- Chicago futures are sharply lower at midday in a risk off session. The fund flows are in the direction to reduce risk relative to the US strike against a key Iranian General and the promised retaliation by Iran. Crude oil has rallied sharply, but the US$ has retreated from a sharp early gain.
- It is unlikely that US/Iran are entering a long military conflict, but tensions are high and Chicago grain markets have enjoyed a multiweek rally. As such, traders are cutting their risk and banking profits. We look for funds to continue with their selling ways into today’s close.
- Chicago brokers report that funds have sold; 7,000 contracts of soybeans, 5,550 contracts of corn, and 4,300 contracts of wheat. In soy products, funds have sold 3,500 contracts of soyoil and 4,100 contracts of soymeal. Normally, rising crude oil would be bullish for the biofuel crops of corn and soyoil.
- US Export Sales for the Week Ending December 26 were; 11.5 million bu of wheat, 20.9 million bu of corn, and 12.1 million bu of soybeans. The sales were below expectations, but it was a holiday week. Please note that there were 1.9 mt of US soyoil sales cancellations while US weekly meal sales were just 94,700 mt. China booked just 160,200 mt of US soybeans while exporting 419,000 mt last week. In the 2019/20 crop year, China has booked 11.1 million mt of US soybeans which includes/exceeds their promise to take 10 million mt made in October.
- For their respective crop years to date, the US has sold 693 million bu of wheat (up 40 million or 6%), 723 million bu of corn (down 530 million or 42%), and soybean sales of 1,084 million bu (down 54 million or 5%). Mexico has taken 9.0 million mt of US corn or some 50% of the total with sales to others at a record low. If not for Mexico, US corn sales would be below the pace of 2012, when US corn exports dramatically sank due to sky high corn prices of $7-8/bu.
- lnforma estimated the 2020 Brazilian soybean crop at 125.6 million mt with Argentina at 54.0 million mt. The lnforma Brazilian soybean crop estimate would be a record large by some 5 million mt.
- US ethanol production likely reached a seasonal high before Christmas with last week’s total falling to 1,066 barrels/day or 313 million gallons per week vs 318 million in the prior week. US ethanol stocks were down to 884 million gallons vs 902 million last year. US ethanol stocks are down 9% on last year. US crude oil stocks fell below last year (down 3%) at 430 million gallons.
- The midday GFS weather forecast is wetter for S Brazil and Argentina into January 13. There is no evidence of any extreme heat and the coming rainfall should be adequate to maintain strong S American crop production. And near normal rainfall is indicated for Argentina and S Brazil in the 10-15 day period. S American crops are in good to excellent condition which should translate into above trend line yields should favourable weather persist for another 3-6 weeks. The early harvest in Northern Brazil will be starting in 10-14 days. Some early cutting is already under way as farmers defoliate a modest portion of their September seeded soybean crop.
- It is hard to say whether Thursday’s Chicago rally amounted to a seasonal top. That potential exists, but there should be a retest rally that offers another sales chance. US corn, wheat and soy export interest remains modest and S American weather forecasts are favourable. The US export opportunity is in retreat. Yet, the USDA Jan 10 Crop Report lies ahead and US President Trump looks to sign the Phase One Trade Deal on January 15.