- HEADLINES: Chicago steady/lower at midday; GFS weather forecast drier than EU model in Argentina.
- Chicago futures are weaker at midday as the soy complex digests rainfall currently impacting Cordoba in Argentina, which was not forecast Wednesday evening, and a weekly contraction in export sales. Paris milling wheat futures have extended their overnight decline and are down €2.25-2.50/mt. Crude oil is down $0.35/barrel. The Dow is down nearly 500 points.
- There remains confusion over the spread of Covid in China following the relaxation in Covid protocols and also reporting of new cases/deaths. Reported cases have plummeted, but there are many stories suggesting hospitals are being filled and the spread will accelerate into mid-winter. Covid in China, coupled with already sluggish economic growth, continues to act as a weight on financial and raw material markets.
- Through the week ending Dec 15, US exporters sold 25 million bu of corn, vs. 38 million the previous week, 12 million bu of wheat, vs. 17 million the previous week, and 27 million bu of soybeans, vs. 108 million the prior week and the lowest since late November. The harvest of short-season soy varieties has started in Mato Grosso this week. It is very early but yield reports are solid. Harvest there will accelerate into the middle part of January. Later planted soy crops will benefit from ongoing rainfall in Mato Grosso and Goias, and we note that meaningfully negative root-zone soil moisture anomalies in Central Brazil are now confined to Sao Paulo and Minas Gerais.
- For their respective crop years to date, the US has sold 813 million bu of corn, down 48% from last year, 531 million bu of wheat, down 8%, and 1,560 million bu of soybeans, up 4% year on year. The USDA will leave its 2022/23 US soy export forecast unchanged in January, but sales must stay above 25 million bu each week into late winter. We also note that the US as of mid-Dec has sold a meagre 14 million bu of sorghum (22,000 bu last week), vs. 201 million a year ago. China remains absent from the US feed market.
- The midday GFS weather forecast projects rain to linger in Cordoba and northern Argentina into Saturday, with additional totals pegged at 0.25-1.00”. Lesser but widespread weekend rain will impact much of Argentina’s Crop Belt, with the GFS forecast still much drier than the EU’s morning solution in Santa Fe and Entre Rios. A drier but mild pattern resumes in Argentina Dec 26-Jan 5, but since early Dec the forecasts have underestimated rainfall there. Brazilian precipitation expands to envelop all but Rio Grande do Sul in the south in the 6-15 day period. A full-blown weather market lies ahead, with odds of a pattern change in Argentina Jan onward central to corn/soy price discovery in the New Year.
- Markets will add/subtract premium based on the latest S American forecast, but without sizeable Argentine yield loss (10+% from trend), rallies will struggle in Q1 amid demand issues and the arrival of the Brazilian soy crop.