Monthly Archives: January 2023

12 January 2023

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  • HEADLINES: USDA data bullish corn, soy; Wheat follows; Winter wheat seedings hit 8-year high.
  • USDA stocks, seedings and balance data lean bullish of row crops and neutral to slightly bearish of wheat.
  • Final US corn production was trimmed a surprising 200 million bu as higher yield (+1 bushels/acre) was more than offset by a 1.6 million drop in harvested acreage. US sorghum production was lowered 48 million bu (20%) as yield was lowered just under 2 bushels/acre and final harvested area was reduced by 900,000 acres. Final US soybean production was 4,246 million bu, down 70 million from November. US soy yield was lowered 0.7 bushels/acre.
  • Yet, downward revisions to stocks in USDA’s Jan WASDE were a function of supply loss, not demand. Dec 1 US corn stocks of 10.8 billion bu were 200 million below the trade’s guess, but Sep-Nov feed use is calculated at 2,397 million bu, down 6% from last year and in line with the USDA’s annual forecast of 5,275 million bu. 2022/23 US corn exports were lowered 150 million bu to 1,925 million, which better aligns with pace analysis.
  • US 2022/23 corn ending stocks were cut by just 15 million bu, with annual stocks/use unchanged at 8.9%. NASS’s yield cut does justify post-harvest strength, particularly in cash corn basis levels across the Central Plains.
  • Dec 1 US stocks at 3,022 million bu fell 120 million bu short of expectations, but US soy end stocks were lowered a modest 10 million bu to 210 million. Exports were cut 55 million bu following a 1 million mt hike in expected Brazilian production and as Chinese imports from all origins in 2022/23 was lowered 1 million to 95 million mt. Crush was left unchanged. US soy residual use was reduced 2 million bu.
  • Dec 1 US wheat stocks were 1,280 million bu, the lowest since 2007 and which implied positive feed/residual disappearance worth 17 million bu. Note that Sep-Nov wheat feed/residual is very often negative, and so USDA was forced to hike annual US wheat feed consumption to 80 million bu, vs. 50 million in December. End stocks were cut 4 million bu to 567 million. Much of the decline in wheat stocks, by class, was centred on SRW and white. HRW stocks were increased 15 million bu.
  • US wheat seedings in 2023/24 totalled a sizeable 37.0 million acres, up 3.7 million year on year. Assuming trend yield, US winter wheat output in 2023 will be 1,350 million bu, up 250 million from the previous year. US wheat end stocks rise to 640-650 million bu if Plains drought is allowed to ease. However, wheat acreage expansion of 20-55% occurred across the Midwest and Delta, which eats into land available for corn production. Combined winter wheat seedings in MO, IL, IN, OH, MI and KY were up 1.0 million acres from the previous year. Combined seedings in TX, OK, KS, CO and NE were up 1.3 million. We note that seedings in KS were up only 250,000 Acres. Seedings in TX, where widespread grazing is probable, were up 1.4 million acres.
  • World balance sheets were little changed. Argentine corn production was lowered 3 million to 52 million mt. Brazilian corn production was lowered 1 million mt. Total global corn demand, however, was lowered another 5 million mt, leaving world end stocks relatively stable. Argentine soy production was lowered 4 million mt, which is partially offset by a 1 million increase in Brazil. Total world soybean demand was cut 1.9 million mt. World wheat supply and demand was left alone, with Russia’s balance sheet unchanged completely.
  • The midday GFS weather forecast is wetter in far Western Argentina but leaves the core of the Ag Belt arid into Jan 25-26. There remain hints of a wetter pattern thereafter, but confidence stays low until this precipitation is pulled forward into the 10-day outlook. Extreme heat returns to Argentina next Wed-Sun. Above normal rainfall continues in Brazil, with a needed expansion in precipitation due in RGDS in the south this weekend.
  • Markets have added premium following an unexpected but modest lowering of US corn, wheat, and soybean end stocks. Focus shifts back to S American weather and principally whether wetter/cooler conditions evolve in Argentina during the final week of January. A choppy marketplace will be ongoing into late winter, as Argentine yield loss cannot be dismissed but rallies require confirmation that demand is begin funnelled to the US. This is not evident today.
To download our USDA data recap as a PDF file please click on the link below:

