago brokers estimate that funds have bought 5,600 contracts of corn and 4,900 contracts of soybeans, while selling 4,300 contracts of wheat. In the soy products, funds have bought 4,300 contracts of soymeal and 3,800 contracts of soyoil. Investment managers appear willing to add to their existing market length in corn and soybeans, while paring back on wheat. Funds have not really embraced a sizeable net long wheat position except in KC futures.

• FAS/USDA reported that an unknown destination secured 122,000 mt of US soybeans overnight. Commercial sources report that China has booked 24-28 cargoes of Brazilian/US soybeans this week with 15-18 of those cargoes being sourced from the US. China is 50-60% covered on January soy import needs.

• E European cash traders report that the Ukraine continues to book corn with purchases nearing 500,000 mt or about 8-9 cargoes. Why China is willing to pay up for Ukraine corn for nearby shipment is unknown. US Gulf corn is cheaper, but Chinese purchases would also be more transparent due to the US’s Daily Reporting system.

• China is in a timeframe when TRQ’s could be issued for the New Year. These TRQ import licenses are for corn/wheat, which would produce some immediate buying amid heady import margins. We should be closely watching for the China Government to issue TRQ import licenses in the weeks ahead.

• Interfax is reporting that the Russian Government is considering setting an export quota of 14 million mt for all grains in 2022. This would include 9 million mt of wheat from February 15 to June 30. We calculate that if the rumours are correct, Russia would export 31.5-32.0 million mt of wheat, well below the WASDE forecast of 36.5 million. Such a quota would be longer term bullish. However, WASDE will not change their Russian wheat export estimate until the government officially announces the quota and places it in the federal registry. This would likely occur in the January WASDE report.

• The midday GFS weather forecast is slightly wetter than the overnight run for Southern Brazil including the state of Parana. Yet, high-pressure ridging aloft across Argentina/Southern Brazil will restrict the flow of moisture next week. Temperatures start to warm this weekend under the ridge with highs ranging from the mid 80’s to the mid 90’s. Crop-critical weather lies ahead with S Brazilian soil moisture in fast retreat. The GFS ensemble model is drier for Southern Brazil (than the operational) which follows the existing weather trend. There could be a few showers in mid-December for Southern Brazil, but the rains do not appear to be drought breaking.

• Chicago and Paris wheat futures are sagging intraday, but cash markets in the Black Sea and Europe are holding strong. We doubt that any break in KC March wheat can be sustained much below $8.20. Corn/soy futures will be closely following S American weather with a March corn close above $5.90 turning all chart-based price trends up. The continuous daily corn chart illustrates how important the $5.90 level has been looking backwards to July. March soybeans target $13.00 with ongoing dry weather for S Brazil into mid-December.