- Total area of crops continues to expand across Argentina due to profitable margins and tax promises. On January 1st, the Marci Government has promised to reduce their soybean export tax by 0.5% in each month going forward. The Argentine Peso sits a near record low vs. the US$. The combination of lower taxes and a weak currency has been a potent stimulus for Argentine farmers to expand their seeded area. The extra acres could reduce some of the yield drag amid regional dryness.
- It was a mixed day of trade in Chicago that left January soybeans 2.75 cents higher at the close. Chicago soyoil prices followed Malaysian palm oil futures to losses, while oil share spread unwinding lifted soymeal prices back to the best prices in more than a month. Commodity fund traders were estimated buyers of; 4,500 soybean and 5,200 soymeal contracts, while selling 6,000 soyoil futures. The US weekly export inspections report was delayed, and the results were disappointing. Soybean inspections were at the low end of estimates at 58 million bu, or the lowest since early October. The previous week’s inspection total was revised up by 5.3 million bu, while cumulative inspections of 768 million bu are now 120 million (14%) behind a year ago. The USDA will release US 10 year Baseline projections on Tuesday, which will feature preliminary estimates for new crop acreage, while the EPA is expected to release its 2018 biofuel mandate before Friday. Record large December 1 US soybean stocks look to cap rallies above $10.00 while the unknowns in the coming S American growing season looks to support breaks to $9.50.
- Chicago corn fell 3-4 cents as December’s first notice day is just ahead, and as the major weather forecasting models are in general agreement that needed rainfall will impact Argentina in the next 5-7 days. Recall very early planted corn begins pollinating in Argentina in mid/late December, and weather is becoming more important to yield determination. More rain will be needed (a majority of the crop will pollinated in February), but concern over lasting dryness is being eased. Otherwise, the market lacks a spark to drive funds out of what is still a massive short position. As of last Tuesday managed funds were short a net 210,000 contracts, down 20,000 from the prior week, but still historically large. Cumulative US corn export inspections at 285 million bu (through to mid November) are down 40% from this week a year ago. The US corn export pace is slow amid keen S American competition. Argentine rain is noted, and simply put, until there are hints of major US/world balance sheet changes the market will remain stuck between $3.30-3.60 basis spot futures. No change to the EPA’s ethanol US blending mandate is expected.
- Climate outlooks through to late December suggest a more normal pattern of precipitation may lie in the offing across the drier areas of the US Plains. With favourable weather ongoing in the Black Sea, there are just not many threats to the newly planting N Hemisphere winter wheat crop. World cash markets are slightly higher and contacts suggest hi-pro milling supplies are getting rather tight in Northern Europe. A host of tenders worth upwards of 1 million mt will close on Tuesday. In that sense today’s lukewarm reaction in the cash markets is somewhat disappointing. However, we look for a bottom in the wheat to be scored in early December. Interior US HRW basis continues to narrow, significantly so in some locations, and as German/Baltic prices rise the US is much more competitive for Jan-March exports. Winter wheat ratings fell for a third consecutive week (50% good/excellent, vs. 52% last week), which highlights that rain is needed across the whole of the Western US, good/excellent ratings are at/below 40% in MT, OK, SD and TX. Funds as of last Tuesday were short a net 109,000 contracts, unchanged on the week.