- Chicago is mixed at midday with corn, soy and wheat futures trading either side of unchanged. A push to new rally highs uncovered profit taking from the bulls ahead of the holiday with a slight improvement in the rainfall forecast for Argentina and S Brazil in the last few days of 2020. Traders are prepared for disappointing sales numbers from FAS on Wednesday morning as large daily sales totals were not announced. But when the US has already sold 90% of the annual US soybean export forecast, any sales are large. We doubt that you can keep soy futures down amid rumours that China is now seeking new crop US soybeans and is worried about Brazilian abilities for late February export executions amid a delayed crop. There may be as much as another 1 million mt of Brazilian February soybean demand that is shifted to the US. The problem is that with US 2020/21 soybean end stocks at just 170 million bu, there is no room for any new buying.
- Chicago soybeans, corn and wheat futures can ease, but additional soybean and corn demand rationing is needed. This should have the bulls back buying after the Christmas holiday. Traders want to be long heading into the January 12 USDA report as a further fall in US corn/soybean yields is feared.
- FAS/USDA did not announce any new daily sales of corn, wheat, soybeans, or soy products today. Traders are trying to understand how much (if any) Argentine soy product or corn demand has switched to the US. Argentine exporters fear that the strike will persist into 2021. There are 100 vessels waiting to load, and for each day the strike continues, the cost for exporters/end users and the Argentine Government is dramatically growing. Both sides are entrenched in their position, and it seems for now both seem unmovable.
- Chicago brokers estimate that fund managers have sold 5,200 contracts of soybeans, 3,500 contracts of corn while buying 3,200 contracts of wheat. Funds have sold 2,900 soymeal and 2,400 contracts of soyoil.
- China soybean imports to date suggest a 102-104 million mt all origin import pace for 2020/21. China’s westernised hog production model (following ASF) and rapid growth in its sow herd argue for a sizeable increase in Chinese soybean imports into 2023. Some forecast that China could take 107-109 million mt of all origin soybeans in 2021/22, a 5-7 million increase from the current crop year.
- The point is that China is again growing its soybean demand which suggests that the WASDE baseline soybean import estimate for 2021/22 is too small at 2,175 million bu. Analysis of world soybean trade and Chinese demand argues for a total closer to 2,325 million bu, 150 million bu larger. The problem is that such exports virtually deplete 2021/22 US soybean end stocks, even if US 2021 soybean seeding rises to a record 90.5 million acres. The soybean bull is a multiyear event which demands above trend 2021 US yields before it ends.
- CIF Gulf corn/soy values are up 2-4 cents at midday as exporters reach for supply from the producer. The problem is that US producers show no willingness to part with stored supply until the New Year. The US farmer has a tax issue for 2020 amid US Government Covid support amid autumn rising grain values. Chicago corn/soy spreads will continue to continue to gain on the need for cash grain.
- The midday S American weather forecast is wetter than the overnight run for Cordoba and the western half of Santa Fe. The model indicates 1.50-3.00″ of rainfall. However, the midday GFS Ensemble was unchanged and did not follow the wetter GFS forecast. The Euro model is just starting to run, but “other” model verification is needed for us to buy into the wetter GFS solution. The extended range forecast maintains a classic La Niña pattern for S America and we are worried about the return of dryness for N Brazil in January
- Firming Gulf CIF values have rallied corn spreads and flat price this morning. Buying the last 15-30% of the 2020 crop is not going to be easy. Most farmers want to make sure that a S American weather problem is avoided. We stay bullish looking for better than expected export sales early Wednesday. Any corrections should be modest as this is demand rationing rally.