- HEADLINES: Chicago mixed at midday as Argentine weather forecast goes wetter and traders debate Thursday’s USDA report.
- Chicago ag futures are mixed at slightly higher at midday with early weakness unable to show any follow through technical selling. Wheat has traded both sides but with Egypt/Turkey in the world market, the early Chicago break uncovered commercial buying. The index fund roll starts at the close and traders will be watching for any unusual buying or selling. Index fund managers will use TAS (trading at settlement) so as to not produce too much of a market disruption. We would remind that the USDA January Crop Report will be released on Thursday with normal trade on Friday, with a 3-day weekend following (Martin Luther Kingf Observance) with the Asian Lunar New Year starting on January 21. Chicago trade will not be back in full force until the closing days of January. Market volatility will stay elevated until all market participants have returned. We look for mixed Chicago price action heading into today’s close and Thursday’s USDA report.
- Chicago brokers estimate that funds have bought 2,200 contracts of corn and 3,200 contracts of wheat, while selling 1,900 contracts of soybeans. In the products, funds have sold 3,900 contracts of soymeal and bought 1,500 contracts of soyoil.
- US export inspections for the week ending January 5 were 15.6 million bu of corn, 52.9 million bu of soybeans, and 7.4 million bu of wheat. US grain exports continue to be disappointing. For their respective crop years, the US has exported 393.6 million bu of corn (weekly average of just over 23 million bu to date, far below the 43 million weekly average needed to achieve the USDA annual export pace of 2,075 million bu). US wheat exports rest at 444 million bu or down 12 million from last year, while US soybean exports rest at 1,105 million bu, (down 62 million or 5%). We would expect WASDE to trim their 2022/23 US corn export estimate by 50-100 million bu on Thursday. We can also argue for a cut in US 2022/23 soybean exports of 25-50 million bu. The US export profile will struggle going forward.
- The average trade estimate for the 2022 US corn yield is 172.5 bushels/acre, up ).2 from the November NASS forecast with soybeans at 50.3 bushels/acre, up 0.1. We lean towards increases in both of 1 bushels/acre in corn and 0.5 bushels/acre in soybeans. Our bet is that the onus on the report is on the bulls. NASS tends to surprise to the upside on yield and does adjust harvested acres also.
- March corn TAS has traded nearly 3,000 contracts for the close which suggests that Index funds will us it partially to rebalance. We doubt that the rebalance will have much of an impact on Chicago futures this week.
- Egypt and Turkey are seeking world wheat for February/March, which should include Black Sea and potentially French wheat. US wheat is bouncing as the domestic price reached low levels that worked into SE US feed rations.
- The midday GFS weather forecast is wetter than the overnight run with better rain projected for Argentina/S Brazil late this week and next. A front is forecast to produce showers Thursday/Friday, and again early next week with a third (potent) storm system noted from January 19-22. The 10–15-day period features 0.5-2.00” of rainfall for Argentine crops. The improved rainfall pattern boosts Argentine and S Brazilian crop potential if correct. Traders will monitor the EU model’s rainfall output before the close. Near normal rains look to fall across the remainder of Brazil with a drying trend to aid the Mato Grosso harvest late month. The midday GFS forecast is improved (in respect to Argentine rainfall) from prior model solutions.
- Chicago futures are mixed at midday with corn, soybean and wheat holding either side of unchanged. Unless Thursday’s USDA January crop report holds a bullish surprise, the wetter Argentine weather forecast should start a sustained downtrend. Brazilian soybean premiums are under pressure as their harvest starts in earnest in a few weeks. US corn, soy and wheat export demand stay seasonally slow, and selling Chicago rallies is our current leaning. The downside price leader should be corn/soymeal on speculative length and slowing US corn trade profile. Notice that even with a 43 million mt Argentine soybean crop in 2023, that world soybean supplies will be record large, which does not sustain rallies above $15.00.