- HEADLINES: New RMA data confirms smaller US winter wheat seeding; Hot/dry weather for S Brazil/Argentina into 2022; Adding risk premium ahead of Christmas.
- Chicago futures are mixed at midday with soybeans/soymeal/KC wheat posting gains on parched Southern Brazilian and Argentine weather forecasts while corn/soyoil sag on macro financial market considerations. The DOW and a host of other financial markets are under acute pressure on the fear that the fast-spreading Omicron virus will negatively impact US/World GDP rates. The rally in soybeans/soymeal and wheat argues for fresh market strength.
- We look for a mixed Chicago close. S American weather is more important than Omicron to longer term Chicago price direction. And world fob grain prices are rising in Latin America and the Black Sea as cash shorts are having trouble securing supply heading into the holidays. The Chicago has a strong bid below it and few S American or US farmers are willing to sell any break on the fear of crop loss. Chicago will catch a strong bid a week from now if the S American forecast stays arid/hot. Traders will embrace a bigger weather bull market following Christmas, as they will not have to worry about a pattern change over the 3-day holiday weekend. The risks are strongly tilted to the upside on both a supply and demand perspective.
- Chicago brokers estimate that funds have sold 5,600 contracts of corn and 4,200 contacts of soyoil, while buying 1,900 contracts of soybeans, 3,100 contacts of soymeal and 1,200 contracts of wheat. In the case of soybeans/wheat, funds were early day sellers and midday buyers.
- FGIS grain inspections for the week ending December 16 were; 39.4 million bu of corn, 61.7 million bu of soybeans and 7.8 million bu of wheat. For their respective crop years to date, the US has shipped out 445 million bu of corn (down 61 million or 12%), 998 million bu of soybeans (down 294 million or 29%), and 427 million bu of wheat (down 92 million or 18%. The US continues to make progress in soybean/ corn exports in catching up with the Gulf shutdown produced by hurricane Ida back in September.
- RMA released new crop insurance data that correlates well with the January USDA winter wheat seeding report this morning. The data offered that final US winter wheat seeding will be down 1-2 million acres compared to last year. This was a surprise with the biggest losses occurring in the Plains. US farmers were expected to expand US winter wheat seedings by 1-2 million acres, not the other way around. The new RMA data is extremely bullish for new crop US HRW wheat futures amid the loss of 35-45 million bu of production potential.
- Cash sources indicate that China secured another 500-750,000 mt of Aussie milling and feed wheat on Friday. And China remains a bidder for Ukraine corn. China is estimated to have secured 2.5-3.0 million mt of Aussie wheat and 10-12 million mt of Ukraine corn for the 2021/22 crop year. The Chinese wheat purchases limit Aussie wheat export ability to others since loadout capacity is capped. And if Argentina only allows 12.5 million mt of wheat exports (down 1 million) from WASDE and the Government has already issued 9.1 million mt of licenses, their old crop supply availability will quickly tighten. We see no evidence of wheat export demand rationing, rather it is accelerating.
- The midday GFS weather forecast is consistent with the overnight run. Limited rain is offered for the crop areas of S Brazil and Argentina over the next 14 days. A ridge of high pressure produces high temperatures ranging from the upper 80’s to the lower 100’s. Northern Brazil stays well-watered with rains of 3.50-8.00”. The need for rain is immediate across S Brazil/Argentina.
- Adverse S American weather offers sizeable upside potential in corn/soy. S Brazilian crop condition ratings are expected to fall sharply midweek. Brazilian soy and corn crop estimates are in fast retreat. The price outlook for soyoil is exceptionally bullish on renewable diesel demand while any loss of Argentine corn production will push up 2021/22 US corn export potential.