- HEADLINES: Chicago wheat falls to chart support, drags soy/corn along in sympathy; Midday GFS weather forecast slightly drier for S Brazil/Argentina.
- Chicago trade is mixed at midday with corn/soy trading either side of unchanged while wheat prices sag on active wheat/corn spread unwinding. It is Tuesday in a full week of futures trade. The charts show that soymeal, soybeans, and corn futures are overbought. Amid overbought chart conditions, futures either consolidate or decline (or a little bit of both) before returning to trend. Our bet is that the overbought technical condition is resolved with a few days of sideways/choppy trade. Fund managers have additional grain purchases to make in early 2022.
- The price trend of corn, soybeans and wheat are higher with key support offered at $8.25 and below KC March wheat, $6.09 March corn, and $13.42 on March soybeans. January soybeans and soy products are deliverable on Friday. We see soymeal as the most overbought and against weekly chart support at $422/ton basis spot Chicago futures. A short-term meal top should be formed just before delivery as the shorts are forced out. We see the next upside price target for March soybeans resting at $13.86-13.95.
- It is S American weather and crop sizes that will determine how high is high with new crop availability and determining the severity of the drought across S Brazil and Argentina being key in the weeks ahead. We believe that the Southern Brazilian and Argentine drought is just beginning with heavy rainfall battering Northern Brazil with flooding through January.
- Chicago brokers estimate that funds have sold 1,500 contracts of corn and 5,500 contracts of wheat, while buying 3,500 contracts of soybeans, 4,200 contracts of soymeal and 1,400 contracts of soyoil. The managed money has been on both sides of the Chicago markets with the selling in the grains and buying of the complex. Sinking wheat values have pressured Chicago corn.
- Parana’s Deral will not release crop condition estimates for corn/soybeans this week due to the holidays. Condition rating reporting will return next week Tuesday. Early soybean harvest starts in 2 weeks with yields feared to be 10-20% lower due to the ongoing drought. However, early edible bean yields are off as much as 40-60% which could precede a worse soy/corn yield decline. Rains are promised for Parana around January 4, but they are too late to aid first crop seeding. Parana farmers are active chopping corn for silage due to the lack of grain. Basis bids on the Paranagua Corridor will be rising amid building crop losses and their shortened export season.
- Wheat traders are watching for Iraq/Egypt’s GASC to return with tenders on the market drop. The Iraqi tender was pushed forward by a week in the hope of a price correction. Should either importer gauge the market at a desirable level, a new tender will be set. The Russian wheat export tax at $95.10/mt holds through the holidays. Russian wheat traders often celebrate Orthodox Christmas which runs into mid-January. Russia will be a slow wheat seller/exporter into late January, with the new export quota to be set on February 15 at 8 million mt. Russia’s wheat export availability is in seasonal decline.
- Asian traders are awaiting China’s activation of TRQ import licenses in 2022 for corn/wheat. Private Chinese buyers/importers can make purchases and import cargoes, but the TRQ only becomes active upon the vessel’s arrival in China. US corn is the cheapest source into China while in wheat it is Australian. China 2022 TRQ’s are set at 7.2 million mt of corn and 9.4 million mt of wheat.
- The midday GFS weather forecast is slightly drier across Parana/MGDS and through Argentina than the overnight run. Limited rain looks to drop across Argentina/RGDS in S Brazil for another 2 weeks. The S American weather pattern remains static with a cold front to produce rain of 0.25-1.50” across Parana/MGDS mid next week. Argentina is hot/dry for the next 10 days. And flooding rains will drop across the northern half of Brazil. S American crops are declining.
- The S American weather forecast is a touch more threatening at midday and is static with La Niña now projected to hang on well into mid-2022. US ethanol/soy crush margins are strong which maintains record large US domestic demand. We see Tuesday’s drop as corrective in a bull market. Corn and soyoil should be the upside leaders in early 2022. This is no place to turn bearish.