- Chicago futures are mixed at midday with summer row crop futures higher while wheat futures sag on profit taking of the recent Russian tax related rally. Chicago volume has sagged from yesterday’s active trade with traders being more cautious ahead of the holidays. Research looks for a mixed Chicago close with March soybeans unable at rise above $12.00 (the 2016 high) this morning.
- However, this is the fifth test of $12.00 and history shows that when a market tests key resistance this many times, the odds grow for an ultimate penetration. The sag in soybeans of the $12 high is due to soyoil which was unable to build on the new contract high that was scored overnight.
- Chicago brokers estimate that funds have bought 700 contracts of soybeans and 300 contracts of corn, while selling 3,900 contracts of wheat. In soy products, funds have bought 3,200 contracts of soymeal while being flat in soyoil. Funds were net buyers of soyoil overnight but have since sold back most of those purchases. Fund managers appear to be content to hold net long Chicago positions into 2021 amid threatening S American weather forecasts. Funds were buyers of corn and soybeans overnight and then sellers this mornig which leaves them as a modest buyer of a few hundred contracts.
- FAS/USDA did not report any new US sales through their daily reporting system.
- The Brazilian Senate late Tuesday approved a Bill that would allow foreign individuals and corporations to own Brazilian land, including farmland. The Bill is expected to pass the Lower House and be signed by President Bolsonaro in late 2020 or early 2021. The ability of foreigners to own Brazilian land has been a long time coming and will be a bullish jolt to Brazilian agriculture. Interest is already being expressed by China and other large investment funds in farmland. The legislation maintains the expansion of arable land across N Brazil. This is a big deal for Brazilian agriculture.
- EIA reported that the US produced 281 million gallons of ethanol last week. Down 10% from last year, but down only 10 million gallons from last week.
- US ethanol stocks soared to 964 million gallons or up 5% on last year. Since late October, US ethanol stocks have grown by 12% or 100 million gallons. The US ethanol industry appears to be preparing for the return of more normal US driving activity in Q1 as more than 100 million Americans are vaccinated.
- The weather forecast has reduced rain totals for Argentina from Friday into the weekend, with hot/dry stressful weather for Mato Grosso and Mato Grosso do Sul. Yet, the forecast holds onto near to above normal rain for E Brazil of 4-6.00″. This is abnormal December S American weather which is having an increasing adverse yield impact. In fact, following the weekend rain chance for Argentina, the forecast is arid into January. The shortage of rain is becoming critical for Argentine crops. And Argentine temperatures will rise to the upper 80′s to mid 90′s late next week. The extended range 10-15 day forecasts have been wetter for weeks with that moisture not being pulled forward in the forecast for either N Brazil or Argentina. The overall dry weather pattern is concerning.
- The Argentine dock/crush industry strikes along with abnormal S American weather will keep Chicago corn/soybean prices in an uptrend. Even Chicago wheat will not be able to fall too far below $5.80 March Chicago support. Other Chicago analysts are forecasting sideways trade through the holidays. However, based on threatening Argentine weather, our bet is for a marching bull market that reflects declining S American crop potential.