- Chicago ag futures are sagging at midday as profit taking and day trade selling have toppled corn/wheat futures whilst pulling soybeans back to near unchanged. New investment money was put to work overnight, which pushed values sharply higher. Profit taking was noted after the morning reopening.
- The midday decline is technical in nature with as corn futures have rallied 14 consecutive days while soy /wheat futures had become overbought. Nothing fresh is noted fundamentally with the decline in soyoil futures making Gulf export offers highly competitive into SE Asia vs. palm, sun, corn and canola oil. The USDA January crop report is 5 days off and traders are interested in trimming their market exposure ahead of this key data. We look for a mixed Chicago close, but we doubt that the decline in corn/wheat/soyoil will be able to gather any downside momentum. There is still no evidence of the needed demand rationing in corn, soybean or soy products.
- US weekly export inspections for the week ending December 31 were; 35.9 million bu of corn, 47.9 million bu of soybeans, and 11.9 million bu of wheat. US soybean exports for the last week of the calendar year were record large. China shipped out 29.9 million bu or 62% of the annual US export pace. China also shipped out a couple of cargoes of US corn. US soybean and corn export inspections were larger than expected for the holiday shortened week.
- For their respective crop years to date, the US has exported a record 1,416 million bu of US soybeans (up 615 million or 77% more than last year), 587 million bu of US corn (up 248 million or 73%), and 546 million bu of wheat (equal to last year). It is remarkable that the US has already exported 64% of the annual USDA soybean export estimate. We look for the USDA to raise their US 2020/21 soybean export estimate by at least 50 million bu and corn 150-200 million bu next Tuesday. This means that there is no room for any decline in US corn and soybean yield and production.
- Neither US or Brazilian farmers have been large cash sellers. We understand that elevators report modest US corn movement, but little or no soybean sales. US farmers are picking up their money for deferred payment corn/soybeans which were made this autumn. Lower Chicago markets are not expected to entice new farm sales.
- There are cash connected rumours that China was seeking 2-4 million mt of Brazilian corn for July-September shipment in the New Year. No sales can be confirmed, but Chinese interest for world feedgrain is active.
- The midday S American GFS weather forecast at midday is wetter in Central and Eastern Argentina, but otherwise consistent with morning forecasts. Limited rain will drop across Argentina over the next 7-8 days with a cold front to produce showers/storms from January 12-14. The models do not have a very good handle on the system, but rain totals of 0.25-1.50″ are expected. The heavier rains are for Santa Fe and Corrientes, but our confidence in rains better than 1.50″ is low. Following the rain, Argentina looks to return to a drier profile. Northern Brazil will endure below normal rainfall with temperatures holding in the mid 80’s to the lower 100’s. Research doubts that a S American weather pattern change is occurring. Drought is not defined by zero rain, but a trend of below normal totals, which is forecast to persist into February.
- All bull markets have corrections. This one could be felt for a few days. However, Research sees nothing that indicates US demand rationing or a slowing of China interest. In fact, Year 2 of the US/Chinese agreement calls for China to book $43.5 billion of US ag goods. March soybeans should hold support at $13.00 and March corn at $4.75.