- Chicago ag markets are steady to higher at midday, with export sales and long-range Argentine weather forecasts driving activity. Prices have cooled from morning highs, but meaningfully bearish input remains tough to find.
- Through the week ending Dec 10, US exporters sold a net 76 million bu of corn, vs. 54 million the previous week and well above trade expectations. Weekly soybean sales were 34 million bu, vs. 21 million the previous week. Wheat sales totalled 20 million bu, vs. 23 million the previous week. Meal sales were a sizeable 261,000 mt.
- For their respective marketing years to date, exporters have sold 1,637 million bu of corn, up 142% from mid-Dec a year ago, 1,978 million bu of soybeans, up 89%, and 722 million bu of wheat, up 10%. Soybean commitments now account for a full 90% of the USDA’s forecast, with 8 months remaining in the crop year. Bean sales moving forward must average just 7.6 million bu per week to hit the USDA’s target, which is clearly too low. Corn sales must average only 29 million bu. Even weekly wheat sales must average only 13 million per week to meet the USDA’s 2020/21 forecast.
- China through the reporting period secured one cargo of US HRW, 13 million bu of sorghum and 9 million bu of US corn on a known basis. US sorghum export commitments now sit at 196 million bu, or 71% of the USDA’s forecast. The US cash sorghum will continue rationing supply via high price/slowed feed consumption.
- The lack of daily sales announcements from FAS last week was a poor indicator of actual demand.
- Global crude oil prices have scored new rally highs on hope for a return to near-normal driving/travel patterns by mid-2021. Rising energy markets are helping to boost biofuel blending incentive and is also working to strengthen currencies in Russia, Canada and Australia. This is turn is keeping global fob grain prices elevated when valued in US$. Additionally, US$ weakness is funnelling money into the €uro, which is acting to increase the US$ value of Russia’s wheat export tax, which we believe is set at €25/mt. The impact of Russia’s export tax will be determined by price movement in Russia’s interior wheat market over the next 30 days. A relatively strong Ruble will further hinder any decline in forward Russian wheat fob offers.
- NOAA’s updated Jan-Mar US climate forecast is slightly wetter than its outlook in November. Yet, above normal temperatures are probable in all regions into early spring. Plains drought over the next 90s days is projected to expand eastward and envelop the whole of KS and OK.
- The midday GFS weather forecast is little changed from the overnight run. Spotty showers will impact Central Argentina on the weekend while heat and abnormal dryness persist into the middle of next week across 45-50% of Brazil’s Soy Belt.
- The extended forecast maintains a classic La Niña pattern, in which complete dryness resumes across Argentina Dec 20-Jan 1. A more normal pattern of rainfall evolves in major soy producing states Mato Grosso, Mato Grosso do Sul and Goias in Brazil beyond Tuesday.
- Our primary concern remains worsening drought across Argentina, which will have a major impact on corn and soy product markets if dryness lingers into the middle part of January.
- The impact of current moisture deficits in Brazil on soy yields will be unknown until mid-winter. However, the need for global oilseed rationing remains. Corn export demand will stay at impressive levels through the foreseeable future. Even a modest jump in US wheat export demand is anticipated beyond winter. Our outlook stays bullish.