11 January 2023

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  • HEADLINES: Chicago rallies in pre report positioning; Argentine weather forecast unchanged.
  • Chicago ag futures are higher at midday on positioning ahead of Thursday’s USDA January Crop Report. The report is expected to cut Argentine corn and soybean crops by 3 million mt (each) and offer final US corn/soybean yield data and the first glimpse of 2023 US winter wheat seeding.
  • Historically, Chicago endures extensive market volatility post the report due to its importance to longer term price direction. The report finalises 2022 US summer row crop yields, but also offers a crop year Q1 indication of US corn feeding. Traders are cutting their position size while understanding that fund managers are holding sizeable net long corn, soybean, and soymeal net long positions. The report holds market risk that is always difficult to assess. We look for a mixed to higher close on positioning for the report.
  • Chicago brokers estimate that funds have bought 1,600 contracts of wheat, 5,400 contracts of corn, and 5,500 contracts of soybeans. In the products, funds have bought 3,900 contracts of soymeal while being flat in soyoil.
  • Private Brazilian firms are preparing to start crop tours to assess yield potential throughout N and C Brazil. The early harvest is underway, and a record crop appears likely. Most crop watchers peg the Brazilian soybean crop at 151-154.4 million mt with yield to at least reach trendline. Coming rains for RGDS will be key in discussing a Brazilian soybean crop of more than 155 million mt. The 2023 Brazilian soybean harvest will be record large at least 24 million mt larger than last year. This will help ease pressure on world soybean supply tightness.
  • Brazilian soybean offers are 50 cents cheaper than the US Gulf for February and 70 cents cheaper in March/April. World demand is completely shifting away from the US due to price and new crop availability. And Brazilian and Paraguayan soybeans are being booked by Argentina to crush amid their drought losses. This will help to ease further losses in premiums relative to the US Gulf. We also note that Brazilian soymeal for February is offered $28/mt below the US Gulf with March/April $38/mt cheaper. US soymeal demand is going to be difficult to uncover amid the cheapness of Brazil. The export outlook for both US soybeans and soymeal is in retreat.
  • Ukraine 2023 wheat/corn production is forecast to be down 20-40% amid a shortage of seed/fertilizer and financing. It is mid-sized Ukraine farmers that are struggling to find financing. All the above will have an adverse impact on Ukraine 2023 grain production due to the war. Thus, the outlook for world wheat supply is cloudy until Black Sea crops can be better assessed in spring.
  • The midday GFS weather forecast is like the overnight forecast with showers reported in N and NW Argentina at midday. Rains are still expected across Southern Brazil late Thursday and Friday. A second system is noted for Argentina in the last half of next week with near normal rainfall in the 11–15-day period. Temperatures hold in the 80’s to the mid 90’s with extreme heat in retreat.
  • Brazilian rain will delay the harvest of early planted beans, but yield threats are lacking. Soil moisture will be abundant for safrinha corn seeding in February/early March with favourable rain for the remainder of Brazil. A record soy crop is expected which will boost world soybean supplies to a record.
  • Demand for US corn, soy and wheat remains concerning, but markets worldwide must contend with uncertain late Jan weather in Argentina and uncertainty over Sep-Nov residual corn and soy disappearance. Soybeans above $15.00 are richly priced while March corn will struggle above $6.70.

