- Chicago soybean/corn futures are sharply higher at midday with wheat values mixed on active fund demand and rising world fob markets. The fast approaching USDA January Crop report amid diminished S American crop potential has soy futures pacing today’s gain. Investors are adding to net long positions across Chicago, but their buying is expected to slow following the FAS Weekly US Export Sales report on Thursday. Any correction is expected to be modest and brief as any selling being related to profit taking. Few end users will want to be bearish with the January Report likely to be bullish. The USDA must adjust S American crops downward and raise US soybean/corn export estimates. The result will be a further fall in US corn and soybean end stocks with US January soybean stock/use ratio to be record low. We would see any price correction to $4.70-4.80 July corn or $13.00-13.25 March soybeans as providing the next buying opportunity. The odds are very low that a seasonal high is or will soon be scored. Statistical evidence of demand rationing (slowing of US soybean/corn exports or US soybean crush) is required to form a seasonal high.
- Chicago brokers estimate that funds have bought 1,500 contracts of wheat, 5,900 contracts of corn, and 5,100 contracts of soybeans. In the products, funds have bought 3,200 contracts of soymeal and 4,100 contracts of soyoil. Managed money continues to pile into fresh market length.
- Argentine soybean export taxes rose back to 36% on Monday. The 2-month tax holiday did little to facilitate new sales. The increased tax rates along with soaring inflation will not produce much of an increase in Argentine farm selling in coming months. Argentine farmers report that Argentine farmers have little or no interest in making any new cash sales amid threatening weather and diminished production with an annual inflation that exceeds 40%.
- US weekly ethanol production was 275 million gallons. up slightly from the week prior. The weekly grind is down 12% from last year, but above the weekly pace needed to reach the USDA Annual forecast. US ethanol stocks fell to 978 million gallons vs 987 million in the week prior. The good news is that US ethanol exports are rising which is due to fresh Chinese buying. US blending margins are increasing, but the sharp rise in corn prices has harmed ethanol margins.
- The S American GFS weather forecast at midday is wetter for C Argentina with two systems in the 7-13 day period. Limited rain is offered for the next 5-6 days before a cold frontal passage increases rain chances for January 12-14th. The midday GFS forecast prints out rains of 0.4-1.25″ with locally heavier totals between January 12-14. A second chance of rain is offered in the 11-15 day period, but confidence in this rain is low. Other forecasting models do not show the second system. The EU and GFS models have been apart on rainfall forecasts for the past 4 days. Our forecast lean is with the EU and Canadian models which are drier. The GFS has been over forecasting rainfall for Brazil and Argentina since early December. The EU model is the best performer for the past 3 weeks.
- The end of the 2020 and the first 3 days of 2021 has produced a big run in Chicago values with March soybeans rising $1.20 with March corn up $0.50/bu. Higher Chicago prices are expected into midwinter, but a pause is likely following Thursday’s FAS Weekly Export Sales/Shipment report. The bulls desire to take some profits off the table amid the uncertainty of the USDA January Crop report. There is no indication of demand rationing, but the index fund rebalance that starts Friday could produce consolidation of the recent gains.