- HEADLINES: Wheat rallies further on yet more Chinese demand; Plunge in crude weighs on row crops.
- Chicago futures are mixed again, with row crops weaker and global wheat values steady/higher on additional Chinese demand for US origin. We also note that China this week has begun shipping previously purchased Russian cargoes. And bitterly cold temperatures and active snow in Southern and Central Russia will challenge logistics at ports and in the interior of Russia into mid/late December. Finally, the Aussie market has been stable despite ABARES raising its Australian production estimate on Monday. Wheat short covering continues.
- US exporters sold another 372,000 mt of SRW to China this morning.
- This brings Chinese purchases of US SRW this week to 37 million bu and brings total US SRW export commitments to 144.8 million bu, which matches the USDA’s annual forecast. Even assuming SRW sales between mid-Dec and late May average only 1 million bu/week, final US SRW exports are likely to reach 170 million bu. US SRW stocks, which were excessively large in summer/early autumn following record yield, will be cleared by spring. We expect the USDA to lift its all-wheat export forecast on Friday by 25-35 million bu.
- Exporters also sold 136,000 mt of soybeans to China for old crop delivery.
- Yet, the primary driver of corn, soy and soy product markets today is a further collapse in crude oil. Spot WTI is down $3.00/barrel at $69.30, a new 5-month low. Energy markets remain hyper-focused on Monday’s downgrade to Chinese debt and general pessimism surrounding global economic growth in 2024. Cash ethanol prices have followed crude lower, with the spot Midwest swap market dropping to $1.75/gal, vs. $2.20+ in Sep-Oct.
- Weekly EIA data, however, is not overly bearish. US ethanol production in the week ending Dec 3 totalled 316 million gallons, up 19 million gallons on the prior week and unchanged from early Dec a year ago. Ethanol stocks totalled 901 million gallons, down 8% year on year. US commercial crude stocks last Friday were 445 million barrels, down 4.7 million from the previous week, and replenishing the US’s strategic reserve (which is still a very weak 352 million barrels) will be challenging.
- The midday GFS weather forecast is consistent with its forecast into Dec 15-16. Better rain chances evolve across Central Brazil and Argentina in the 6–10-day period. Accumulation in the driest areas of Mato Grosso and Goias is pegged in a range of 0.75-2.00”, while multiple days of needed drier weather occur in far Southern Brazil. Soaking rainfall is forecast to blanket the core of Argentina’s Ag Belt next Thurs-Sat. However, heat/dryness persist in C/N Brazil into the weekend, and the GFS model is much drier in C/N Brazil the 11–15-day period as expansive high pressure ridging returns. Model forecasts, and the market, are struggling with forward S American outlook. Rain is needed immediately in N Brazil.
- Wheat is nearing overbought levels technically and a pause in the recent recovery is likely, while March Chicago corn failed to break through its 50-day moving average. Chicago soy and soyoil are nearing oversold levels, and many have been unimpressed with Brazilian soy crop health to date.