10 January 2023

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  • HEADLINES: Row crops reverse overnight losses on drier Argentine forecast; Wheat continues to struggle.
  • Chicago ag futures reversed overnight losses and hold in a choppy back-and-forth trend heading into Thursday’s USDA January Crop report. The overnight models reduced rainfall chances for Argentina which was the catalyst for the Chicago morning recovery. The forecast models are having trouble regarding extended S American weather. We note that the EU model is moving to a new supercomputer, but it is the GFS forecast that has been more volatile as of late. We would argue that the models are starting to see the dramatic weakening of La Niña but are having difficulty with rainfall amounts and locations across the drought areas of Argentina. It is the forecast uncertainty ahead of the USDA report and a 3-day weekend that is causing traders angst. We look for a mixed close with corn/soy futures back to adding weather premium back into price. Weather forecasts will be changeable in the 10–15-day period and until the rain is pulled forward in the forecast.
  • Market volatility will be the theme of the market following the USDA report data release amid uncertain weather for the last half of next week.
  • The lowest price offer to Egypt’s GASC was for 60,000 mt of Russian FOB wheat from Ashton, a large Russian exporter. The fob offer works back to around $308-310/mt, down slightly from prior sales. Traders have been watching Russian FOB wheat offers due to talk on rising Black Sea insurance rates. However, Ashton often uses its own boats in these transactions and may self-insure. The offer is competitive and reflects that Russia looks to stay aggressive in offering wheat in early 2023. Mother nature will have to intervene to slow Russian grain exports. We maintain that Russia will export 44-46 million mt of wheat in 2022/23, a record.
  • US farmers are holders of old crop corn hoping for a rally like the past few years. Today’s rally has sparked some cash corn movement, but ethanol producers are hoping for improved movement to lock down supply and margin. We note that most farmers hope for a yield decline from USDA on Thursday. Our own view is that US corn yield will rise 1.0 bushels/acre to 173 due to diminished harvest losses and better than expected yields across the Eastern Midwest and Delta.
  • India is claiming that it might produce a record large 2023 wheat crop as large as 112 million mt. We note that Indian farmers did seed record acres, but that it is last half of February/March weather that will determine final yield/production. A year ago, temperatures soared in March to 120 degrees plus to substantially reduce yield. The point is that that it is too early to declare the 2023 crop a record and close attention will be paid to daily high temperatures next month.
  • The midday GFS weather forecast is wetter in eastern Buenos Aires in Argentina but is otherwise warmer and drier in Argentina and portions of Rio Grande do Sul in southern Brazil into Jan 25 relative to the model’s overnight solution. Scattered showers will impact Northern Argentina Fri-Sun and again next Wed-Thurs. But organized soaking showers are not indicated, which if realised keeps historically low soil moisture intact into the latter part of the month. The midday GFS forecast keeps max temperatures in Argentina in the 90s/low 100s as late as Jan 23.
  • Heavy Brazilian rain will delay the harvest of early planted beans, but yield threats remain lacking. Soil moisture will be abundant for safrinha corn seeding in February/early March.
  • Demand for US corn, soy and wheat remains concerning, but markets worldwide must contend with uncertain late Jan weather in Argentina and uncertainty over Sep-Nov residual corn and soy disappearance.

