- HEADLINES: Technical selling pressures wheat and drags down corn to key support; Stonex Brazilian soybean crop at 134.0 million mt.
- Chicago markets are mixed at midday with corn/wheat values pushing lower while the soy complex holds higher as Chicago looks for its “sea legs” heading in the new trading year. Soybean futures are higher as private crop loss estimates for Brazil continue to grow. Corn loss estimates are only beginning for S America with the Brazilian first corn crop pegged at 28-29 million mt with a trendline yield. A 20% yield loss amounts to 5-6 million mt based on the arid weather pattern to date.
- It is the Argentine corn crop that becomes more important with time amid export registrations that are well above commercial stocks. Volatility will be elevated in the months ahead.
- We doubt that either corn or wheat have scored their annual or seasonal highs, but the charts must heal before short covering develops ahead of the USDA January Crop Report. WASDE is expected to do what it needed to in December and raise 2021/22 US corn ethanol demand by 50-100 million bu. The increase in demand makes the January US corn yield highly important or US corn end stocks will be sliding to historically low levels. Few will want to be bearish of corn if the S American weather pattern stays static.
- StoneX Brazil estimated the 2022 Brazilian soybean crop at 134.0 million mt, down 10 million from the December WASDE estimate, and down 3 million from last year. The continued weather pressure on the crop has traders talking about a 2022 Brazilian soy crop of 130-132 million mt by the final count. StoneX dropped their estimate of the 2022 Brazilian corn crop by 2.5 million to 117.0 million mt. The StoneX Brazilian soybean crop loss was larger than expected.
- There is no doubt that soy/corn crop losses in Parana and surrounding states are important and growing. On the weekend, the Parana ag minister estimated that the average Parana soybean yield would be off 38% from trend, which by itself would count for nearly 8 million mt of lost soy production. And 4-6 million mt has been lost in the nearby production states of S MGDS, Santa Caterina and RGDS. The big question will the soybean yields to the north help to offset the losses from the south. Currently, too much rain and disease threaten the Northern Brazilian soy crop. Harvested yield data is anxiously awaited.
- US weekly export inspections for the week ending December 30 were 5.2 million bu of US wheat, 23.5 million bu of corn, and 43.8 million bu of soybeans. All were on the low side of expectations. For their respective crop years to date, the US has exported 444 million bu of wheat (down 107 million or 19%), 508 million bu of corn (down 91 million or 15%), and 1,113 million bu of soybeans (down 328 million or 23%). We do not look for the USDA to alter its 2021/22 corn/wheat export estimates on January 12, while US soybean exports could be trimmed 25-40 million bu depending on where WASDE sees the 2022 Brazilian soybean crop.
- The midday GFS weather update is like the overnight run with ligh and widely scattered showers for Argentina with 10-day accumulations of 0.2-0.8” while heavy rain dogs the early soy harvest across Northern Brazil with rainfall of 5-10.00”. The early Brazilian soy harvest will be slowed by regular daily rainfall. The S American weather pattern is static, except for a modest southward shift that allows for 0.5-1.50” of rain across Parana and MGDS late week. Extreme heat persists across Argentina with numerous days with highs in the 90’s/lower 100’s into mid-January. Crop stress will be acute for S Brazil and Argentina corn and soybean crops over the next 2 weeks.
- Brazil has no old crop soy stocks left, for each 1 million mt of lost production you must reduce its 2021/22 exports or crush by a like amount. This pushes demand to the US for late summer and autumn on soy products and soybeans. The US export/crush gains could be as much as 200 million bu, which depletes US 2021/22 and 22/23 estimated end stock totals back to historically low 225-350 million bu. Stocks supports spot Chicago futures at $12-12.50/bu for months to come and produces an upside price target of $14-14.25 with the US needing extra soy acres in 2022.
- However, corn has an equally bullish story as soybeans, but the market may have to get beyond the January USDA crop report to sustain a rally. It was the wheat selling that pulled corn lower today. We doubt that the world wheat cash market has forged an annual top and that support will be found under $7.50 March Chicago. The S American weather risks are real and growing. Corn/wheat and soyoil futures are too cheap!