- HEADLINES: Low volume mixed trade with debate raging as to the losses of the 2022 Brazilian soy/corn crops; Extreme heat ahead for Argentina.
- Chicago futures are mixed in a modest reversal of Thursday’s trade in a thin volume New Year’s Eve session. The world is already celebrating the New Year and traders have closed their books on 2021. Futures trade will resume in 2022 on Sunday evening with a full week’s trade ahead. We look for a mixed Chicago close today, but price trends are higher and new fund monies are expected to be put to work across the commodity markets in early 2022. We doubt that this past week’s highs are important with corn/soyoil and KC wheat to be the upside leaders in early 2022. Remember that with world stock/use ratios of the major exporters are record lows, it does not require much of a production loss to generate a dynamic bull marketplace.
- Brokers estimate that funds have bought 2,500 contracts of soybeans and 1,200 contracts of corn, while selling 1,400 contracts of wheat. In the soy products, funds have bought 1,900 contracts of soyoil and 2,300 contracts of soymeal. Chicago final open interest in corn, soybeans and wheat fell on Thursday’s decline, suggesting long liquidation. Amid a lack of resting orders, it does not take a large order to push the market.
- The USDA is closed for the New Year’s Holiday. No daily sales reports today.
- French wheat futures closed lower, and this is having a bearish impact on US wheat futures. March Paris wheat futures closed at €279.50, down €1.50/mt.
- Very early Parana soybean yield data is highly disappointing with losses of 30-90% from trend. Thursday’s heavy rain occurred across the NC areas, but it missed the heart of the drought-stricken crop areas of the west. In another 2-3 weeks, any rain that falls will come too late to benefit either the first corn or soy crops. Traders will be closely following yields across N Brazil to gauge if they can make up for the losses in the south. The odds are increasing that the 2022 Brazilian soybean harvest will fall below 137 million mt (the size of the 2021 harvest). Such a crop would produce US export opportunities in late July/August and in the September-October timeframe. US 2021/22 and 2022/23 soybean export estimates are rising via the smaller Brazilian soybean harvest. We estimate Parana soybean production losses of 7-9 million mt.
- Although Argentina will enjoy a few light showers over the next 5 days (low coverage of just 20% each day), the heat will be unrelenting into mid-January. Highs in the upper 80’s to lower 100’s will continue to quickly deplete soil moisture. Crop stress will be increasing. Farmers have yet to seed 19% of their soybean and 29% of their corn crops. A year ago, rains started to fall across S Argentina around Jan 8 and pushed northward through the state into late month. The January/March rains saved the 2021 Argentine corn/soy crops.
- The “big-short” in the world soybean market is China as it has fallen behind on its soy purchase pace amid the sharp Chicago December rally. China will have to step up its purchases of Brazilian soybeans in January before the nation enjoys its weeklong Lunar New Year in the opening week of February. China will be the bid under Chicago, should additional weakness develop.
- The midday GFS weather update is like the overnight run with light and widely scattered showers for Argentina with 10-day accumulations of 0.2-0.8” while heavy rain dogs the early soy harvest across Northern Brazil with rains of 5-12.00”. The early Brazilian harvest will be slow and waterlogged with seed damage to rise during January. The overall pattern is static, except for a modest southward shift that allows for some 1-2.00” of rain across Parana and MGDS. Extreme heat persists across Argentina numerous days with highs in the 90’s/lower 100’s.
- 2022 promises to be extremely volatile year with drought plaguing S America, the Central US, and portions of Ukraine. We anticipate China will return as a sizeable US corn buyer in Q1. US ethanol/crush industries are flush with margin and cash basis bids are strong. Chicago breaks will be sharp/short and unable to carry through. Renewable diesel feedstock demand doubles in 2022 with tightening world vegoil stocks ahead.