9 January 2023

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  • HEADLINES: Chicago mixed at midday as Argentine weather forecast goes wetter and traders debate Thursday’s USDA report.
  • Chicago ag futures are mixed at slightly higher at midday with early weakness unable to show any follow through technical selling. Wheat has traded both sides but with Egypt/Turkey in the world market, the early Chicago break uncovered commercial buying. The index fund roll starts at the close and traders will be watching for any unusual buying or selling. Index fund managers will use TAS (trading at settlement) so as to not produce too much of a market disruption. We would remind that the USDA January Crop Report will be released on Thursday with normal trade on Friday, with a 3-day weekend following (Martin Luther Kingf Observance) with the Asian Lunar New Year starting on January 21. Chicago trade will not be back in full force until the closing days of January. Market volatility will stay elevated until all market participants have returned. We look for mixed Chicago price action heading into today’s close and Thursday’s USDA report.
  • Chicago brokers estimate that funds have bought 2,200 contracts of corn and 3,200 contracts of wheat, while selling 1,900 contracts of soybeans. In the products, funds have sold 3,900 contracts of soymeal and bought 1,500 contracts of soyoil.
  • US export inspections for the week ending January 5 were 15.6 million bu of corn, 52.9 million bu of soybeans, and 7.4 million bu of wheat. US grain exports continue to be disappointing. For their respective crop years, the US has exported 393.6 million bu of corn (weekly average of just over 23 million bu to date, far below the 43 million weekly average needed to achieve the USDA annual export pace of 2,075 million bu). US wheat exports rest at 444 million bu or down 12 million from last year, while US soybean exports rest at 1,105 million bu, (down 62 million or 5%). We would expect WASDE to trim their 2022/23 US corn export estimate by 50-100 million bu on Thursday. We can also argue for a cut in US 2022/23 soybean exports of 25-50 million bu. The US export profile will struggle going forward.
  • The average trade estimate for the 2022 US corn yield is 172.5 bushels/acre, up ).2 from the November NASS forecast with soybeans at 50.3 bushels/acre, up 0.1. We lean towards increases in both of 1 bushels/acre in corn and 0.5 bushels/acre in soybeans. Our bet is that the onus on the report is on the bulls. NASS tends to surprise to the upside on yield and does adjust harvested acres also.
  • March corn TAS has traded nearly 3,000 contracts for the close which suggests that Index funds will us it partially to rebalance. We doubt that the rebalance will have much of an impact on Chicago futures this week.
  • Egypt and Turkey are seeking world wheat for February/March, which should include Black Sea and potentially French wheat. US wheat is bouncing as the domestic price reached low levels that worked into SE US feed rations.
  • The midday GFS weather forecast is wetter than the overnight run with better rain projected for Argentina/S Brazil late this week and next. A front is forecast to produce showers Thursday/Friday, and again early next week with a third (potent) storm system noted from January 19-22. The 10–15-day period features 0.5-2.00” of rainfall for Argentine crops. The improved rainfall pattern boosts Argentine and S Brazilian crop potential if correct. Traders will monitor the EU model’s rainfall output before the close. Near normal rains look to fall across the remainder of Brazil with a drying trend to aid the Mato Grosso harvest late month. The midday GFS forecast is improved (in respect to Argentine rainfall) from prior model solutions.
  • Chicago futures are mixed at midday with corn, soybean and wheat holding either side of unchanged. Unless Thursday’s USDA January crop report holds a bullish surprise, the wetter Argentine weather forecast should start a sustained downtrend. Brazilian soybean premiums are under pressure as their harvest starts in earnest in a few weeks. US corn, soy and wheat export demand stay seasonally slow, and selling Chicago rallies is our current leaning. The downside price leader should be corn/soymeal on speculative length and slowing US corn trade profile. Notice that even with a 43 million mt Argentine soybean crop in 2023, that world soybean supplies will be record large, which does not sustain rallies above $15.00.

