- HEADLINES: Liquidation pummels Chicago on charts/Parana rain; Downside price targets close in corn, KC wheat and soyoil; New ag inflows in 2022?
- Chicago grain futures are sharply lower at midday with soybeans/soyoil leading the decline on liquidation tied the overnight rain that fell across portions of Parana and Mato Grosso Do Sul, with the forecast offering additional showers during the last half of next week. Chicago is extracting weather premium in a correction. Chicago had rallied $1.35/bu off the December 4 low, and the drop of $0.50-0.55/bu is corrective.
- Corn/wheat have been followers with March corn futures pushing back below $5.95 and March KC wheat testing $8.00-8.10 support. The downside price risk in corn, wheat and soybeans is becoming limited below today’s low with light volume expected on Friday ahead of 2022. Most of the world will be on New Year’s holiday tomorrow with Chicago open for a full trading session. Chicago returns to normal trading Sunday evening.
- Chicago brokers estimate that funds have sold 9,600 contracts of corn, 7,200 contracts of soybeans, and 3,600 contracts of Chicago wheat. In soy products, funds have sold 4,200 contracts of soyoil and 3,500 contracts of soymeal. Managed money has been on the sell side of the market this morning.
- US export sales for the week ending December 23 were 7.3 million bu of wheat, 49.1 million bu of corn, and 19.3 million bu of soybeans. The wheat sale total was disappointing with corn/soybeans in line with trade expectations. China continues to secure most of the US sorghum crop taking another 7.2 million bu in a known/unknown basis.
- For their respective crop years to date, the US has sold 582 million bu of wheat (down 173 million down 23%), 1,604 million bu of corn (down 96 million or 6%), and 1,521 million bu of soybeans (down 486 million or 28%). Soybean and corn are slowly making up for lost ground vs the 2020/21 crop year. It is now the size of the S American corn/soybean harvests that will determine if WASDE 2021/22 US corn and soybean exports are too high or low. We don’t expect that WASDE will alter their 2021/22 US corn export estimate, but they could lower soybeans by 20-35 million bu to account for the slow export pace to date.
- Unfortunately, S America crop sizes continue to decline with the early yield results suggesting that the Parana soy crop could fall 35-50% or 7-10 million mt from the initial forecast. The overnight rain will marginally help crops seeded after October 5 as drought has pushed Parana crop maturity. Soy/corn yield/crop losses are also reported in MGDS, Santa Caterina and RGDS which could raise the total Brazilian soy crop loss over 12 million mt. Northern Brazilian soy yields could be better, but the point is that Brazilian soy production could fall under 137 million mt, less than last year’s harvest.
- The initial first Brazilian corn crop is estimated to be down 5.0-6.5 million mt from an original size of 29 million mt or crop of 22.5-24.0 million. The total 2022 Brazilian corn crop (3 harvests) has been cut from 119 million mt to 114-116.0 million range. Additional winter corn seeding will occur if enough rain drops across Parana/ MGDS to restore soil moisture when planting starts in February.
- The midday GFS weather update is slightly wetter than the overnight run with improved rain chances for Parana/MGDS starting mid next week. RGDS/Santa Caterina rains will be more limited. Argentina will have a few widely scattered shower chances across the north, but otherwise the forecast is arid. Argentine crop condition/seeding progress will be available later today. The recent extreme heat/dryness has taken a toll on the first Argentine corn yield and a below normal rain trend will persist into mid-January.
- Thin holiday volume exacerbates Chicago rallies/declines amid a lack of resting orders. A S American weather pattern change is not indicated with considerable yield damage already assessed to S Brazilian crops. We see today’s break as a buying opportunity in soyoil, corn and KC wheat. Rumours abound that Iraq will now be returning Monday for HRW wheat, which could include a US purchase based on valuations following today’s decline. This is no place to be turning bearish.