- HEADLINES: USD ethanol grind stays hot on fat margins; South Central Brazilian weather forecast drier at midday; Egypt’s GASC secures 300,000 mt of wheat.
- After a lower opening, Chicago grain futures roared higher with wheat/corn being the upside leaders. Liquidation ahead of January delivery pressured soybeans/ soymeal, but we do not expect that any large amount of deliverable supply will be tendered Friday. Commercials will hold fast to deliverable Chicago soy supplies amid ongoing US export demand and a Northern Brazilian soy harvest that could be delayed by excessive rain and saturated soils.
- Also, concern is building on the soyoil content of N Brazilian soybeans amid the regularity of cloudy days and mostly below normal temperatures. Early harvest results from Mato Grosso have been highly variable with commercials complaining that 5-8% of the early cut bean seeds are damaged due to the lack of sun/excessive rainfall. The cloudy/wet weather has talk emerging that N Brazilian soybeans will not have their usual elevated oil content that is desired by Asian importers.
- Wheat is bouncing as GASC secured French (and Ukraine/Romanian) wheat in today’s tender. The EU is selling and exporting wheat much too quickly with a Russian export tax of $95.10/mt. EU wheat sales need to be slowed or halted by rising EU wheat prices. The EU wheat export pace is much too fast, and the market has a major task ahead.
- Chicago brokers estimate that managed money has bought a net 1,500 contracts of corn, 1,400 contracts of wheat, and 2,100 contracts of soyoil. Managed money sold 2,200 contracts of soybeans and 3,100 contracts of soymeal. Managed money was an early seller across Chicago but has returned to the buy side.
- The US weekly ethanol grind amounted to 311 million bu, 2 million bu above last week and 24 million bu larger than last year. The US only needs to average 295.5 million bu grind per week to reach the WASDE annual US corn ethanol grind forecast. With the weekly grind averaging 13-17 million bu above this total, we would maintain that WASDE is too low by 150 million bu in its 2021/22 US corn ethanol use estimate. A large portion of this corn grind increase should occur in the January 12 USDA report, which would suggest that US 2021/22 corn end stocks could fall near or below 1,300 million bu with a modest 0.5 bushels/acre decline in yield. Fund managers talk that last year spot Chicago corn futures reached $7.75/bu with 2020/21 US corn end stocks at 1,236 million bu. Sub $6.00 corn futures appear to be too cheap amid threatening S American weather. The world cannot lose any portion of the Brazilian or Argentine corn crops during January. US ethanol producers are enjoying hugely profitable $1.99/bu margins.
- Egypt’s GASC secured 300,000 mt of wheat including 60,000 mt of French, 180,000 mt of Ukrainian, and 60,000 mt from Romania. GASC was willing to pay up $8.00/mt to take the Romanian wheat for late February. The French wheat sale at $330.50/mt was the first time that GASC secured world wheat cheaper than a prior tender since late summer. However, it is just one data point for now.
- The midday GFS weather forecast is slightly drier across Parana/MGDS than the overnight forecast. Rain totals across Parana/S MGDS were cut by 0.5-1.50” to 0.5-2.00”. The rain reduction will harm maturing soy/corn. Argentina/RGDS holds in an arid 2-week weather forecast with extreme heat forecast over the next 5 days with highs in the mid 90’s to the lower 100’s. The S American weather pattern is static with a deepening drought across S Brazil and Argentina. Equally as worrisome is the heavy rain that will fall across N Brazil with rain totals of 5-11.00”.
- S America looks to have lost 6-9 million mt of soybeans and 5-6 million mt of corn to date. A deepening drought across Argentina/S Brazil will add to these loss totals. We remain bullish on new investment flows into ag and declining S American crop sizes. Any Chicago decline is a correction with March corn under $5.90 being too cheap. We see sizeable weather risks ahead for S American and the US Plains in early 2022.