6 January 2023

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  • HEADLINES: Soybeans soar on drier Argentine weather forecast; Traders debate index fund roll next week: US jobs report strong.
  • Chicago ag futures are mixed at midday with the soybean market adding weather premium due to the overnight dry change in the Argentine weather forecast, while the grains struggle amid competitive world export markets. US corn and wheat sales continue to disappoint against cheaper offers from S America, Russia, and the Ukraine. We note that world cash grain trade is tepid, and holiday driven. It will likely be after Asia’s Lunar New Year before normality in volume returns. FOB price offers are holding in world wheat/corn, but Brazilian soybean premiums are in decline vs the US Gulf amid their expanding harvest. Early Brazilian soybean yields are impressively strong, and a record crop is in the making. However, traders would like to get past next week’s USDA January Crop Report before adding to net short positions.
  • The Argentine drought remains a market focal point but even with an Argy soy crop of 38-40 million mt, the world will produce a record soy crop during 2022/23. We maintain that it will be difficult for spot Chicago soybean futures to sustain rallies above $15.00 as the US’s window of export opportunity is closed by cheaper Brazilian price offers from February and beyond.
  • Chicago brokers estimate that funds have bought 6,900 contracts of soybeans, while being flat in corn and selling 1,400 contracts of wheat. In the products, funds have bought 4,900 contracts of soymeal and 2,200 contracts of soyoil. The volume has been in soymeal as funds add to their market length. We calculate that funds are close to a record net long position in soymeal.
  • Index fund rebalances have not had much of an impact on Chicago prices in recent years. We doubt that this year’s rebalance will have much price impact either. Calculations from the fund community has index funds selling 40,000 contracts of corn, 19,000 contracts of wheat, and 26,000 contracts of soybeans in a 5-day period. We hear of continued outflows, not inflows, into the commodity space. Few investors see a fundamental reason to be overly bullish of raw material markets as World Central Banks fight to lower inflation.
  • US weekly export sales were disappointing. For the holiday week ending December 29, the US sold 1.7 million bu of wheat, 12.6 million bu of corn, and 26.5 million bu of soybeans. For their respective crop years to date, US wheat sales stand at 550.0 million bu, a record low and 34 million bu less than last year. US corn sales are 856 million bu, down 758 million or 47% from last year, while soybean sales rest at 1,610 million bu (up 78 million or 5%). Ukraine continues to be a very aggressive exporter of corn to the EU, China, and the others.
  • The January US Employment report showed a gain of 223,000 workers which will likely keep the US Central Bank raising rates into the middle of 2023. US inflation appears to have peaked, but if the FED wants to get the rate down to 2%, it will have to keep raising rates into 2024. We fear that the US Central Bank lending rate may have to rise to 5.5-5.75% before there is a pause. The fight of the US Central Bank against inflation will be difficult.
  • The midday GFS weather forecast is consistent with hot/dry weather to impact Argentina and RGDS (Southern Brazil) for the next 10 days. We suspect that the models are too dry and rain will be added with time, but the GFS forecast at midday followed the overnight run and was equally as dry. The extended range 11–15-day forecast has a few showers, but rainfall amounts in the next few weeks would be running 40-60% of normal or 0.5-1.50”. A drier Northern Brazilian trend is forecast after January 20.
  • A bullish reaction of the macro financial markets to the US Jobs Report and drier Argentine weather is providing a lift to Chicago soybeans today. We believe that chasing March soybeans over $15.00 is ill advised. And Ukraine remains an active seller of corn with China seeking Brazilian corn for June onwards. A secondary top could be formed early next week if the Argentine forecast stays dry. Weather models maintain that they are struggling with the end of La Niña and movement of a MJO (Madden-Julian Oscillation) across the Equatorial Pacific.
To download our weekly update as a PDF file please click on the link below:

5 January 2023

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  • HEADLINES:  Chicago declines continue with focus on macro financial markets and the potential of a record large Brazilian soybean crop.
  • Chicago ag futures are lower at midday on continued chart based and macro market selling. Soybeans/wheat have paced the decline with corn/soyoil and soymeal being tagalongs. End user pricing has been noted on the break in wheat/corn/ soyoil with lows formed as Russian President Putin announced a short-term truce in the war for the troops to celebrate orthodox Christmas.
  • We suspect that trading lows are forming ahead of next week’s USDA report. Macro financial market considerations have played a large role in Chicago valuations in the opening days of 2023. However, the market’s attention will shift back to next week’s January USDA Crop Report and S American crop sizes and weather.
  • Chicago brokers estimate that funds have sold 4,900 contracts of wheat, 3,400 contracts of soybeans, and 6,000 contracts of corn. In the soy products, funds have sold 3,900 contracts of soyoil and 1,200 contracts of soymeal. Funds have come back and bought back some of their earlier soymeal sales. The funds are back to holding sizeable net short wheat and large net long soymeal position.
  • The Index fund rebalance starts Monday and will feature net sales in soybeans, soymeal/corn, and net buying in wheat. We doubt that new money will flow into long only Index funds which will mute its influence on Chicago.
  • US weekly ethanol production was a bearish feature with production falling to 844,000 barrels per day vs 963,000 last week. This was down 19% from last year due to the holidays and extreme cold that blanketed the Central US before and after Christmas. At the same time, US ethanol stocks rose to 1,026 million barrels, up 14% from last year. We maintain that WASDE needs to reduce its US annual corn grind by 50-75 million bu in upcoming monthly S&D reports. The good news is that the drop in corn and natural gas prices has returned margin to Central US ethanol producers. We look for the US corn grind to improve during the remainder of the winter.
  • Tunisia booked 100,000 mt of wheat and 75,000 mt of barley with the wheat fob price estimated at $320/mt. This price would be above their last purchase and reflects that world wheat values have not changed much over the holidays. World cash wheat is holding stronger than US futures with Black Sea fob offers nominal due to the holiday. Russian fob wheat offers are steady.
  • The midday GFS weather forecast is consistent with hot/dry weather to impact Argentina and RGDS (Southern Brazil) for the next 8-9 days with widely scattered showers returning from January 13-15. The extended range 11-15 day forecast also has a few showers, but rainfall amounts in the next few weeks would be running around 40-60% of normal or 0.5-1.50”.
  • The Brazilian forecast stays favourable with an abundance of rain and cooler than normal temperatures for Northern and Central Brazil. Dryness issues do not look like they will get resolved in Argentina/S Brazil into late January.
  • It has been an ugly start of 2023 for Chicago markets. We doubt that March Chicago wheat falls too far below $7.40 with support noted in March corn below $6.45. The fast onset of the Brazilian soybean harvest will pressure cash premiums with world soybean demand shifting entirely to Brazil. March soyoil futures below $0.62/pound is attractive again. We see wheat/soyoil as nearing bottoms while corn/soybeans and soymeal chop sideways ahead of next week’s USDA Crop Report.

