- Soybeans/soyoil have paced the Chicago rally while wheat sags in the Christmas Eve Day trading session. The volume of trade has been curtailed by the coming holiday and the fast-approaching end of the year. Just 4 trading sessions remain in 2020 and fund managers are not willing to take more risk. However, fund managers are also so bullish on Chicago that they do not see a reason to pare back existing positions.
- The Santa Claus grain rally is based on a need to ration US soybean demand amid a lack of cash connected selling. US and S American farmers are so heavily sold, that new sales are not expected until the 2021 S American crop sizes are known. Brazilian farmers are concerned that 60-65% sales could turn out to be 70-85% depending on weather during January and early February. US farmers have sold 80-85% of their 2020 soybean crop. Basis, futures, and spreads are all working in tandem to find the price that moves the last 15-20% of the crop as record large demand chews through the 2020 harvest. US corn export demand is preparing to soar in January as Chinese purchases load. Chicago corn/soy futures are “demand led” bull markets.
- Chicago brokers estimate that fund managers have bought; 3,400 contracts of corn, 2,100 contracts of soybeans, while selling 1,900 contracts of wheat. In soy products, funds have bought 1,900 contracts of meal and 3,200 contracts of soyoil. The entire soy complex has scored another round of contract highs.
- We are questioned on whether a potential resolution can occur in the 15-day Argentine port/crush strike next week. Although either side can move on their demands, the parties are so far apart that a settlement seems unlikely. The Labour Unions are requesting that their workers be paid at the Blue Peso rate (Black Market peso rate vs. US$), or said another way, in US$. The Blue Peso rate is said to be at 140 to 160 vs. the official rate that stands at 83:1 this morning. This would be a request for an 80-100% raise in wages paid so that workers can keep up with coming inflation. Such a huge wage increase is unlikely. And what is surprising is that Government is behind the Labour Unions and their elevated wage demands. So, it is unlikely that they will intervene. Research fears that the strike could last into 2021, because paying employees on the Blue Peso (dollar) rate is so revolutionary, pretty soon Argentine farmers will also want to be paid in the Blue Peso rate also.
- Cash rumours abound that China has added to their US 2020/21 soybean/corn purchases in recent days. FAS daily sales announcements will be watched early next week for confirmation. Exporters indicate that China booked corn for May.
- The midday weather forecast shoved the bulk of next week’s Argentine rainfall to the western half of the country. This is like the EU model which would leave half the country waiting on a rain to finish summer row crop seeding. The GFS’s forecast is for 0.50-2.00″ of rain next week for W Argentina and 0.15-1.00″ for E Argentina which is far too light.
- A new drying trend is noted for Central and Northern Brazil after the holiday weekend. The below normal weather trend for N and C Brazil is worrisome with the crop in its reproductive stage. The long range forecast holds the Northern Brazilian dryness into mid-January. The S American weather pattern is concerning amid expanding dryness.
- An acute need for US soybean demand rationing along with potential dryness for E Argentina and N Brazil are rallying soy/corn futures to fresh contact highs. And the Buenos Aires Exchange indicated that 23% of its soybean and 39% of its corn crop have yet to be planted. This raises the importance of E Argentine rain in January before the planting window closes. Chicago price trends are up, but the bulls are hoping for a year end correction to offer the next purchase opportunity.