- HEADLINES: Funds sell soybeans on chart considerations; Wheat rallies on arctic cold and Black Sea weather forecasts; Midday GFS weather forecast stays wet across N Brazil.
- Chicago grain futures are mixed at midday with the grains higher while soy futures sag to fresh lows. A drop in crude oil and negative mentality regarding future US soybean export demand has sparked the fresh fund selling. Moreover, an open chart gap left from Tuesday has not been filled which is allowing fund managers to add to short soybean positions with limited risk. A close above the chart gap or a recovery late day would underscore that a trading bottom has been found (seasonal price patterns argue for a soy rally in the next few weeks). Otherwise, the market is on a mission to liquidate fund meal length that could pull March soybeans to long term support at $12.50.
- The US dollar is slightly weaker, but most trading desks are loath to start macroeconomic positioning ahead of next week’s USDA January Crop Report. Chicago trading volume is slow to fully recover from the holiday which exacerbates hourly price moves. Moreover, Chicago corn/soy option values/premiums reflect that few are worried about a bullish or bearish USDA report next week. We would argue statistical uncertainty regarding US December 1 corn/soybean stocks that could produce market fireworks.
- Chicago brokers estimate that that fund managers have sold 5,100 contracts of soybeans, 3,700 contracts of soymeal, and 2,900 contracts of soyoil. Funds have bought a net 3,700 contracts of corn and 3,200 contracts of wheat.
- The USDA did not announce any new daily export grain sales.
- US weekly ethanol production was 308 million gallons, up 24% from last year but down 5% from the prior week due to the holiday. US ethanol stocks rose 3 million gallons to 991 million which was down 4% from last year. US gasoline consumption was up 6% year on year at 7.95 million gallons per day. The US ethanol grind is likely to be raised 25 million bu by the USDA as demand continues to be strong and producers have locked down profitable forward margins.
- Ukrainian corn exporters are getting swept up in the Red Sea shipping conflict amid rising insurance costs or a pure lack of insurance which is forcing vessels to take an extra 2 weeks to push southward around the Horn of Africa. The lengthy voyage raises the cost to importers by $19-22/mt. Ukraine corn exports were just coming back to normal before this new logistical snarl. The extra cost means that US Gulf corn is in a more competitive export position.
- The midday GFS weather forecast is wet across Northern Brazil as the forecast keeps a pattern of near daily showers in place. The 10-day outlook is consistent with the overnight run offering monsoonal rainfall of 2.50-6.50”. Drier weather occurs across S Brazil and Argentina with rains of 0.5-2.50”. The Argentine rain is enough for early crop development, but greater rain will be required in February/March when corn and soybeans are reproducing. Any heat will be located across Paraguay and Northern Argentina with highs in the 90’s to lower 100’s.
- Funds are adding to their shorts in soybeans and exciting meal length. Chicago wheat values are higher as key chart support held as the Black Sea endures a round of arctic cold that produces winterkill worry. It is the length of the Black Sea chill and whether ice will form following that will determine crop losses. Corn is unable to decline, but few want to chase a rally ahead of next week’s USDA Crop Report. We look for additional choppiness.