4 January 2023

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  • HEADLINES: Chicago values drop hard on macro-economic concern/crude oil price fall; Demand worry to be featured in Q1.
  • Chicago ag futures opened mixed with the grains lower but soybean/meal futures higher following overnight trading trends. However, spot crude oil futures fell to another $3.00/barrel daily loss (down $6.00 in the past 2 days), and the selling accelerated across the raw material space. Crude/heating oil losses are pacing the market due to the fear of a future recession, both in the US and world economies.
  • The freefall in energy prices has pushed fund managers to be sizeable sellers of Chicago grain/soybeans. The market appears willing to look past the Argentine dryness with Brazil set to harvest a record large soy crop. We note that the deepening Argentine drought will cause support on breaks but following the past few days and the coming USDA January crop report, few are willing to chase rallies. And fund managers are not seeing the commodity space as high on their investment list as the US Central Bank remains restrictive, inflows of new money into raw materials are not expected until China shows that it has won the battle against Covid. With the Lunar New Year ahead, China’s economic growth will contract further.
  • Chicago brokers estimate that funds have sold 8,800 contracts of soybeans and 15,500 contracts of corn, and 8,400 contracts of wheat. In the soy products, funds have sold 4,900 contracts of soymeal while being flat in soyoil. End users are using the break below $0.63 in March soyoil to boost ownership.
  • The USDA reported that it sold 124,000 mt of US soybeans to an unknown destination for the 2022/23 crop year. The buyer is said to be an EU crusher looking to secure nearby needs.
  • Tunisia issued a tender for 100,000 mt of wheat and 75,000 mt of barley between January 10 and March 5 in consignments of 25,000 mt. It is expected that other North African buyers could step forward amid the recent price break. Russian wheat offers stay aggressive into early March.
  • Ukraine is seeking to boost the inspection pace of its grain through Turkey to add to tonnage sales totals. Vessels have been stacking up which adds to the cost of demurrage and insurance. The next negotiations are likely to start in late February or March with the current pact to expire on March 19. It is interesting that Ukraine has not had difficulty in getting grain to port, it is the inspection by Turkey/Russia that has slowed down the shipping process.
  • US ethanol margins have returned to the green with the recent sharp fall in natural gas and corn prices. For the past 6 weeks, US ethanol margins have struggled on high energy and corn costs, especially in the Plains. US ethanol producers are locking down margin by booking corn/natural gas on breaks. We look for corn booking to increase between $6.40-6.50 basis May futures. For now, we doubt that May corn can fall too far below $6.30 until more is known about S American weather and the coming USDA January report.
  • The midday GFS weather forecast is consistent with hot/dry weather to impact Argentina and RGDS in Southern Brazil for the next 9-10 days. A lack of subsoil moisture collides with high temperatures in the 90’s and 100’s across Argentina late next week. The extended range 11-15 day forecast also reduced rainfall potential keeping Argentina in a drought threatening trend into January 20.
  • The Brazilian forecast stays favourable with an abundance of rain and cooler than normal temperatures. We look for Brazilian soy crop estimates to grow, but for Argentina to decline.
  • It has been an ugly start of 2023 for Chicago markets. We doubt that March Chicago wheat falls too far below $7.40 with support noted in March corn below $6.45. The fast onset of the Brazilian soybean harvest will pressure cash premiums.

