- Today’s headlines: Chicago wheat Hits 6-year high; row crops steady on currencies, worsening Argentine soil moisture.
- Chicago ag futures are steady to higher at midday, with wheat today’s star performer. Recall Algeria will be making a sizeable purchase of wheat today. Algerian tender details are slow to find the marketplace, but there is some chatter that US wheat is at least an attractive option to EU origin. We expect Algeria to fill today’s tender with EU wheat exclusively, but this will act to boost EU fob prices, which in turn makes US wheat competitive on even modest declines in KC futures. Broadly, the theme of the market into early Jan remains that commercial end users will be there to absorb price breaks. Prying additional supply from the US farmer will be arduous moving forward. Our outlook stays bullish.
- The US$ has fallen to a new 32-month low, and currencies continue to add to the US’s competitive position in global ag markets. On the margin, the Aussie and Canadian dollars continue to add value. The Brazilian Real has turned lower after spiking on Monday. Recall Russia’s coming export tax is valued in €uro, with the €uro finding new rally highs this morning.
- US ethanol production through the week ending Dec 25 totalled 275 million gallons, vs. 287 million the previous week and a 10-week low. Note that production is seasonally weak in late Dec/early Jan. US ethanol stocks last Friday swelled 14 million gallons to 987 million despite production contraction. Current US ethanol stocks reflect nearly 4 weeks of use assuming no major change in driving patterns occurs in January. Biofuels will act as a weight on domestic corn disappearance throughout the winter months, but a downward revision to total industrial use in 2020/21 is not anticipated. Spot WTI crude is unchanged. RBOB gasoline is up $0.01/gallon at $1.40.
- Other news is lacking as the trade enters holiday mode. Central US rain/snow in the last 24 hours has matched projections. Moisture equivalent totals in excess of 0.25″ have been confined to the far E Plains, Midwest and N Delta. W KS and the OK/TX panhandles were left completely dry. Zero precipitation is offered to the western HRW Belt through Jan 14. NASS will release updated winter wheat crop ratings from select states next week. Little/no improvement from late Nov is expected.
- The midday S American GFS weather forecast is wetter in Central Argentina late next week, with accumulation of 1.0-1.5″ offered to major producing province Cordoba. Confidence so far out is lacking, and even if the GFS verifies much more will be needed over the next 30 days to stabilise soil moisture, which is rapidly deteriorating across Argentina’s primary crop belt. Also notice that areas of E Argentina will be left arid. The GFS also maintains max high temperatures in Argentina over the next 48 hours in the mid /upper 90s. A lasting break from La Niña-based dryness is not anticipated in January.
- Unusual dryness persists in Central Brazil through the weekend. A more normal pattern of shower activity follows Jan 5-14.
- The goal of the market in Q1 2021 is to significantly slow soybean/product use via demand destruction or substitution. Neither are occurring presently as crush margins stay elevated and amid uncertainty over Brazilian soy shipments in late winter. Corn shares in the need to slow consumption if outright drought develops in Central Brazil Feb-Mar.