- The major forecasting models hint at drier weather in Argentina and wetter weather in C Brazil beyond the next 10 days. This pattern shift will be desirable, but confidence so far out is low. Extended range forecasts will be monitored closely through the weekend. Recall 2018 has been a year of climate extremes. In the meantime, a stagnant pattern of excessive rainfall will linger across North/Northeast Argentina. Totals of 2-6” will be widespread (much of this falls in the next 4-5 days), with regional totals pegged upwards of 8-10”. Wheat harvest in some areas is 60-70% complete. Quality on the remaining bushels is in question. The world market cannot afford any more yield/quality loss, particularly as high-pro importers are just now beginning to extend coverage into late winter/spring.
- The drought in S Africa is so far rivaling that of 2015, when concern over food-quality corn was widespread. Assuming the two-week forecast verifies, Nov-Dec rainfall across S Africa’s Corn Belt will reach just 4.5”, vs. a longer term average of 7.4”. A pattern of below normal precipitation will continue into the very end of December. Without well above normal rainfall in January, rationing will be needed there. S Africa’s climate pattern so far has been tied to the recently established El Niño. Model forecasts this evening are in good agreement that a strong El Niño will be in place until at least Feb/Mar. S African corn pollinates in January, and unfortunately production and export forecasts there will be lowered further. Recall in 2015 S Africa was a net corn importer of 1.4 million mt.
- Soybeans traded weaker overnight, and then fell right from the morning open following confirmation from the USDA of exporters sales to China. Ahead of the morning open the USDA announced export sales totaling 1.13 million mt of old crop soybeans to China. However, the figure fell well short of the rumoured figures. Traders hope for additional export sales on Friday or later next week and need to see a steady stream of business. 1 million mt hardly puts a dent in the record large soybean supply that US farmers/elevators are holding. The weekly export sales report showed routine sales and shipments for last week. Total export commitments are close to 13 million mt (34%) behind last year and the slowest in 7 years. At mid-month, US farmers are anxiously awaiting news of the second tranche of payments from the Market Facilitation Program. On Thursday the Ag Secretary said that he expects the White House will approve the second payment despite recent soybean sales. The trade hopes for additional export sales announcements in the coming days. In the near term, resistance in January is near $9.40, with support expected on a correction back to $8.80.
- March corn ended flat again, and since gapping higher in early December has done very little. There is still no indication of China reaching to the US for corn and wheat just yet. Weekly US export sales were good but not great. And S American weather isn’t yet affecting corn potential like it is wheat. Weekly export sales through last Thursday totalled 36 million bu, matching the pace needed to meet the USDA’s forecast. Sales have cooled since cash basis plunged in the Black Sea. We do mention that basis in Ukraine is sharply higher this evening and, overall, world fob values are firm. US, Black Sea and S American is offered at $172-175/mt for Jan-Feb delivery. This compares to $160-165/mt in Jan a year ago. Argentina’s crop is 47% planted, vs. 40% on this week in 2017. First-crop ratings are put at 51% good/excellent, vs. 47% in late Nov. No major S American crop problems exist currently. A bearish bean market and a bullish wheat market will trigger dynamic corn trade. Longer term, above-trend yields are required to replenish exporter stocks.
- World wheat futures rallied further amid another week of solid US export, concern over Argentina quality and uncertainty ahead of next week’s meeting between Russian exporters and government officials. March Chicago has broken through major tech resistance at $5.32. A close above $5.45 turns wheat’s chart bullish. Also note that calendar spread in Europe continue to tighten, with old crop’s premium to new crop rallying to $.40/bu. US weekly export sales totaled a sizable 28 million bu, up 2 million on the previous week and clearly well above the pace needed to hit USDA’s new target. Next week’s sales will be similarly large amid recent HRW sales (7 million bu) to unknown destinations. Argentina’s harvest has reached 57% complete. This is solid progress. However, production was lowered 0.2 million mt to 19 million (USDA 19.5) and excessive rainfall of 5-7” will impact Santa Fe and Entre Rios through the weekend. There is still some 15-40% of the crop left to gather there. We estimate that 1.5-2.0 million mt of wheat is subject to quality downgrades. Argentine fob prices have rallied $10/mt ($.35/bu) since late Nov. The world market is getting more urgent in shifting trade flows.