- Chicago futures started the week higher on concerning S American weather and a continued fall in the value of the US$. January soybean futures opened at $11.98 and traded as high as $11.99 while March corn scored a new contract high at $4.395 with March Chicago wheat in tow. The volume of trade was active with more than 36,000 contracts of Mar corn and 23,000 contracts of Jan soybeans changing hands.
- However, for the fifth time in three weeks, January soybeans were unable to breach resistance at $12.00 and prices retreated into the morning hours. The inability for January soybeans to penetrate $12.00 turned the charts into consolidation as traders try to gauge the impact of S American weather on yield/production. The industry has been reluctant to cut Brazilian or Argentine crop estimates with summer just starting. If there is not a dramatic change in the S American weather pattern during December, a more robust rally will unfold as the market enters a more dynamic demand rationing phase. Research argues that January soybeans will ultimately exceed $12.00.
- Chicago corn, soybean and wheat futures fell sharply on Monday on long liquidation based on the hope for better rain across some of the drier areas of N and C Brazil next week. The bulls had become frustrated with the inability of January soybean futures to push above $12.00 and with the new prospect of rain after December 7, they decided to head for the exit door. The midday speculative selling is robust and based on N Brazilian rain next week.
- Rumours regarding new Chinese interest for US corn were pushed aside as fund profit taking into the end of the month is the day’s theme. Farmers in the US and Latin America are not selling into the break, which could allow for a late week recovery. We note that N Brazil normally receives 2-2.50″ of rainfall per week, so next week’s rain prospect for 0.5-1.50″ for Mato Grosso is less than average, but not totally unexpected. We look for a lower Chicago close today with a turnaround in values forecast for Tuesday.
- Chicago brokers estimate that funds have sold 7,500 contracts of corn, 8,900 contracts of soybeans, and 4,900 contracts of wheat. In soy product futures, funds have sold 7,400 contracts of soyoil and 3,200 contracts of soymeal. The CFTC will be out with their Commitment of Traders Report this afternoon.
- US weekly export inspections were larger than expected for US wheat and soybeans. For the week ending November 26, the US exported 32.7 million bu of corn, 74.8 million bu of soybeans, and 18.5 million bu of wheat. Last week’s US soybean export total was revised up 8.2 million bu, a trend of upward revisions that extends into September. The US will have exported 1.0 billion bu of soybeans in the crop year to date through today, a record. Never has the US exported 1.0 billion bu on a single crop year quarter. China shipped out 55.0 million bu of US soybeans last week with just over 33 million bu loaded out of the Gulf.
- Research notes that Brazil has just 2 vessels in the line-up to load soybeans in coming weeks, suggesting that they are now fully sold out. And Argentina has not shipped out any soybeans in over 5 weeks with no vessels being nominated for the next few weeks. The point is that the US now has the entire world soybean crush demand from today into the last half of February.
- For their respective crop years to date, the US has exported 399 million bu of corn (up 161 million or 68%), 980 million bu of soybeans (up 393 million or 67%), and 474 million bu of wheat (up 8 million or 1%). The US corn and soybean export pace stays impressive. FAS announced the sale of 344,000 mt of US corn to an unknown destination for 2020/21. Mexico, Japan and China are rumoured to be potential buyers. No US soybeans or wheat were announced. China has slowed their soybean demand based on large purchases on the books that equate to 34 million mt known/unknown.
- The midday forecast calls for drier than normal weather for Mato Grosso, Goias, and Mato Grosso Do Sul over the next 6-7 days with limited rain offered for the southern half of Argentina. High temperatures will range from the 90′s to the lower 100′s across N and C Brazil with mid 80′s to mid-90′s across Argentina. Northern and Central Brazilian rainfall chances improve starting next Monday with the return of tropical upper air moisture which will produce daily thunder storm chances. The chance of daily showers exists into December 12.
- The new drought area will form in the southern half of Argentina where limited rains fall in the next 2 weeks. No extreme heat is forecast, but the lack of rain will produce a sharp decline in soil moisture. Our view is that S American weather remains concerning for Brazilian and Argentine crops.
- Chicago is in correction mode based on the prospect of improved Northern and Central Brazilian rains which starts next week along with the inability to rise above $12 January futures. We doubt that the bull market is over and would see any deeper correction as a buying opportunity. You must make large S American crops to assure a bearish trend. Look for China demand to reappear on weakness. $11.50 January support is expected to hold.