- HEADLINES: Backing and filling should produce a turnaround Tuesday; Biden/Putin to talk Tuesday; US soybean exports hold steady.
- The pending USDA December report and the expectation that it will be slightly bearish for soy/wheat has caused Chicago to give back some of Friday’s gain. Midday volume has slackened following active early day managed money selling in corn, wheat, and soymeal futures. We look for a mid-range Chicago close today as bullish or bearish passion is lacking.
- “Backing-and-filling” best describes today with exceptionally strong cash markets underpinning values near the morning lows. US ethanol and soy crush margins are historically strong for early December, and processors are paying “overs” for nearby cash which is producing $6.00 Midwest corn bids.
- And December corn futures are priced at a rare 1.5 cent premium to March. The December premium to March is a record looking backwards for early December. In 2012, December corn traded at a 15-cent premium to March during the heart of the summer drought. This year the US corn crop looks to be the second or third largest on record and it is demand that is pulling cash corn and futures spreads upwards. This is a demand led Chicago rally in the summer row crop futures.
- USDA reported that China booked 130,000 mt of US soybeans. Cash traders indicate that the 2 cargoes were sold for late January. Traders are also discussing that China has issued TRQ’s in November but has not activated them. Friday’s cash connected rumours that a private Chinese buyer took 5 cargoes of US corn is likely correct. Often, private Chinese importers secure grain ahead of TRQ issuance/activation. China (through TRQ’s licenses) must secure 7.6 million mt of world corn and 9.4 million mt of world wheat to follow their 2001 WTO pledge.
- Chicago brokers estimate that managed money has sold 3,000 contracts of wheat, 5,500 contracts of corn, and 4,500 contracts of soybeans. Funds have also sold 4,700 contacts of soymeal while buying 1,200 contracts of soyoil. The fund selling was active in the first 20 minutes of the morning opening.
- US weekly export inspections for the week ending Dec 2 were 29.9 million bu of corn, 82.5 million bu of soybeans, and 9.0 million bu of US wheat. The wheat export total was less than trade expectations while corn/soybeans were in line. We note that the US is now consuming 130-140 million bu of soybeans each week, which amounts to nearly 6.5 billion bu annually. Seasonally, the US will see a significant decline in export loadings in February. The recent string of large US weekly soybean exports will cause WASDE to be slow in cutting their 2021/22 soybean export estimate.
- USDA is not expected to change their S American soy or corn crop estimates in Thursday’s December WASDE report. It is too early in the growing season for CONAB/WASDE to be exact on S American corn/soy yields. It is the reason why S American weather forecasts have diminished importance until mid-December. It is the February and forward S American CONAB/WASDE crop estimates that matter.
- Russia has amassed 175,000 troops on the border with Ukraine, surpassing last spring’s build up by early 70,000. And additional troops and armaments are on their way from Moscow. President’s Biden and Putin will be talking Tuesday, but most sources doubt that Putin will back down. Sanctions will likely include the world banking system and some ban on ag/energy exports. Neither would help EU/world inflation and would be bullish to world corn/wheat values. It is important to monitor the situation closely.
- The midday GFS weather forecast is slightly wetter than the overnight run for Southern Brazil including the state of Parana. Yet, high-pressure ridging aloft across Argentina/Southern Brazil will restrict the flow of moisture. Temperatures are variable highs ranging from the 80’s to the mid 90’s. Crop-critical weather lies ahead with S Brazilian soil moisture in retreat. It is the forecast following Thursday’s USDA report that becomes critical.
- It is just too early to get overly bullish on dry S Brazilian/ Argentine weather. However, that view will change in a few weeks with stress on Southern Brazilian crops increasing. US President Biden has decided to diplomatically boycott the Beijing Winter Olympics for human right abuses, which harms the political atmosphere. Yet, we doubt it will change China’s demand for US ag goods. Don’t sell breaks on tightening US cash supplies and the growing concern that the US/NATO will place economic sanctions on Russia.