3 January 2023

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  • HEADLINES: Chicago falls sharply on Brazilian fuel tax mandate from Lula; China Covid worry amid slowing world economic growth; Argentine forecast drier at midday.
  • Chicago ag futures opened mixed to slightly higher and fell sharply on fund inspired selling and profit taking. Wheat, corn, and soybean futures are all sharply lower at midday with gains heading into the New Year’s holiday fading in a host of financial markets. Selling is noted across commodity, stock, and other financial markets as the worry of US stagflation looms in 2023.
  • Crude oil prices are down $2.65/barrel at $77.60 basis February futures with the US dollar sharply higher. The DOW is down nearly 200 points with energy and automotive stocks sagging. Most analytical firms are forecasting a world recession with lingering inflationary pressures due to rising wage pressures. The IFM forecast that world economic growth in 2023 could be one of the slowest in the past several decades, which does not beget strong future raw material demand. The worry is that sagging demand will not support existing grain or livestock price levels.
  • Adding to the worry is that China’s Covid surge is adding to the concern of future demand. China hospitals are reported to be filling quickly. The Chinese Government has stopped reporting Covid infections/deaths leading to considerable speculation as to the health of China’s economy. Some fear that China is going to go through what the rest of the world endured in the spring of 2020 amid the Covid pandemic. Chinese pork prices fell over 30% in December, a record for any month, which adds to the demand worry. The economic headwinds and China’s embattlement with Covid looks to produce a soft first half of the year for raw material markets.
  • Chicago brokers estimate that funds have sold 8,400 contracts of soybeans and 10,500-11,000 contracts of corn, and 4,400 contracts of wheat. In the soy products, funds have sold 3,400 contracts of soyoil and 6,400 contracts of soymeal. End user pricing has been modest on the early decline.
  • US FGIS export inspections for the week ending Dec 29 were 26.2 million bu of corn, 53.7 million bu of soybeans, and just 3,148 million bu of wheat. For their respective crop years to date, the US has exported 377 million bu of corn (down 137 million or 27%), 1,051 million bu of soybeans (down 80 million or 7.5%), and 435 million bu of wheat (down 13 million or 3%).
  • Brazilian President Lula offered a surprising decree that exempted fossil fuels from tax which would have benefited domestic biofuel industries. And the value of the Brazilian Real fell to 5.43:1 US$ today which is down 1.5%. Private forecasts have the Real weakening to 6:1 in 2023, boosting Brazilian farmers. The lack of a fuel tax will create additional federal borrowing.
  • Threateningly warm and dry weather will impact a majority of Argentina and far southern Brazil over the next 10 days. A lack of subsoil moisture will collide with high temperatures in the 90s & 100s across Argentina late next week. The extended range 11-15 day forecast also reduced rainfall potential keeping Argentina in a drought threatening trend into January 19.
  • The Brazilian forecast stays favourable with an abundance of rain and cooler than normal temperatures into January 15. However, at some point the rains will need to subside to allow the harvest of soybeans and the seeding of winter corn. That will not become a big concern until February.
  • It is a bearish start to 2023 with corn/soy charts starting to break down. The falling Brazilian Real will boost their farm income while Chinese demand will be adversely impacted by the fast spread of Covid. The only bullish fundamental is the ongoing Argentine drought and potential crop loss. We maintain a bearish longer-term outlook as El Niño looks to boost US crop yields in 2023.