- Chicago futures have reversed opening losses with corn, soybeans and wheat higher at midday. The fund selling slowed with rumours of China booking Brazilian soybeans for March/April and US soybeans in a new crop position. The volume of trade in Chicago has been much larger than last Thursday, and the test of recent lows appears to be completed. Chicago will continue to closely follow S American weather and US export demand heading into the end of the year.
- We look for a firm close today, but we doubt that Chicago is ready to strongly rally until after Thursday’s USDA/CONAB crop reports. Following these reports, it is the NOPA December 15 Crush Report and then the January USDA Crop report that should produce an upwards price lift. Few will want to be bearish ahead of the NOPA crush or the January USDA crop report amid tightening US stocks and the potential for record large demand.
- Chicago brokers report that funds have bought 12,000 contracts of corn, 2,000 contracts of wheat, and 7,000 contracts of soybeans. In the soy products, funds have bought 1,000 contracts of soymeal and 1,500 contracts of soyoil. The funds turned around quickly to the buy side of the marketplace this morning on the testing and reversal of key chart-based technical support.
- US export inspections for the week ending December 3 were; 28.9 million bu of US corn, 84.4 million bu of US soybeans, and 19.5 million bu of US wheat. For the prior week, US inspections were revised upwards by 14.2 million bu of soybeans to 89.1 million , corn was revised up 5.7 million bu to 40.7 million, and wheat up 1.1 million bu to 19.6 million. US weekly soybean export revisions to the upside continue to be sizeable. China took 56.5 million bu of US soybeans or 63% of the weekly export total. We understand that China loadings from the US will stay active well into the first week of February.
- For their respective crop years to date, the US has exported a record 1,081 million bu of US soybeans (up 443 million or 69%), 434 million bu of corn (up 177 million or 68.5%), and 494.8 million bu of wheat (up 14 million or 3%). Based on Census data, it appears that the US will have exported a record 1.1 billion bu (26% of the 2020 US soybean crop) in the first quarter of the crop year. This massive export pace reflects strong demand from China, which has us looking for record large US soybean loadings in Q2.
- The price difference between FOB US Gulf and Brazilian soybeans for February is down to just $0.05/bu with it almost impossible to find a Brazilian offer for the first half of February. The delay in Brazilian seeding combined with recent dry weather has delayed the crop and pushed back maturation. This has exporters scrambling pulling back on Brazilian offers with the FOB spread narrowing. Brazil has a quality and freight advantage into China, but other world importers will be prodded to cover their soy import needs from the US. China is rumoured to have booked 5 cargoes of Brazilian soybeans for February and US new crop soybeans for Sept/October.
- The 10-day weather forecast is drier than the overnight run for N and C Brazil and equally as dry for Argentina. The 10-day rainfall anomaly map reflects that the forecast is far from normal. Although rains will drop across N Brazil in the next 2-3 days with totals of 0.5-2.00″, such rain is short of historical crop needs and averages.
- N Brazilian temperatures are forecast to be seasonal with highs ranging from the mid 8O’s to the mid 90′s. Argentina and S Brazil temperatures will range from the 80′s to the mid 90′s. Our concern for S American weather is rising again amid the ongoing “deficient” rainfall pattern for N Brazil and all of Argentina.
- The coming N Brazilian rain has been talked about for well over a week. The problem is that following 3-4 days of normal rainfall, the forecast is arid again thereafter. This is not what the Mato Grosso or Goais farmers have been hoping for after an extensively dry October and November.
- US soybean demand is record large with exports nor crush showing any sign of price rationing. Traders are looking for WASDE to raise US 2020/21 soybean exports by 25 million bu, we expect the increase to be more like 50-75 million bu. US corn export demand is also understated. We maintain a bullish outlook.